Big Fish versus Big Pond? Entrepreneurs, Established Firms, and Antecedents of Tie Formation

Abstract

Entrepreneurial and established firms form collaborative relationships to commercialize products. Through such ties, entrepreneurs seek (a) development help to hone ideas into marketable products and (b) access to markets. In most cases, entrepreneurs face a trade-off: they can be a big fish in a small pond , getting more attention and development help from a smaller firm with less market access, or a small fish in a big pond , getting less attention and help from a larger firm with more market access. Our study investigates what goes into choosing between these options. Drawing from resource dependence theory and an empirical study of tie formation between developers and publishers of PlayStation 2 video games, we develop and test a framework that identifies the key decision variables and focuses on two moderators—resource need evolution and resource uncertainty related to competition—that explain whether a big fish (more development help) or a big pond (more market access) drives tie formation. Our findings point to prospective peers as one of the significant decision criteria at tie formation and highlight the dynamic nature of resource dependence. Altogether, the results give resource dependence theory a dynamic element it has lacked in the past.