Dynamics of Social Capital and Their Performance Implications: Lessons from Biotechnology Start-ups

Abstract

Based on comparative longitudinal case analyses of six new biotechnology firms, this paper explores how the configuration, management, and evolution of entrepreneurial firms' social capital affect firm performance. Findings suggest that firms can realize performance benefits when their members repeatedly adapt the configuration of their social capital to changing resource needs, while inertia turns a firm's social capital into a liability. Our research provides a dynamic view of the conditions and processes that produce such inertia, allow firms to overcome it, and develop a firm's social capital to organizational advantage. A core theoretical contribution of our study is to identify and theorize how the internal organization of firms' management of relationships with external partners, through horizontal and vertical differentiation and integration, affects the dynamic of firms' social capital, adaptive capacity, and performance.

Entrepreneurship, innovation and regional growth: a network theory

“…Network capital investments, however, may become ineffective if there is knowledge equivalence between organizations due to similarities in knowledge profiles, which results in network redundancy (Cowan et al 2004). These inertial network forces highlight the issue of over-embeddedness, whereby the actors an organization is best connected to may not be best placed to provide solutions to current problems (Krackhardt 1994;Monge and Contractor 2003;Maurer and Ebers 2006).…”

Networked by design: Can policy requirements influence organisations' networking behaviour?

“…The requirement to include a minimum number of partners could encourage the participants to expand their network of relationships and become acquainted with numerous organisations that can provide them with further networking opportunities. For example, in the case of firms trapped in relational lock-ins (Gargiulo and Benassi, 2000;Maurer and Ebers, 2006), this requirement could help increase the chance to meet new partners, access new knowledge and embark on new innovative projects. This in turn could increase firms' likelihood to engage in subsequent networks, and to form larger networks.…”

A Network-based view of regional growth

“…Unless diversity is sustained, in the long-run networks may reduce heterogeneity through the articulation of shared norms, standards, and rules of conduct among organisations (Oliver 1997;Monge and Contractor 2003). Although stable networks may reduce the potential costs of network capital, it is likely that as knowledge becomes increasingly homogeneous and less useful across network actors, the value of network capital may well erode (Maurer and Ebers, 2006). Network capital investments may become ineffective if there is knowledge equivalence between organisations due to similarities in knowledge profiles, which results in network redundancy (Cowan et al, 2004).…”

“…Network capital investments may become ineffective if there is knowledge equivalence between organisations due to similarities in knowledge profiles, which results in network redundancy (Cowan et al, 2004). These inertial network forces highlight the issue of over-embeddedness, whereby the actors an organisation is best connected to may not be best placed to provide solutions to current problems (Krackhardt, 1994;Monge and Contractor, 2003;Maurer and Ebers, 2006).…”