Funding and Social Networks: The Case of the Minnesota Network MAA - Medical Alley Association

Abstract

The objective of this research is to demonstrate that companies, within a given industry network, benefit from their social network clusters to get better access to financing. Recent research has demonstrated the efficiency of social network connections for early venture financing, achieved through bank or private investors, allowing to overcome the lack of information that investors have to face when deciding to invest in a new venture. The motivation for this research is to examine the social network of the Medical Alley Association (MAA) in Minnesota for the measure(s) of centrality that procures the most effective financing. Using MAA membership data 2013-2015, we define 106 company strong social network with a member base of 59 members and their respective measures of centrality. We test for their significance in obtaining funding as a function of their centrality in the member network. The type of firm, medical device or not and the number of years of membership serve as control variables. The results are robust, indicating significant relationship between successful funding and the centrality measure of eigenvector. Results of the examination can serve to refine the MAA network or the growth of other social networks.

Keywords: SOCIAL NETWORK; NEW VENTURE CREATION; INNOVATION; FINANCING OF ENTREPRENEURIAL INNOVATION