A survey on all 29,688 companies listed on U.S. Stock market from 1960 to 2009 revealed that recent firms, listed from 2000 to 2009, are dying more quickly than older ones, listed before 1970.
On average, the recent firms spent more than twice as much as the older ones on organizational capital (such as patents, R&D, intellectual property, and personnel) but only half as much on physical assets. This does allow the newer firms to be nimbler, but leaves them more vulnerable to quick imitation. Life cycles are longer in the physical world, while they have shortened in the technology-based sectors.
What can newer firms do to increase their longevity? Govindarajan and Srivastava (2016) suggest 3 approaches as below:
- Incorporate both technology and physical assets into your business model. This makes it harder for competitors to create a me-too service quickly. For example, Tesla has developed deep expertise in batteries and vehicle manufacturing as a competitive advantage (...) Read more? Sign up for free
