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Size Really Matters--New Insights for Start-ups' Survival

Author

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  • Ornit Raz

    (Sloan School of Management, Massachusetts Institute of Technology, E40-339, 77 Massachusetts Avenue, Cambridge, Massachusetts 02139-4307)

  • Peter A. Gloor

    (Sloan School of Management, Massachusetts Institute of Technology, E40-339, 77 Massachusetts Avenue, Cambridge, Massachusetts 02139-4307)

Abstract

This paper presents new evidence regarding a firm's probability for survival, based on the network structure of the firm's managers. We found that start-ups that have larger informal communication networks increased their chance to survive external shock. Original data have been collected from Israeli software start-ups during the dot-com economic growth. About eight years later, we added information about their ability to survive the burst of the dot-com bubble. From a theoretical point of view, this paper highlights the power of the classic social networks approach in explaining organizational performance. From a practical point of view, these findings offer some guidelines for managers of start-ups. Our results show that the size of informal interfirm networks really matters.

Suggested Citation

  • Ornit Raz & Peter A. Gloor, 2007. "Size Really Matters--New Insights for Start-ups' Survival," Management Science, INFORMS, vol. 53(2), pages 169-177, February.
  • Handle: RePEc:inm:ormnsc:v:53:y:2007:i:2:p:169-177
    DOI: 10.1287/mnsc.1060.0609
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    References listed on IDEAS

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    Cited by:

    1. Walter, Sascha & Heinrichs, Simon & Walter, Achim, 2013. "Hostile Parent Firms and Child Firm Performance," EconStor Preprints 68592, ZBW - Leibniz Information Centre for Economics.
    2. Gloor, Peter A. & Fronzetti Colladon, Andrea & Grippa, Francesca, 2020. "The digital footprint of innovators: Using email to detect the most creative people in your organization," Journal of Business Research, Elsevier, vol. 114(C), pages 254-264.
    3. Huatao Peng & Bingbing Li & Yang Liu, 2022. "How Social Network Influences the Growth of Entrepreneurial Enterprises: Perspective on Organizational and Personal Network," SAGE Open, , vol. 12(2), pages 21582440221, June.
    4. Dakshina Garfield De Silva & Marina Gertsberg & Georgia Kosmopoulou & Rachel Pownall, 2017. "Dealer Networks in the World of Art," Working Papers 198144199, Lancaster University Management School, Economics Department.
    5. Mark J. O. Bagley, 2019. "Networks, geography and the survival of the firm," Journal of Evolutionary Economics, Springer, vol. 29(4), pages 1173-1209, September.
    6. De Silva, Dakshina G. & Kosmopoulou, Georgia & Pownall, Rachel & Press, Robert, 2023. "Surviving in the marketplace: The importance of network connectivity for art dealers," Economics Letters, Elsevier, vol. 231(C).
    7. Priscila Ferreira & George Saridakis, 2017. "Firm Shutdown During the Financial and the Sovereign Debt Crises: Empirical Evidence from Portugal," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 24(2), pages 153-179, May.
    8. Lavlu Mozumdar & Geoffrey Hagelaar & Valentina C. Materia & S. W. F. Omta & Mohammad Amirul Islam & Gerben Velde, 2019. "Embeddedness or Over-Embeddedness? Women Entrepreneurs’ Networks and Their Influence on Business Performance," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 31(5), pages 1449-1469, December.
    9. Bernardo Balboni & Guido Bortoluzzi, 2015. "Business Model Adaptation and the Success of New Ventures," Journal of Entrepreneurship, Management and Innovation, Fundacja Upowszechniająca Wiedzę i Naukę "Cognitione", vol. 11(1), pages 119-140.
    10. Mayer-Haug, Katrin & Read, Stuart & Brinckmann, Jan & Dew, Nicholas & Grichnik, Dietmar, 2013. "Entrepreneurial talent and venture performance: A meta-analytic investigation of SMEs," Research Policy, Elsevier, vol. 42(6), pages 1251-1273.
    11. Ronald S. Burt, 2019. "Network Disadvantaged Entrepreneurs: Density, Hierarchy, and Success in China and the West," Entrepreneurship Theory and Practice, , vol. 43(1), pages 19-50, January.
    12. Kwangsoo Shin & Gunno Park & Jae Young Choi & Minkyung Choy, 2017. "Factors Affecting the Survival of SMEs: A Study of Biotechnology Firms in South Korea," Sustainability, MDPI, vol. 9(1), pages 1-18, January.
    13. Thorsten Semrau & Arndt Werner, 2014. "How Exactly Do Network Relationships Pay Off? The Effects of Network Size and Relationship Quality on Access to Start–Up Resources," Entrepreneurship Theory and Practice, , vol. 38(3), pages 501-525, May.
    14. Shanling Li & Jennifer Shang & Sandra A. Slaughter, 2010. "Why Do Software Firms Fail? Capabilities, Competitive Actions, and Firm Survival in the Software Industry from 1995 to 2007," Information Systems Research, INFORMS, vol. 21(3), pages 631-654, September.
    15. Yang Song & Leo Paul Dana & Ron Berger, 2021. "The entrepreneurial process and online social networks: forecasting survival rate," Small Business Economics, Springer, vol. 56(3), pages 1171-1190, February.
    16. van den Heuvel, Frank P. & de Langen, Peter W. & van Donselaar, Karel H. & Fransoo, Jan C., 2013. "Spatial concentration and location dynamics in logistics: the case of a Dutch province," Journal of Transport Geography, Elsevier, vol. 28(C), pages 39-48.
    17. Aishwarya Singh & Santoshi Sengupta & Swati Sharma, 2018. "Towards a Better Understanding of the Relationship Between Authentic Leadership and its Positive Outcomes: A Theoretical Framework," International Journal of Innovation and Technology Management (IJITM), World Scientific Publishing Co. Pte. Ltd., vol. 15(02), pages 1-20, April.
    18. Fronzetti Colladon, Andrea & Toschi, Laura & Ughetto, Elisa & Greco, Francesca, 2023. "The language and social behavior of innovators," Journal of Business Research, Elsevier, vol. 154(C).
    19. Minetti, Raoul & Murro, Pierluigi & Peruzzi, Valentina, 2022. "Out of sight, out of mind? Global chains, export, and credit allocation in bad times," Working Papers 2022-2, Michigan State University, Department of Economics.
    20. Thommie Burström & Jussi Harri & Timothy. L. Wilson, 2018. "Nascent Entrepreneurs Managing in Networks: Equivocality, Multiplexity and Tie Formation," Journal of Enterprising Culture (JEC), World Scientific Publishing Co. Pte. Ltd., vol. 26(01), pages 51-83, March.
    21. P. A. Gloor & A. Fronzetti Colladon & F. Grippa & B. M. Hadley & S. Woerner, 2021. "The impact of social media presence and board member composition on new venture success: Evidences from VC-backed U.S. startups," Papers 2105.10237, arXiv.org.
    22. Ungerer, Christina & Reuther, Kevin & Baltes, Guido, 2021. "The lingering living dead phenomenon: Distorting venture survival studies?," Journal of Business Venturing Insights, Elsevier, vol. 16(C).
    23. Kai Fischbach & Peter A. Gloor & Detlef Schoder, 2009. "Analysis of Informal Communication Networks – A Case Study," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 1(2), pages 140-149, April.
    24. Paul D. Ellis, 2010. "Is Market Orientation Affected by the Size and Diversity of Customer Networks?," Management International Review, Springer, vol. 50(3), pages 325-345, June.
    25. Gloor, Peter A. & Fronzetti Colladon, Andrea & Grippa, Francesca & Hadley, Beth Marie & Woerner, Stephanie, 2020. "The impact of social media presence and board member composition on new venture success: Evidences from VC-backed U.S. startups," Technological Forecasting and Social Change, Elsevier, vol. 157(C).

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