Selecting a target segment: market structure and new venture entry strategies

Abstract

Purpose – The purpose of this paper is to explore new banks ' market niche position choices at the time of founding. Design/methodology/approach – The authors used data on the establishment of new banking organizations in California, over 1979-1988, to test the hypotheses. During that time, banking within California experienced dramatic deregulation, which provided ample opportunities for new bank start-ups. Findings – New banks were found to enter more often in specialist market niches when the market was highly concentrated, but less often when there were more non-bank financial institutions active in the market. The frequency of new specialist entries displayed an inverted U-shaped pattern as the number of established specialist banks in the market increased. Originality/value – The findings confirm the idea that elements of market structure influence the niche positioning decisions of new ventures. The paper contributes to our understanding of entrepreneurial decision making in response to environmental conditions.