Thinking about Entry of Firms: A Theoretical Discussion

  •  Christian Garavaglia    


This paper analyses the factors that play a role in determining entry of new firms into markets from a theoretical point of view. We analyse the traditional interpretation of entry as a mechanism of re-equilibrating profits towards their long-run level. Then, we concentrate on other theoretical approaches, showing how the characteristics of technological innovation, the endowment of skills and competencies of the entrants, the role of information signals, the phases of the industry life cycle, the sociological concepts of legitimization and competition, and the psychological aspects might play fundamental roles in explaining new entry. The paper debates possible cross-fertilizations among theories: The discussion results in some fruitful intertwinements among the different relevant features about entry and spawns new collaborative and interdisciplinary research to create additional knowledge about entry. Insights about international entrepreneurship (IE) are also discussed.

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