Putting All Eggs In One Basket: Capability Configurations and New Venture Survival

New ventures need to choose which capabilities to develop first in order to build legitimacy and thus enhance survival. Building on configuration and organizational capability theories, we explored the trade-off between flexibility and specialization strategies in capability development in new ventures. Using the longitudinal Kauffman Firm Survey of US start-ups we found that building distinctiveness by specializing in specific capabilities early on was better for survival than pursuing flexibility by simultaneously developing R&D, Marketing, and Production capabilities. Simultaneous development of several capabilities exposed start-ups to a higher risk of exit.