Social Networks, Funding, and Regional Advantages in Technology Entrepreneurship

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