Firm networks: external relationships as sources for the growth and competitiveness of entrepreneurial firms

Inter-firm networks, as an inter-organizational form, are increasingly perceived as a model for entrepreneurial firm growth. We study egocentric networks of high-growth entrepreneurial firms in the IT industry and explore how these firms grow through the use of external relations and become competitive. Based on case study research, we identify that firms are using relations for a variety of purposes and that every firm has an individual relational mix. This relational mix changes with the development of the firms. While the relative importance of social and reputational networks decrease with the firms' development, co-opetition networks increase over time. Knowledge and innovation networks are a function of reputation and management capacity while the development of marketing networks depends on the firm's culture and management style. Both weak ties and strong ties are important for the growth of the firm since they fulfil different functions. Firm growth is determined by path-dependent relational capability that eventually reaches its limits and leads to the reconfiguration of a rather stable network. Additionally, firm growth depends not only on the building of egocentric networks but also on the existence and development of healthy sociocentric networks.