Research Article
The Effect of Network Resources at Startup on Post-Startup Firm Performance and Strategy
Published: January 2007 · Vol. 36 No. 4 · pp. 1093-1118
Full Text
Abstract
Founding contexts matter in determining eventual organizational evolutions (Hannan & Freeman, 1997; Lawrence, 1984; Zald, 1987; Boeker, 1989). Among different facets of founding contexts, we focus on the founding network resources in this study. We define founding network resources as the cooperative relationships a firm creates with external organizations and individuals at the time of its founding. While the idiosyncratic organizational routines (Nelson & Winter, 1982) may emerge independently from the organization itself, it may as well be that those routines are an outcome of transferred practices and imitated processes from external sources, or their mutations with internally developed routines over random-based historical events and continuous interfaces with external environments. Inputs from a network of allies at founding stage, along with other founding contexts, create a genetic imprinting (Boeker, 1989) that lasts over the life of the organization. No organizations at their births can be free from the routines or genetic structures created by their predecessors. To varying degrees, start-ups inherit the routines of their family members, that is, the network of founding alliances. Like inheriting superior genes, as a start-up receives more of the positive influences from the founding alliances, the chances of its survival or performance would increase. Exposures to such positive influences from the founding alliances at the inception would also lead the start-up to become increasingly network-dependent in its behavioral patterns.We argue in this paper that an important portion of variations in firm performance and strategic behaviors one observes now can be traced back to firm's founding network resources in the past. Assuming the evolutionary context of the two different time stages i.e. firm's founding stage and post-founding stage, this research proposes and tests the following three theses relating to firm's founding network resources: (1) firm's initial endowment of network resources at the founding stage enhances the firm's eventual performance at post-founding stage, (2) the amount of founding network resources a firm starts with also influences how extensively the firm will rely on external networks for building its own competitive advantage and growth potentials at post-founding stages, (3) an important variations in the strengths of the above relationships can be accounted for by the differences in top manager's leadership. For the empirical investigations of our research questions presented in this paper, we found the game development industry of Korea fairly relevant as research sample. The game development industry of Korea suits our research purpose well in that bulk of the industry participants we observe today were newly created start-ups founded during a relatively identical time period i.e. mostly during the few years after 1997.
