Social Networks, Funding, and Regional Advantages in Technology Entrepreneurship

49 Pages Posted: 4 Oct 2015 Last revised: 30 Aug 2018

John Butler

University of Texas at Austin - Red McCombs School of Business

Rajiv Garg

University of Texas at Austin - Department of Information, Risk and Operations Management

Bryan Stephens

University of Texas at Austin - Red McCombs School of Business

Date Written: August 1, 2015

Abstract

With increased penetration of digital technologies in entrepreneurship, the traditional need for proximity to specific locations or large funding for infrastructure development have diminished. Thus, digital entrepreneurs now pursue locations that provide more opportunities for funding and greater social support. In this paper, we empirically estimate the role of economic factors, funding opportunities and social networks on entrepreneurs’ choice of their startup location. To estimate the effects, we use economic indicators made publicly available by the U.S. government, investment information from CrunchBase and PwC, demographics, and professional histories and network data from LinkedIn. We posit that these digital entrepreneurs have a choice to establish a startup in their current location or move to a different location. When relocating, entrepreneurs decide to create a startup immediately or delay it by a short duration (possibly to get embedded in local community). Analysis of 1,418 entrepreneurs that were successful in acquiring funding, suggests that funding rounds per year play a significant and positive role in influencing startup creation, and local social network density creates stickiness to that location thus negatively influencing entrepreneurs' decisions to relocate. Additionally, we find that female entrepreneurs are less likely to relocate. We also examine startups by sub-industry segment (Internet based) and find that those ventures tend to start in the same location. This research contributes to enhance the understanding factors that influence location choices and adds to the limited literature on digital entrepreneurship in IS.

Keywords: Social Networks, Entrepreneurship, Regional Advantage, Startups, Innovation, technology entrepreneur

JEL Classification: M13, D71, D80, O15, O30, O51, R23

Suggested Citation

Butler, John and Garg, Rajiv and Stephens, Bryan, Social Networks, Funding, and Regional Advantages in Technology Entrepreneurship (August 1, 2015). Available at SSRN: https://ssrn.com/abstract=2668918 or http://dx.doi.org/10.2139/ssrn.2668918

John Butler

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX 78712
United States

Rajiv Garg (Contact Author)

University of Texas at Austin - Department of Information, Risk and Operations Management ( email )

CBA 5.202
Austin, TX 78712
United States

HOME PAGE: http://www.RajivGarg.org

Bryan Stephens

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX 78712
United States

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