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Network Progeny? Prefounding Social Ties and the Success of New Entrants

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  • Peter W. Roberts

    (Goizueta Business School, Emory University, Atlanta, Georgia 30322)

  • Adina D. Sterling

    (Olin Business School, Washington University in St. Louis, St. Louis, Missouri 63130)

Abstract

Entrepreneurs that were employed by successful industry incumbents prior to founding tend to confer advantages on their new organizations. We propose and then demonstrate a similar "network progeny" effect rooted in the social relationships that form among entrepreneurs. Our analysis of new entrants into the Ontario wine industry shows that prefounding friendship ties of the founders of one especially prominent entrepreneurial firm led to significantly higher ice wine prices. This attests to the promise of a network progeny extension of the parent-progeny account of new firm success. Follow-on analysis indicates that this effect is not attributable to an entrant's ability to make ice wines of superior quality or to it having access to better distribution knowledge. We therefore conclude that having a social tie to this prominent entrepreneurial firm generated reflected prominence that enhanced the valuations and therefore prices of wines made by connected market entrants. This paper was accepted by Jesper SØrensen, organizations.

Suggested Citation

  • Peter W. Roberts & Adina D. Sterling, 2012. "Network Progeny? Prefounding Social Ties and the Success of New Entrants," Management Science, INFORMS, vol. 58(7), pages 1292-1304, July.
    • Handle: RePEc:inm:ormnsc:v:58:y:2012:i:7:p:1292-1304
    DOI: 10.1287/mnsc.1110.1484
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    References listed on IDEAS

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    Cited by:

    1. Michael A. Abebe & Pingshu Li & Keshab Acharya & Joshua J. Daspit, 2020. "The founder chief executive officer: A review of current insights and directions for future research," Corporate Governance: An International Review, Wiley Blackwell, vol. 28(6), pages 406-436, November.
    2. Charles E. Eesley & Yong Suk Lee, 2021. "Do university entrepreneurship programs promote entrepreneurship?," Strategic Management Journal, Wiley Blackwell, vol. 42(4), pages 833-861, April.
    3. Pierre Azoulay & Toby Stuart & Yanbo Wang, 2014. "Matthew: Effect or Fable?," Management Science, INFORMS, vol. 60(1), pages 92-109, January.
    4. Adina D. Sterling, 2015. "Preentry Contacts and the Generation of Nascent Networks in Organizations," Organization Science, INFORMS, vol. 26(3), pages 650-667, June.
    5. Laura Rosendahl Huber & Randolph Sloof & Mirjam van Praag, 2012. "The Effect of Early Entrepreneurship Education: Evidence from a Randomized Field Experiment," Tinbergen Institute Discussion Papers 12-041/3, Tinbergen Institute.
    6. Pierre Azoulay & Toby Stuart & Yanbo Wang, 2012. "Matthew: Effect or Fable?," NBER Working Papers 18625, National Bureau of Economic Research, Inc.
    7. Huber, Laura Rosendahl & Sloof, Randolph & Van Praag, Mirjam, 2014. "The effect of early entrepreneurship education: Evidence from a field experiment," European Economic Review, Elsevier, vol. 72(C), pages 76-97.

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