The Founding of Specialist Firms in a Global Fragmenting Industry
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JOURNAL OF INTERNATIONALBUSINESSSTUDIES, FIRST QUARTER1996
industry. Attention to specialists complements prior research on generalists and can begin to address dynamics and interactions between the two strategies. Second, specialists are of inherent interest because, as Porter [1980] notes, focus is one of three generic strategies that should lead to higher firm performance. The purpose of this study is to analyze what forces drive the pattern of specialist foundings over time in a global fragmented industry.Foundings here refers to the births of specialists each year. Global in this study means that it encompasses all countries in which all firms in the worldwide industry participate. Fragmented industries are those populated by a large number of small- and medium-sized companies where no firm has a significant market share and can influence the industry outcome. Fragmented industries are common in an economy, both domestically and overseas [Porter 1980]. To achieve this purpose, the study will evaluate two theoretical models for the foundings of specialists that have so far been analyzed in national and concentrated industry contexts even though their underlying mechanism supposedly transcend national borders. These models are Hannan and Freeman's [1987, 1988, 1989] density dependence model, and Carroll's [1985] resource partitioning model. The density dependence model implies that specialists' foundings are a function of the density (i.e., number of existing firms) of the specialist population. The resource partitioning model suggests that specialists foundings are a function of industry concentration. The number of firms and concentration that underlie the two theories comprise the basic elements of market structure.The study will also assess at what levels national or global - these models operate in practice, if at all. The study finds that worldwide specialists foundings are driven by their international density. Support for the density dependence model is found at the global level but not at the United States national level. This finding implies that legitimation and competition forces transcend national borders and as such suggests that this industry is globally integrated. No support, however, is found for the resource partitioning model at either the global or the national level in a fragmented industry. The next section reviews the literature and develops hypotheses for the foundings of specialists in a global fragmented industry. Then the study's methodology is detailed, followed by a report of the study's findings. Finally, the conclusions are presented. THEORETICAL FOUNDATION AND HYPOTHESES Hypotheses are derived from two theoretical models for the foundings of specialists in this section: Hannan and Freeman'smodel of density dependence and Carroll'sresource partitioning model.
THE FOUNDING OF SPECIALISTFIRMS
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Density Dependenc
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