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

  • Authors:
  • Ornit Raz;Peter A. Gloor

  • Affiliations:
  • Sloan School of Management, Massachusetts Institute of Technology, E40-339, 77 Massachusetts Avenue, Cambridge, Massachusetts 02139-4307;Sloan School of Management, Massachusetts Institute of Technology, E40-339, 77 Massachusetts Avenue, Cambridge, Massachusetts 02139-4307

  • Venue:
  • Management Science
  • Year:
  • 2007

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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.