Start-Up Businesses: A Comparison of Performances

An effort was made to determine whether or not there are any significant differences and/or similarities between enterprises established by large successful companies and those started by energetic entrepreneurs. The sample was composed of 34 individual start-ups (ISUs) which were compared to enterprises started by Fortune 200 companies (CSUs). It was found that, on average, ISU businesses reached profitability in 3.5 years, whereas the CSU businesses waited 7 years. The entry strategies and the corrective actions of ISU managers appear to have been superior, and the ISU environment more completely weeded out the poorer performers. Results also indicate that entering an existing market is equivalent to beginning a new business, and that corporate start-ups would perform better if they are treated as stand-alone businesses. Inflexibility is to be avoided and performance objectives should be significantly higher than the average financial performance of the corporations' other businesses, although such objectives must be balanced against the operative laws of the marketplace.