Who Do Start‐Up Firms Imitate? A Study of New Market Entries in the CLEC Industry

Institutional theory contends firms imitate other firms with ideal traits, whereas the strategic groups literature on imitation suggests firms imitate similar firms. We address this debate by studying 1,067 market entries by founder‐managed start‐ups in the U.S. Competitive Local Exchange Carrier industry from 1996 to 2004. In support of the strategic groups literature, start‐ups imitate entry decisions of and gravitate toward markets that are densely populated by other start‐ups. Though start‐ups avoid markets already densely populated by corporate ventures, they imitate the market entries of corporate ventures. Our discussion of these and other findings provide insights for start‐ups navigating new industries.     

Angel Financing and the Performance of High‐Tech Start‐Ups

In this paper, we investigate what drives the performance of high‐tech start‐ups receiving angel financing, while taking a closer look at the capabilities (i.e., experience) and investment behavior of business angels (BAs). We exploit a new data set (extracted from Crunchbase), which consists of 1,933 high‐tech start‐ups that received at least one financing round from a BA. The results indicate that the experience of BAs in early stage investments is positively associated with additional receipt of follow‐on rounds of financing and sequential capital injections from venture capitalists (VCs). Later‐stage experience is positively associated with the start‐up's success (i.e., probability to be listed or acquired), but reduces the need for new VCs to invest in the start‐up. Furthermore, we find consistent evidence that start‐ups that combine BA and VC financing experience higher levels of funding amounts, additional VC financing, and an improved likelihood of success. Finally, we find that the co‐localization of BA investors and start‐ups in the same area facilitates the attraction of VC financing.     

The Capital Gains Tax: A Curse but Also a Blessing for Venture Capital Investment

Our study analyzes the effect of the capital gains tax on the individual investment decisions of venture capitalists. By doing so, we are able to study the decisions for a sample of 61,558 funding rounds in 32 countries from 2000 to 2012. Our results support the predictions of the theoretical model that higher capital gains tax rates are associated with fewer start‐ups financed and a lower probability of receiving follow‐up funding. However, the results concerning the effect on the probability of success of start‐ups show that a higher tax burden is associated with a higher probability of eventual start‐up success.     

Intra‐cluster Knowledge Exchange and Frequency of Product Innovation in a Digital Cluster

We investigate how intra‐cluster knowledge exchange affects the frequency of product innovation. Based on self‐administered survey data of digital SMEs from the Bournemouth and Poole regions of England, this study shows that digital firms that sustain both temporary and prolonged relationships with outbound employees have a higher probability of introducing frequent product innovation. Moreover, while cognitive proximity and the use of external knowledge providers increase the probability of frequent product innovation, geographical proximity reduces it. Our findings suggest that managers of young digital firms with limited resources in peripheral regions should ‘act near’ before reaching out.     

The Impact of Relational Capital on the Success of New Business Start‐Ups

This study seeks to highlight the key role played by relational capital in new business start‐ups. Following a review of previous research examining the success factors of new ventures and the role played by intellectual capital, our study sets out to achieve this objective by analyzing the impact of a set of intangible relational assets on the initial success of new business start‐ups. Based on a study of 130 firms, we analyzed six hypotheses regarding the possible positive relationship between the relational capital of a start‐up company and its success in its first few years of business.     

The Impact of Human and Social Capital on Entrepreneurs’ Knowledge of Finance Alternatives

Building upon prior research that demonstrates how the limited knowledge of finance alternatives of entrepreneurs may cause suboptimal finance decisions, this paper examines how entrepreneurs’ human and social capital influence their knowledge of finance alternatives. For this purpose, we use survey data from 103 Belgian start‐ups. Results demonstrate that entrepreneurs with a business education and entrepreneurs with experience in accountancy or finance have a broader knowledge of finance alternatives. Having a strong network in the financial community is further positively associated with the knowledge of finance alternatives. However, generic human capital, including higher education, industry experience, and management experience, is almost not related with the knowledge of finance alternatives.     

Impact of the Community Reinvestment Act on New Business Start‐Ups and Economic Growth in Local Markets*

Economic growth in the United States has historically bypassed many minorities and low‐income communities. Some researchers and community advocates assert that the deterioration of these communities is in part caused by financial institutions' redlining and neglect. To rectify the situation, the government introduced the Community Reinvestment Act (CRA) for the purpose of encouraging banks and saving institutions to become more socially responsible and help meet the credit needs of communities in which they are located. The CRA was the government's response to bank lending discrimination. However, when passing the Act, Congress was equally concerned with reversing or at least halting disinvestment from inner‐city communities and in turn revitalizing local economies. Many believe that the availability of credit to establish, refinance, and improve small businesses is critical to the well‐being of local communities. Therefore, through the provision of small business loans, the CRA could be envisioned as a catalyst toward achieving that goal. Thus the aim of this paper is to investigate potential relationship between banks' CRA lending activities, and new business start‐ups and economic growth in local markets. The paper proposes that new start‐ups will have spillover effects that will consequently contribute to community development. After controlling for several potential variables that could have an impact on business start‐ups and community developments, the study found a strong positive effect. Beside its social and economic implications, the study also considered policy implications associated with the CRA regulation as a welfare improving initiative in low‐income communities. It offers ground for certain government intervention in the loan market.     

Digital sport entrepreneurial ecosystems

The entrepreneurial ecosystems literature has increasingly explored network relationships between different stakeholders, as well as the role of context. This article addresses the challenge of including a sport context in the entrepreneurial ecosystem literature thereby contributing to the sport entrepreneurship literature by bringing insights from entrepreneurship ecosystem research. In‐depth interviews of football stakeholders in the sport entrepreneurship ecosystem are conducted in terms of understanding the emergence of digital sport start‐ups. The issues raised help explore the changing nature of digital entrepreneurial ecosystems to take into account new sport technological advances. Mixed embeddedness theory is used as the conceptual foundation to understand sport digital entrepreneurial ecosystems. Key management practices are identified in terms of sport start‐ups participating in entrepreneurial ecosystems. The article concludes by making suggestions for future research.     

The Impact of Social Capital on the Start‐ups' Performance Growth

This paper analyzes the development of strong and weak ties of social capital between a start‐up and its main customers and its impact on the growth of the start‐up's economic and innovative task performance outcomes. Results confirm that there are different configurations of social capital able to influence the start‐up's performance growth during its life cycle, which are contingent on the selected measures of task performance outcomes. Our findings can offer some interesting reflections in the field of social capital, entrepreneurship, and performance research, raising critical strategic implications for start‐ups in terms of opportunities, resources, and governance.     

Distance to Customers,Absorptive Capacity,and Innovation in High‐Tech Firms: The Dark Face of Geographical Proximity

This paper investigates the impact of both geographical and relational proximity on the innovative performance of the firm. We address the role of one firm characteristic—its absorptive capacity—as a specific contingency affecting the relationship between different proximities and innovation. Using data from 158 high‐tech firms located in the Tiburtina Valley in Italy, we studied the relationship between these firms and their key customers. Our findings support the need to downplay the role of geographical proximity in promoting innovation. Our results also show that relational proximity to key customers has a complementary relationship with absorptive capacity, which positively moderates its influence on innovative performance.     

New Competence Creation in Multinational Company Subunits: The Role of International Knowledge

It has been demonstrated that more creative innovative activities of subunits of multinational companies (MNCs) rely upon the munificence of local knowledge in the host country. Here, we argue that the strength of international business network connections of a host location influences the potential accessibility of international knowledge and hence tends to widen the domain of new knowledge search that can be successfully undertaken by an MNC subunit. This in turn increases the likelihood of an MNC subunit building new areas of competencies, that is, in fields of competencies which are relatively new to the MNC. Specifically, we suggest that the relevant international business network connections are those involving local actors in the MNC subunit's relevant industry. Moreover, geographical proximity between MNC subunits and their parent company has an inverse U‐shaped relationship with new competence creation by subunits. Using a balanced panel data set on innovative activities conducted abroad by 194 of the world's largest industrial firms from 1975 to 1995, we find support for our expectations.     

The Role of Geographic Location in the Acquisition Strategies of High‐Technology Firms: Evidence from Computer Networking Equipment Industry

The present study focuses on the acquisition strategies of Cisco Systems, a comprehensible representative of high‐technology firms. This investigation has depicted a dynamic picture of acquisition behavior when the geographic location of targets varies. Analysis has revealed that high‐technology firms are more likely to acquire co‐located start‐ups. Our findings suggest that high‐technology firms are more likely to acquire targets who have received an earlier equity investment and whose technologies have been standardized. We have also found partial evidence that supports the argument that high‐technology firms pursue cluster‐based acquisitions. Analysis suggests that access to patents does not matter for start‐up companies located in industry clusters while their counterparts outside these clusters need patents to become acquisition targets. © 2013 Wiley Periodicals, Inc.     

The Relationship Between Top Management Team–Outside Board Conflict and Outside Board Service Involvement in High‐Tech Start‐Ups

Corporate governance research has extensively studied the relationship between outside board characteristics and outside board involvement. We add to this literature by investigating the extent to which interactions between outside board members and the top management team (TMT) affect the functioning of the outside board. Building on conflict theory, our study shows that conflict between TMT and outside board is an important antecedent for outside board service involvement. Specifically, drawing from a hand‐collected data set of 70 high‐tech start‐ups in Belgium, we find that TMT–outside board task conflict is both directly and indirectly, that is, through TMT–outside board relationship conflict, related to outside board service involvement.     

Entrepreneurial Access and Absorption of Knowledge Spillovers: Strategic Board and Managerial Composition for Competitive Advantage

The resource theory of the firm implies that knowledge is a key resource bestowing a competitive advantage for entrepreneurial firms. However, it remains rather unclear up to now how new ventures and small businesses can access knowledge resources. The purpose of this study was to suggest two strategies, in particular, that facilitate entrepreneurial access to and absorption of external knowledge spillovers: the attraction of managers and directors with an academic background. Based on data on board composition of 295 high-technology firms, the results clearly demonstrate the strong link between geographical proximity to research-intense universities and board composition.     

The Trade‐Off between Foreign Direct Investments and Exports: The Role of Multiple Dimensions of Distance

To serve foreign markets, firms can either export or set up a local subsidiary through horizontal foreign direct investment (FDI). The conventional proximity–concentration theory suggests that FDI substitutes for trade if distance between countries is large, while exports become more important if scale economies in production are large. This paper investigates empirically the effect of different dimensions of distance on the choice between exports and FDI. We find that different dimensions of distance affect exports and FDI differently. There is clear evidence of a proximity–concentration trade‐off in geographical terms: the share of FDI sales in total foreign sales increases with geographical distance. The positive relation between import tariffs and FDI intensity provides further evidence for a trade‐off resulting from trade costs. On the other hand, the share of FDI decreases with language differences and cultural and institutional barriers. The latter dimensions of distance thus affect FDI more strongly than exports.     

Small business is big business

The number of small business start‐ups in the UK continues to increase. This article discusses the stages of business and marketing development that a small business can expect to encounter. Success in business depends upon a number of factors, these are described and discussed under the headings of individual qualities and key components.     

Export Survival in Global Production Chains

In this paper, we examine the survival capacity of trade relationships in cross‐border production chains. Our main contribution is to show that there are differences in the probability of export interruption between intermediate and final stages along the global value chain, finding a lower sensitivity of intermediate goods to the increasing competition from lower‐income countries. In addition, the paper also makes a methodological contribution by using time‐discrete duration models with product‐country random effects to control for unobservable heterogeneity and by including interactions in the model, in order to identify the sources of these differences. Our estimates show that variables such as EU membership, export experience, product and market diversification, initial trade value, destination market size, geographical proximity and economic proximity reduce the likelihood of export failure more for intermediate than for final goods, being the differential impact particularly higher for the two first variables. These results would suggest that factors that reduce uncertainty and search costs and increase trust and reliability among production partners are particularly relevant for intermediate stages, fostering the probability of remaining an active member of global production chains.     

Spatial Econometric Analysis of Foreign Direct Investment Determinants in Russian Regions

Using a spatial autoregressive model of cross‐sectional and panel data, we study the determinants and dominant strategies of foreign direct investment (FDI) inflows into Russia before and after the 1998 financial crisis. The important determinants of FDI inflows into Russian regions since the start of transition appear to be market size, the presence of large cities and sea ports, oil and gas availability, proximity to European market, and political and legislative risks. Since 1998, it appears the importance of big cities, the Sakhalin region, oil and gas resources, proximity to European markets, and legislation and political risks has increased. Our results also reveal a shift from horizontal FDI strategy to vertical FDI strategy in the post‐crisis period. Using a multiple spatial lags approach, we show that neighbouring port‐endowed regions tend to have emerged in the post‐crisis era as competitors for FDI.     

Does Founders' Human Capital Matter for Innovation? Evidence from Japanese Start‐ups

Using an original questionnaire survey, this paper explores whether and how founders' human capital affects the innovation outcomes of start‐ups. We found that founders with greater human capital are more likely to yield innovation outcomes. Because certain types of human capital may boost research and development (R&D) investment, which possibly results in innovation outcomes, we estimate the determinants of innovation outcomes by an instrumental variable probit model. Our findings suggest that specific human capital for innovation, such as prior innovation experience, is directly associated with innovation outcomes, whereas generic human capital, such as educational background, indirectly affects innovation outcomes through R&D investment.     

Competition and demand effects of geographic distance to rivals

Based on previous research in the literature of spatial economics and agglomeration, this study proposes that a firm's geographic distance to its rivals may have two opposite effects on prices which depend on the strength of local demand. In periods of high demand, the competition effect of proximity is relatively smaller than the benefits of being geographically close, which results in a positive net effect of proximity on prices. To the contrary, in periods of low demand, the negative competitive effect of proximity will be greater than the positive effect; therefore, the net effect of proximity on prices is negative. The results for a sample of 1838 hotels support the two contrary consequences. These findings contribute to increase our knowledge of the relation between geographical distance and prices in service industries in which competition is local and demand fluctuates over time.