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Entrepreneurial growth expectations and information flows in networks

  • Daskalopoulou, Irene
  • Petrou, Anastasia

The study analyzes entrepreneur’s expectations regarding future growth by analyzing the relationship between information flows from networks and the perceived risk of decisions associated with the future size of a firm. The main proposition is that growth expectations might be the outcome of superior judgment stemming from privileged information derived from networks. To provide evidence in support of this hypothesis a sample selection model is estimated using a two-step estimation procedure. Cross-section questionnaire data are used in the empirical analysis. Evidence is provided on the role of inter-firm contacts and relationships as a mechanism able to assist entrepreneurs in better assessing and even reduce the risk and uncertainty associated with their present and future decisions regarding firm growth. The study provides evidence on the factors affecting expected growth rates while it explicitly formulates and tests the hypothesis that expectations regarding growth might be the outcome of superior judgment stemming from privileged information derived from networks. Analysis indicates that networks are indeed information mechanisms, however, such information should be specific to problem solving firm processes. Better informed entrepreneurs are those that foresee higher growth in the future, yet they are not blocked in only local networking.

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File URL: http://mpra.ub.uni-muenchen.de/22663/1/MPRA_paper_22663.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 22663.

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Date of creation: 2010
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Handle: RePEc:pra:mprapa:22663
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  1. Bengt Johannissson, 1998. "Personal networks in emerging knowledge-based firms: spatial and functional patterns," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 10(4), pages 297-312, January.
  2. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
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  4. Evans, David S., 1986. "Tests of Alternative Theories of Firm Growth," Working Papers 86-36, C.V. Starr Center for Applied Economics, New York University.
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  6. Toke Reichstein & Michael Dahl, 2004. "Are Firm Growth Rates Random? Analysing Patterns and Dependencies," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(2), pages 225-246.
  7. Bronwyn H. Hall, 1986. "The Relationship Between Firm Size and Firm Growth in the U.S. Manufacturing Sector," NBER Working Papers 1965, National Bureau of Economic Research, Inc.
  8. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  9. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June.
  10. Robson, Paul J A & Bennett, Robert J, 2000. " SME Growth: The Relationship with Business Advice and External Collaboration," Small Business Economics, Springer, vol. 15(3), pages 193-208.
  11. Almus, Matthias & Nerlinger, Eric A, 1999. " Growth of New Technology-Based Firms: Which Factors Matter?," Small Business Economics, Springer, vol. 13(2), pages 141-54, September.
  12. Francesca Lotti & Enrico Santarelli & Marco Vivarelli, 2003. "Does Gibrat's Law hold among young, small firms?," Journal of Evolutionary Economics, Springer, vol. 13(3), pages 213-235, August.
  13. Audretsch, D.B. & Klomp, L. & Thurik, A.R., 2002. "Gibrat's Law: are the services different?," ERIM Report Series Research in Management ERS-2002-04-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
  14. Audretsch, David B, 1997. "Technological Regimes, Industrial Demography and the Evolution of Industrial Structures," Industrial and Corporate Change, Oxford University Press, vol. 6(1), pages 49-82.
  15. Ron A. Boschma & Jan G. Lambooy, 1999. "Evolutionary economics and economic geography," Journal of Evolutionary Economics, Springer, vol. 9(4), pages 411-429.
  16. Cressy, Robert, 1996. "Are Business Startups Debt-Rationed?," Economic Journal, Royal Economic Society, vol. 106(438), pages 1253-70, September.
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