ESSAYS ON A DEMAND-SIDE DRIVER OF MARKET ENTRY

Abstract

In this three-essay dissertation, I explore the role of demand-pull in new market entry given repeated transactions with embedded prior transaction partners. I investigate a demand-side driver of entrepreneurial spin-outs and diversifying entrants into a new market through recurring transactions between buyers (clients) and suppliers (firms). In the first chapter, I examine the performance of diversification driven by embedded client ties, "client-led diversifiers." I focus on diversifications intended to cater to an existing client's needs and its adverse effect on firm performance. In doing so, I explore the potential tension embedded client ties create vis-à-vis firm capabilities. I find support for the negative impact of client-led diversifications on firm performance. In the second chapter, I further explore the new market performance of client-led entrants. I focus on the role of clients’ selection in entering a new market and argue that such selection predicts firm and individual performance variations in the new market. The third essay explores how individuals become entrepreneurial entrepreneurs when they experience an increase in the value of relational capital. I examine how a discontinuous increase in the value of an employee’s relational capital influences her mobility and entrepreneurship decisions.

Empirically, I exploit the reporting requirements mandated by the Lobbying Disclosure Act of 1995 to construct a unique transaction-level database between lobbyists and clients for lobbying service on lobbying issues in the United States federal lobbying industry between 1999 and 2008. In the first two chapters, I exploit the exogenous creation of the "Homeland Security" issue market after the 9/11 terrorist attack to identify the effect of client-led diversification on firm performance. In chapter three, I use a sample of revolving door lobbyists who are lobbyists-turned-ex-staffers of a politician in the U.S. federal lobbying industry between 1999 and 2008. I leverage plausibly exogenous and large shocks to the value of an employee’s relational capital in testing the hypotheses.