Networks and Local Environmental Characteristics in the Survival of New Firms

This study seeks firstly to clarify which networks at start-up situation and early in life influence the survival of new firms. Secondly the study examines regional differences in the success of new firms. The subjects were firms which had closed down during their fourth to sixth year of operations, and they were compared with firms continuing in business. The results indicate, firstly, that it is networks internal to firm that create competitive advantage, innovation and efficiency. Secondly, management based on working in groups was emphasized in the firms that continued in business. In a typical family enterprise, ownership, management and family are united in a single entity. In other types of firms networks are seen as participating in the strategic management of the firm. Thirdly, close-downs were often caused by uncontrolled risks. A firm which fails after a successful start-up often tends to grow rapidly in the beginning, leaning on its product idea, but this rate of growth is too high from the viewpoint of the financing and the management of the firm. In firms which closed the growth objectives were too ambitions compared with the resources of the entrepreneur.     

A comparison of new firm financing by gender: evidence from the Kauffman Firm Survey data

This study uses data from the new Kauffman Firm Survey to explore gender differences in the use of start-up capital and subsequent financial injections by new firms. We find that, consistent with previous studies, women start their businesses with significantly lower levels of financial capital than men. A new finding from this research is that women go on to raise significantly lower amounts of incremental debt and equity in years two and three. These results hold even controlling for a variety of firm and owner characteristics, including the level of initial start-up capital and firm sales. Our findings also reveal that women rely heavily on personal rather than external sources of debt and equity for both start-up capital as well as follow-on investments. Our findings have implications for further research into gender differences in financing sources and strategies and business outcomes.     

Firm networks and firm development: The role of the relational mix

This study examines the role of different networks, called the relational mix, on the development of the entrepreneurial firm. Our regression analysis of survey data from 60 venture capital-financed firms questions the importance of network size on firm development. Rather, our results suggest that different types of networks are more important for firm development. In particular, we found a significant positive relationship for reputational networks and a weak significant negative relationship for cooperative technology networks at founding with time-to-break-even. Social networks at founding have no direct effect on time-to-break-even and a significant negative relationship with sales in the years after foundation. Furthermore, our findings show the important role of marketing information and co-opetition networks (relationships with direct competitors) on firm development in the years after foundation. These results suggest that the relational mix is a more appropriate construct for explaining network development than network size alone.     

The High Growth in New Metal-Based Manufacturing and Business Service Firms in Finland

This study examined the effects of the factors involved in the start-up situation and the first seven years' development on the subsequent high growth of firms. The criterion of success used in this study was high growth in business during the first seven years. The subjects were Finnish metal products manufacturing firms and business service firms established in 1990. The results indicated, firstly, that it is the internal networks of firms that bring about competitive advantage, innovations and efficiency. In these entrepreneurial team-driven firms a group of people participate in the strategic management of the firm. It was also found that co-operation between firms and changes in external personal networks contributed to a high rate of growth. The empirical results showed that new firms had equal chances for growth irrespective of their locality. On the other hand, growth was affected by changes in a new firm's competitive situation and by changes in strategic factors. The results also clearly indicated that high growth firms were characterised by rising productivity of labour at the same time as they were generating new jobs.     

Business Incubation Centers and New Firm Growth in the Basque Country

The purpose of this article is an attempt to identify those factors related to human capital and organizational resources which help in overcoming barriers to survive during the infancy period of firm start-ups. The paper aims to find out the extent to which the support received by entrepreneurs from incubator centers is critical to ensure firm life. Primary data have been used to conduct an empirical analysis on a sample of 114 start-up firms participating in a business assistance program (i.e., business incubation centers). Results from regression analyses suggest that human capital attributes of entrepreneurs and certain start-up firm characteristics seem to be critical to explain business success. An important implication of this study is that, despite the economic advantages derived from this policy based on the promotion of business incubation centers policy makers should be cautious in its application. Empirical evidence from our study suggests that a portion of new firms being nurtured in business incubation centers may cause the exit of more efficient incumbent firms not receiving such policy support.     

The Effects of Learning on Relationship Value in a Business Network Context

ABSTRACT

In today's intense global competition, a firm's ability to learn from its networks of business relationships is an important source of sustainable competitive advantage. Learning in a network of relationships involves a constellation of resource linkages among business partners tied together by interconnected resources. This has the potential of increasing the relationship value of a firm in terms of knowledge created through interactions among firms in the business network. Prior research has not yet examined the effects of learning in and through relationships in a business network context. Interdependence of firms in business networks gives rise to learning effects of adaptation and coordination that can have implications for relationship value. An empirical study of 215 business relationships from a network of nine high-technology companies in the United Kingdom shows that learning in and through relationships as a result of interactions and resource interdependencies in networks of relationships has a positive effect on a firm's relationship value. Furthermore, an understanding of the network context through interactions among firms facilitates learning and development of the firm's learning capabilities that enhance relationship value.     

The function-specific microfoundations of dynamic capabilities in cross-border mergers and acquisitions

In mergers and acquisitions, the acquiring firm must combine two firms’ resources and capabilities so that the outcome yields value. In individual firms, the marketing & sales, and R&D functions have typically developed intertwined and complex relationships over time. These multifaceted dependencies may obscure the integration of the firms and their functions. In order to reveal to what extent cross-functional relationships determine the success or failure of an acquisitions, we have made one of the first attempts to study merging firms’ function-specific capabilities, underlying microfoundations, and their cross-functional relationships during the integration process—instead of focusing on acquisition capabilities as such. We use longitudinal data from two cross-border acquisitions between US and Finnish SMEs. Our results indicate that major differences between merging firms’ cross-functional microfoundations—that is, their structures, processes, routines, and skills—might either enforce or erode the seemingly promising synergies at the product and market levels, depending on managerial awareness of their nature.     

New evidence in the pursuit of locating new businesses

Finding good, generalizable samples has long been an Achilles heel for those interested in entrepreneurship-related phenomena. Practitioners, policy makers, and researchers frequently desire to take the pulse of entrepreneurial activity but struggle in doing so. For example, Friedman (1995) reported that California overestimated job loss by 2.4 times because of failure to account for newer, more robust firms. With the goal of being able to better identify new businesses, this research addresses the following questions: (1) Which sample sources best identify new businesses? (2) Are the characteristics of a sample drawn from one source similar to those drawn from a different source? (3) How accurate are the different sample sources in the information they report? and (4) How practical and cost effective are the different sample sources?We pursued answers to these questions by examining the state sales tax file and comparing it with the previously examined sources of the state unemployment insurance file (ES202) and Dun & Bradstreet's Dun's Market Indicator file (DMI) (Birley 1984; Aldrich et al. 1989). The phonebook was also used to examine its overlap with the three primary sources. In making these comparisons, we evaluate generalizability issues, accuracy of founding date, cost, practicality, and other auxiliary information.Sales Tax FileOur findings suggest that the sales tax file is a rich source for identifying generalizable samples. The accuracy of the founding data was correct over 70% of the time, and it appears to identify businesses very early in the start-up phase. The data also are available in machine readable format, give some helpful auxiliary information, and the cost of obtaining the file was negligible. Another advantage of the sales tax file is its ability to identify new businesses that do not have visible on-street locations. Thus, the sales tax file appears to be a very credible source for identifying firms early in the start-up process.ES202 File, DMI File, and Phone BookOur study affirms earlier studies that found major limitations with both the ES202 and DMI files. More specifically, this study found that both sources have substantial limitations in identifying new start-up firms, and they both appear to be slow in removing firms from their records once they have moved or gone out of business. As for the phonebook, as it is only issued annually, it takes some time for new businesses to be listed in the directory. Furthermore, because so many of the new businesses identified by the sales tax file initially operate out of the entrepreneur's home (58% in our survey sample), the enumeration/phonebook method would miss many new businesses unless they had a business phone listing and a business sign on their residential property. Thus, we do not consider the enumeration/phonebook method to be very practical, nor the best method for identifying new firms.In sum, these findings give renewed hope in locating generalizable samples of new businesses. Although the sales tax file is not a perfect source, it represents a very attractive alternative for those interested in identifying entrepreneurial firms early in the start-up phase. These findings should assist practitioners, policy makers, and researchers in making better sample selections, which should lead to more accurate indicators of new business start-ups, fewer sample biases, and ultimately, to a better understanding of the determinants of new venture failure and success.     

The role of networks in the entrepreneurial process

The extent to which the entrepreneur interacts with the networks in his local environment during the process of starting a new firm was studied. This study was based on the premise that, during this process, he is seeking not only the resources of equipment, space, and money, but also advice, information, and reassurance. Consequently the help and guidance received from both the formal networks (banks, accountants, lawyers, SBA) and the informal networks (family, friends, business contacts) will influence the nature of the firm substantially.The study was conducted in St. Joseph County, Indiana, a county that has experienced the same economic problems as many other towns in the midwest smoke-stack belt during the 1970s. In 1982, in response to this general decline in the business climate, a fund was raised to create and manage a new industrial strategy. Before this, there was no collective strategy for nurturing either the small firm or the new firm. Therefore, in order to determine the extent to which an interventionist strategy was appropriate, a research project was designed that posed three basic questions: what does the environment look like; does it need changing; and, if so, in what ways? This article reports part of that study—a survey of firms that had started in the county in the previous five years (1977–1982). It was concerned with two issues: the characteristics of the St.Joseph County entrepreneur and the usage of the formal and informal networks.The results of the survey show that the aggregate characteristics of the St. Joseph County entrepreneur are similar to those found in other studies. The new firms were founded by local people from small firms who started their small firms in similar industries that were local in nature. Moreover, the majority (90%) not only started small, but also grew very little subsequently—firms that have been classified elsewhere as life-style ventures. It is to be expected that such people would have a strong local network, both formal and informal, particularly in a county with a population of only 220,000. However, the results of the second part of the study showed that the main sources of help in assembling the resources of raw materials, supplies, equipment, space, employees, and orders were the informal contacts of family, friends, and colleagues. The only institution that was mentioned with any regularity was the bank, which was approached towards the end of the process when many of the resources were assembled and the elements of the business set in the entrepreneur's mind. This was not because the formal sources were unwilling to offer guidance, but rather that the entrepreneur and his social network appeared to be unaware of what was available. Moreover, in using only business contacts, family, and friends, the entrepreneur was likely to re-create the elements of previous employment, even when he was starting business in an entirely new market. Further, there was no significant difference between growth and no-growth firms. It would appear that in this county, the formal network was uniformally inefficient.This research shows that a major aim of the new strategy should be to increase the awareness of the community to the formal sources and types of help that are available. However, whilst most of the institutions are prepared to solve specific problems, they are not in the business of diagnosis or counseling. The network needs a hub or an enterprise office.The data on the start-up process and the role of networks in relation to new firms are very sparse and often anecdotal. This study was conducted in one environment, a small midwest county with a jaded entrepreneurial tradition. Further studies are necessary. Research questions include the extent to which networking is crucial in the start-up process, the length of time it took for the sophisticated networks of Boston's Route 128 and California's Silicon Valley to develop, and the effect of different geographic, cultural, and economic conditions. Only in this way is it possible to determine the extent to which regional, regeneration strategies for new firm creation should be county specific rather than state or country wide.     

New ventures and employment growth

The research studied the extent to which the employment size of a new firm is set the start, how many subsequently grow, and whether those that survive and grow have any identifiable characteristics. Answers to these questions would help to determine whether future assistance programs aimed at improving the performance of new firms should concentrate on the actual start-up process or on the first few years of trading.The study was pan of a series conducted in St. Joseph County, Indiana, a county that had experienced the same economic decline as the rest of the midwest, rust-belt of the United States. It formed part of a community effort, named Project Future, to develop a strategy for industrial regeneration. The series first examined the characteristics of the new firm population during the years 1976–1982 (Birley 1985, 1986), and two results emerged that were pertinent to this study. First, 92% of the firms that ceased trading in the first two years were the smaller ones, employing less than 20 people: second, the entrepreneur in the county tended to use only the informal networks of family and friends when gathering the resources of the firm, rather than the formal networks of accountants, lawyers, realtors, and banks. The question that remained, therefore, and which formed the basis of this article, was the extent to which it was possible to identify, and thus focus the strategy upon, those firms or industrial sectors that exhibited growth characteristics. Three research questions were posed: how many tended to grow during the first few formative years; what was the rate of growth and on what dimensions did it occur; and when did growth occur—were there differences in the growth of firms of different ages?The primary measure of growth used was that of employment. For both the start of the firm and at the time the questionnaire was administered (1983), data were collected on the number of owners, part-time and full-time, and on the number of employees both part-time and full-time and on their level of skill. Financial data included sales level, profits level, and forecast sales trend. Indicators of possible change were either an altered legal structure or a move of premises. Control variables included incubator characteristics, industry, and supplier and customer geographic base.The results of the study show that, for the majority of the firms, employment size was set at the start. No aggregate growth occurred in either full-time or part-time jobs, nor was there any apparent age effect. During the six years studied, firms that had increased the number of employees were of all ages. Those firms that grew sales during the early years did so by increasing the customer base, and without generating further jobs.Analyzing growth by industry, only one significant result emerged: Entrepreneurs from smaller companies tended to set up in competition with their incubator firm, while those from larger firms tended to start firms with no apparent relationship to their previous employment.The major inference from this study is that growth would appear not to be a primary objective of the entrepreneur. Further research to test these results is clearly necessary. Should they be replicated elsewhere, however, future strategies to improve the job generation capabilities of new firms would be most fruitful if directed at building a solid foundation for all firms rather than trying the impossible task of “picking winners.” Such assistance can only be provided at the time that the resources necessary for the successful launch of the firm—premises, equipment, orders, employees, money—are being assembled. Since almost all of these firms are local in nature, strategies that devise specific schemes tailored to meet local needs and using local people are most appropriate. By contrast, the small number of high-growth firms should be easily identifiable in the community and assisted individually.     

A study of the impact of owner's mode of entry on venture performance and management patterns

This study examines if firm performance and the associated patterns of management vary with the owner-manager's mode of entry into the firm in owner-started (OS), buyout (BO), and family firms (FF). Prior research suggests that these three types of firms differ on certain managerial characteristics but has not examined the role of the owner-manager's mode of entry in determining firm performance on the one hand and its influence on the firm's management pattern on the other.We collected data from 345 firms, employing four to 99 employees, operating in four northeastern states. Self-reported return on assets (ROA), annual sales, business strengths, competitive strategies, and management practices were compared for OS, BO, and FF firms. Performance was found to vary with owner's mode of entry. The 227 OS firms' average ROA was significantly higher than that of the 61 family firms and the 57 BO firms. Successful start-up owners may have enjoyed greater profits because they assumed greater risk compared to those who opted to buy an existing venture or took over a family firm. Annual sales were highest for FFs, second for OS firms, and the lowest for BOs. In terms of management patterns, owner-started firms rated themselves significantly higher on business strengths and tended to have higher self-ratings for competitive strategies and operations strengths than did FFs or BOs. All of these differences were significant after controlling for the age and size differences among the firms, indicating that mode of entry did directly impact performance as well as the management patterns.Examining the impact of mode of entry versus management patterns on venture performance, we found that while the OS mode of entry was associated with greater ROA, this was primarily due to the different management patterns adopted by the OSs. Looking at annual sales, the FF mode of entry was associated with higher sales, and this was independent of the types of management patterns adopted by the firms. A priori, BOs would appear to be in a better position to achieve superior performance, but this was not so in this sample.Further analysis revealed different paths to profitability for the three entry modes. For OS firms, high ROA was associated with operating in the service and retail sectors, developing a broad range of business strengths, and offering competitively priced but higher quality customized products. For OSs, ROA was also enhanced by using informal and personalized management practices. Sales performance was greatest when OSs employed trained staff for functions such as budgeting and sales. For FFs, ROA was enhanced by broad-ranging strengths, but it was hurt by price and quality competitiveness—mainly because on average, their lower prices were not supported by a competitive cost of goods. Sales performance was greatest when FFs had owner-managers with extensive industry experience, were conservative in adding workers, emphasized product customization, relied on written reports, but avoided long-range operations planning. Management patterns of BOs were not related to their ROA, but their annual sales were marginally higher when the acquiring owners had extensive industry background and employed a large workforce.Thus, this study confirms our hypotheses that performance and management patterns vary across mode of entry as does the effectiveness of strategic management patterns. Further, our findings concurred with previous studies which suggested that sales performance and profitability were likely to be influenced by different management actions. This study demonstrates that owner's mode of entry is an important explanatory variable for variations in performance as well as management patterns. Venture CEOs need to recognize that different management approaches may be needed for success depending upon whether they founded, purchased, or inherited their firms.     

The role of social networks and institutions in the internationalization of Russian entrepreneurial firms: Do they matter?

Drawing upon network theory and institutional theory, this paper examines the influence of networks on the internationalization of Russian entrepreneurial firms. Our case analysis suggests that within the context of the Russian environment, networks play a much less important role in the internationalization process than it is usually assumed in the literature. For the Russian entrepreneurial firms examined in our study, the most important factor in their internationalization was their engagement in honest business practices that established trust and commitment in their relationships with international business partners. This study underscores the importance of the institutional context of an entrepreneurial firm’s country.     

The effect of investor origin on firm performance: Domestic and foreign direct investment in the United States

This paper evaluates the causal relationship between the source of origin of FDI and the performance of the target firm. The empirical analysis uses new data on a comprehensive sample of public U.S. firms that received FDI between 1979 and 2006. To account for the possibility that performance differences arise due to the selection of superior target firm rather than the change in ownership, I use propensity score matching to create similar comparison groups of target firms prior to acquisitions. The analysis reveals three major findings. First, acquiring firms from industrialized countries lead to labor productivity increases of 13% in the target firm three years after the acquisition compared to targets acquired by domestic firms. Firms that received developing country firm acquisitions, on the other hand, exhibit lower labor productivity gains four years after acquisition, compared to targets acquired by domestic firms. Second, targets receiving FDI by firms from industrial and developing countries also experience increases in profits, compared with firms receiving acquisition by domestic firms from the United States. Third, compared with domestic acquisitions, foreign industrial firm acquisition FDI tends to increase their targets' employment and sales, whereas targets acquired by firms located in developing countries experience a decrease in both revenues and total number of employees. These findings suggest that target firms are subject to significantly different restructuring processes depending on the origin of the acquiring firm.     

Export performance of emerging market firms

I investigate the export performance of firms from emerging economies based on resource based view (RBV) of a firm. Based on review of extant literature, I identify firm size, research and development expenditure, advertising expenditure and business group affiliation to be important antecedents of level of exporting activities of a firm. I utilize a two-stage least square estimation (G2SLS) on a sample of 47,140 firm-year observations over a period of sixteen years from 1990–2005. The findings suggest that export sales and domestic sales are interdependent and affect each other. R&D expenditure and business group affiliation positively affect export sales, however advertising expenditure negatively affects export sales.     

New business entrepreneurship in the Japanese economy

This article presents the results of a study focused on the role of new business entrepreneurship in the Japanese economy. Particular attention is paid to the activities of various government agencies in relation to new business entrepreneurship and to the barriers to this activity in Japan. New business entrepreneurship was defined as the formation and rapid growth of a business enterprise through unique approaches to the firm's activities.In contrast to the American stereotype of Japan as an economy of a few large, interconnected firms, it is, in fact, characterized by small- and medium-sized enterprises. Over 99% of all Japanese enterprises are categorized as small or medium and over 80% of all employed Japanese are employed by such firms. However, very few of these firms are entrepreneurial in nature. The vast majority are small firms that are either subcontractors to a single larger firm or small retail, wholesale, or restaurant establishments.The start-up rate for all types of businesses in Japan has been declining for the past 10 to 15 years. More importantly, the rate of start-up s for independent firms, as opposed to firms started by a larger firm to serve primarily as a subcontractor, declined even more sharply. This indicates a significant weakness in Japan's otherwise strong economy.The low and declining rate of new business entrepreneurship in Japan is a function of structural, governmental, and cultural barriers. Structural barriers include an acute, long-term labor shortage, high financial start-up costs due in large part to high land prices, and a shortage of venture capital funding. Government barriers include “red tape,” financial and other support for small firms that is withdrawn as they enter rapid growth, and the persistent protection of inefficient industry structures. Cultural barriers involve Japan's strong group/collective orientation, the traditional career path in Japan, bounds on creativity, and the fact that entrepreneurship is not assigned a high social value.While the government provides an extensive, well-developed network of services for small- and medium-sized firms, these programs are not designed to facilitate rapid growth into the large firm phase. The Japanese experiences and programs offer useful insights for policy and tactics by other governments.     

Survival patterns among newcomers to franchising

This study examines survival patterns among franchisee and nonfranchise small firms and establishments that entered business during 1986 and 1987. Aspiring entrepreneurs purchasing franchises choose this path to small business entry, in part, because they expect to improve their chances of survival during the turbulent early years of operation. Evidence to date has been mixed: some studies conclude that franchising is a low-risk route to small business ownership, while others suggest that independent start-ups are more likely to remain in operation than franchises.This study utilizes two distinct methodological approaches to investigate franchisee survival patterns. The first approach demonstrates that franchise units have better survival prospects than independents, and the second approach demonstrates that young firms formed without the benefit of a franchisor parent are more likely to remain in operation than franchised start-ups. Reconciliation of these seemingly inconsistent findings is explored.Survival measurement is heavily influenced by the unit of analysis in franchising. Firm-specific data show different patterns than establishment-specific data when young franchise units are tracked through time. Analysis of establishments owned by corporations is undertaken for restaurants opened nationwide in 1986 and 1987. Using Census Bureau data describing corporate-owned restaurant establishments that reported payroll to the IRS in 1987, 52,088 young establishments were identified; 22.5% were franchises. Comparison of the franchisee and independent restaurant units indicated that independents were more likely to cease operations by 1988 than franchises.The fact that franchisee establishments had a better survival track record than independent restaurants does not, however, demonstrate that aspiring entrepreneurs improve their survival prospects by purchasing a franchise. In fact, 84% of the new franchise establishments under consideration were units of multi-establishment corporations, and few of these corporate parents were new businesses. Envision a corporation in operation for 15 years that owns 20 McDonalds restaurants; in 1987 they opened their twenty-first unit. The findings of this study indicate that this twenty-first unit has excellent survival prospects, more so than either an independent start-up or a franchisee opening a restaurant for the first time. New franchised restaurant units, overall, may be a safe investment, although simultaneously, the newcomer opening a franchise may face a high-risk situation.The analysis then shifts from establishments owned by franchisees to young firms (not establishments) started in 1986 and 1987 as proprietorships, partnerships, or S-corporations. Among these young firms, franchisees are found to have lower survival rates than independent start-ups, and these differences persist when various firm and owner traits are controlled for statistically. Retailing is found to be a particularly difficult field for young franchised firms: risk of firm closure is high and mean profits are negative. The most common route into retailing entailed purchasing an operating franchise unit from its previous owner, that is, an ongoing franchise. Over 53% of the young franchised retailing firms started in 1986 and 1987 were ongoing operations. By 1991, only 52.4% of these firms were still operating with the owner of record present in 1987.The findings of this study indicate, on balance, that purchase of a franchise is unlikely to reduce the risks facing a new business start-up. This does not imply that the multi-establishment franchisee adding another new franchise unit to its existing chain of operations faces a high-risk situation. Rather, the high risk facing the franchisee newcomer is partially rooted in the fact that so many of the newly-opened units in mature franchising niches are owned by multi-unit franchisees that have greater experience and resources than newcomers who are attempting to enter the industry.     

Disentangling the effect of services on B2B firm value: Trade-offs of sales,profits, and earnings volatility

In the face of declining business and growing pressures from low-cost competitors, many business-to-business (B2B) manufacturers have moved from their previously successful product-centric strategies to more service-oriented business models. Yet despite their substantial investments in services, firms fail to understand the performance ramifications of these offerings. With a longitudinal data set (2001–2016) of 227 B2B manufacturers listed in the S&P 1500 index, this study disentangles the simultaneous effects of financial-based mechanisms that link the service ratio (i.e., share of a firm's revenue generated from selling services) to firm value. The findings reveal significant trade-offs across these mechanisms. Although the service ratio monotonously boosts sales growth, it has U-shaped curvilinear relationships with profitability and earnings volatility. These effects also depend on industry- and firm-level factors. Industry maturity positively moderates the effects of the service ratio on sales growth and profitability. However, business scope has an adverse effect on the service ratio–profitability relationship. Finally, industry turbulence negatively moderates the effect of services on earnings volatility.     

Does trade credit play a signalling role? Some evidence from SMEs microdata

Using micro-data on small- and medium-sized enterprises, this paper empirically investigates the “signalling hypothesis” formulated on the role of trade credit (Biais and Gollier in Rev Financ Stud 10: 903–937, 1997; Burkart and Ellingsen in Am Econ Rev 94: 569–590, 2004). The research method adopted allows evaluation of the impact of suppliers’ credit on bank debt accounting for the strength (duration) of bank–firm relationships. Our main finding is that trade credit seems to have an information content for banks, especially when the latter do not dispose of adequate (soft) information on firms, which is likely the case at the beginning stages of bank–firm relationships. An implication of our results is that the availability of suppliers credit might be crucial to foster access to institutional funding for new firms entering the market. Our evidence also suggests that banks seem to consider suppliers a reliable source of information on firms’ financial conditions even after several years of lending relationships.     

Does family employment enhance MSEs performance?: Integrating socioemotional wealth and family embeddedness perspectives

This paper analyzes the effect of family employment on performance in micro and small enterprises (MSEs) by combining two research perspectives that, until now, have been conducted separately: the family embeddedness perspective of entrepreneurship (Aldrich and Cliff, 2003) and the socioemotional wealth (SEW) approach to family business (Gomez-Mejia et al 2007). Our integrated perspective allows us to highlight how the nature of the employment relationships in MSEs enhances the benefits derived from the socioemotional endowment associated with family labor, and reduces the opportunity costs of employing relatives. Moreover, we assert that this relationship is moderated by specific family characteristics that determine the firm's ability to preserve the SEW, while at the same time pursuing financial goals. Our results provide partial support to the enhancing role of family labour on MSEs performance: employing family members increases sales but decreases profitability as measured by ROA. This effect also results in improved performance for women-led firms and for firms that have received family funding, but impairs MSEs performance when the business is the main source of the owner´s household income.     

Changing Paradigms of International Entrepreneurship Strategy

This article identifies sweeping transformations taking place in the contemporary international business environment, and discusses their impact on international entrepreneurship. We focus on two overarching trends: (1) the demise of the nation-state as the relevant unit around which international business activity is organised and conducted; and (2) the demise of the stand-alone firm, with a hierarchic distribution of power and control, as the principal unit of business competition. We then discuss an alternate approach to internationalisation: one that involves a multi-polar distribution of power and control. Traditional approaches to internationalisation focus on the hierarchic centralised firm, with a uni-polar distribution of power and control. We suggest that the world is moving towards multi-polar networks of firms, involved in what we term symbiotic management: each entity benefits from working together within a multi-polar network. This includes large corporations as well as small and medium-sized enterprises (SMEs). As corporations out-source to specialised firms–increasingly SMEs–power and control are dispersed among independently owned firms that are cooperating voluntarily for increased efficiency and profit. The new paradigm moves from a focus on the firm, towards a focus on relationships within multi-polar networks. We conclude by illustrating how this emerging competitive paradigm may impact on the strategic management of small firms, with examples from a real-world company.