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Determinants of business and financial network formation by Japanese start-up firms: Does founder’s human capital matter?

Author

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  • Okamuro, Hiroyuki
  • Ikeuchi, Kenta

Abstract

Business start-ups are expected to make major contributions to economic growth. However, most of them lack internal business resources that are necessary for survival and growth. Therefore, business and financial networks that provide business opportunity and external resources are essential for the post-entry performance of start-ups. However, previous studies have regarded such networks as exogenous and not explicitly investigated the determinants of network formation. We argue that the formation of business and financial networks by start-up firms depends on founder’s human capital measured by university education and work experience, and empirically test it with our original survey data of recent Japanese start-ups. Moreover, we focus not only on the size of such networks, but also their quality measured as the status of major partners. Empirical results show that founder’s industry experience for 10 or more years has positive and significant effect on the size of both business and financial networks, while founder’s university education positively affects not only the size, but also the quality of both business and financial networks. Moreover, we also find that founder’s specific strength and personality also significantly affect network formation. We find no distinct differences between the determinants of business and financial network.

Suggested Citation

  • Okamuro, Hiroyuki & Ikeuchi, Kenta, 2012. "Determinants of business and financial network formation by Japanese start-up firms: Does founder’s human capital matter?," Working Paper Series 21, Center for Interfirm Network, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:cinwps:21
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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/25345/4/ifn_wp021.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    business network; financial network; start-up; founder; human capital;

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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