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Size Really Matters—New Insights for Start-ups’ Survival

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
ornit{at}mit.edu
pgloor{at}mit.edu

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.

Key Words: organizational studies; strategy; communication networks; start-ups
History: Received: May 5, 2005;