INSEAD Working Paper 2015/61/EFE
We examine the drivers of division-level product market entry in a sample of multidivisional firms during the period following an industry-wide shock. In contrast with prior work examining firm-level outcomes, a division-level approach allows us to examine the tension between cooperation and competition among divisions of the same (multidivisional) firm, shedding light on the within-firm mechanisms influencing market entry paths in a dynamic external environment. We model the propensity of divisions to enter markets new to the firm, finding that capabilities facilitating entry into related markets are shared among divisions within the same firm. Divisional barriers that might preclude such sharing are lower in the presence of pre-existing common ground among divisions and higher when the potential new market is more concentrated.