We began this paper by observing that there is a growing conviction among some business strategy theorists that core competencies are fundamental to strategic success. We argued that if this is true, then core competencies must underlie entrepreneurial success. To test this proposition, we examined all the entrepreneurial firms formed in the semiconductor silicon industry to determine what core competencies the founders possessed and how the firms succeeded. From this, we learn that firms whose founders had start up experience, silicon industry experience, and a materials technical background were far more successful than founder with other backgrounds. Only one firm combined these three attributes with the fabrication and assemble experience and this firm was also successful.

All successful firms, however, had founders with materials background. No firm without materials background became successful. Thus, at least one founder attribute, materials background is necessary for success in this industry. Materials background is a necessary core competence that the founders brought to their newly founded firms. Apparently, they built their firm strategies around this core capability and achieved success.

Furthermore, the results demonstrate that the long held belief that successful founders have experience in their industry is correct. And the often cited argument that founders with previous entrepreneurial experience are the most likely to succeed in another start up is also true in the silicon industry. But, the results also show that these two attributes by themselves are not adequate to assure success. Start ups in this industry need founders with a materials background first and foremost. But, industry and start up experience are also important.

Our study strongly supports the normative claim that firms that build strategy around core capabilities are more likely to succeed than firms that do not. Survivors exhibit more extensive materials capabilities than non-survivors. More successful survivors have deeper and broader core capabilities than less successful survivors. Long term survivors exhibit a superior ability to acquire and develop new materials capabilities as the requirements for success change over time. In short, having core capabilities in the materials area are critical for success in the semiconductor silicon industry.

In the early years of the industry, materials capabilities appear to have been less important. Some "high technology" firms that lacked materials capabilities garnered a significant percentage of the industry. Other firms who were "extremely close to their customer base," but who also lacked materials, capabilities also prospered. These firms had larger market shares than the materials firms initially, but over time could not progress down the cost, quality and performance curves as fast as their fellow materials based competitors. The possession of a generic materials core capability became critical.


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Last Updated 4/27/97 by Germaine Wong

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