SEARCH

SEARCH BY CITATION

Abstract

Diversification by firms into unfamiliar areas of business is achieved either by acquisition of an existing business in the destination industry or a greenfield start-up. This article focuses on the business strategy of greenfield start-ups. We theorize and find that firms entering a market by establishing a new subsidiary rely solely on their own preexisting internal resources, making it favorable to align the business strategy of the start-up with the firm's value-generating competencies. Our empirical results, which are based on a sample of German Pensionsfonds and their parent companies, are consistent with the view that the business strategy choice of a newly founded subsidiary is substantially directed by the internal resources and competencies of the parent firm.