Age,Experience and Corporate Synergy: When Are They Sources of Business Unit Advantage?

When do older businesses have a competitive advantage over new startups? When do the corporate subsidiaries have advantages over independent firms? This paper tackles these questions by comparing the performance of businesses classified according to age and affiliation in the game of competitive survival. The research is based on an analysis of 377,000 United States business units between 1978 and 1984. Our results suggest that age confers substantial advantages in competitive environments where intangible assets, accumulated through experience, are critical to success. These include industries with high-labour intensity, high skill levels and heavy reliance on push marketing. For other industries, e.g., where competitive advantage can be built through superior service or media hype, age advantage is generally much more limited. Affiliation with a corporate group, meanwhile, allows young businesses to overcome some of their handicap by ‘borrowing’ experience through their parent. Once a business is well established, however, affiliation is immaterial.