The Causes and Consequences of the Initial Network Positions of New Organizations: From Whom Do Entrepreneurs Receive Investments?

Abstract

This paper examines the mechanisms by which new organizations establish their initial network positions, or sets of network ties from which their future tie networks evolve. I develop hypotheses from two competing logics, one based on the effects of previously developed network ties and the human capital of a new organization's founders and the other based on the effects of a new organization's early accomplishments. I test these logics in a study of 92 Internet security ventures forming ties by receiving investments from venture capitalists and other investment organizations between 2000 and 2005. In contrast to how the network positions of established organizations evolve, I find that new organizations forming their first ties early obtain their initial network positions through their founders' ties and human capital, while new organizations forming their first ties later achieve their initial network positions through their organizational accomplishments.