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Regional ecologies of entrepreneurship

September 11th, 2017 | Posted by admin in 2017 - (0 Comments)

Olav Sorenson

Why do some regions produce more entrepreneurs than others? An ecological lens provides insight into this question: The demography of organizations in a region – particularly the proportion of small and young em- ployers – shapes many aspects of the environment for would-be entrepreneurs: (i) beliefs about the desirability of founding a firm, (ii) opportunities to learn about entrepreneurship and to build the abilities needed to succeed, and (iii) the ease of acquiring critical resources. Births of new industries and the demise of mature ones can therefore catalyze rapid changes in the rates of entrepreneurship that become self-reinforcing.

Journal of Economic Geography, 17 (2017): 959-974

Sampsa Samila and Olav Sorenson

We argue that social and financial capital have a complementary relationship in fostering innovation, entrepreneurship and economic growth. Using panel data on metropolitan areas in the United States, from 1993 to 2002, our analyses reveal that social integration – in the microgeography of residential patterns – moderates the effect of venture capital, with more integrated regions benefitting more from expansions in the supply of financial capital. Our results remain robust to estimation with an instrumental variable to address potential endogeneity in the geography of venture capital. We also find some evidence for a similar effect from business associations. Our findings support the idea that social structure may contribute importantly to regional economic differences.

American Sociological Review, 82 (2017): 770-795

Summarized in Yale Insights

Entrepreneurs and social capital in China

June 13th, 2017 | Posted by admin in 2017 - (0 Comments)

Olav Sorenson

Does social capital operate differently in China? A long and vibrant literature on the concept of guanxi suggests not only that social capital might have a different character in China but also that it might prove more valuable there to employees and entrepreneurs alike. Drawing on unusually high quality data on Chinese executives, Burt and Burzynska (2017) explore the question of whether the same structural configurations of relationships appear associated with success in China as have been found in the West. Their short answer is yes. In this response, I comment on their article.

Management and Organization Review, 13 (2017): 275-280

Olav Sorenson and Michelle Rogan

Interorganizational relationships connect people affiliated with organizations rather than corporate actors themselves. The managers and owners of organizations therefore do not always control these connections and consequently often cannot profit from them. We discuss the circumstances under which individuals (versus organizations) “own” these relationships (and therefore also the social capital generated by them). Three factors increase the odds of individual ownership: (i) the extent to which the resources valued by alters belong to the individual (rather than the organization), (ii) the degree to which alters feel greater indebtedness to the individual than the organization, and (iii) the extent to which relationships involve emotional attachment. We discuss the implications of the locus of ownership, argue that these distinctions can help to explain many results that appear inconsistent on the surface, and call for future research to pay closer attention to these issues.

Annual Review of Sociology, 40 (2014): 261-280

Michelle Rogan and Olav Sorenson

Numerous studies have found that mergers and acquisitions destroy value. What might account for these poor decisions? Using comprehensive data from the advertising industry, we found that the probability of being acquired rose but that the performance of merged entities declined – both losing clients and selling less to the clients retained – with the number of common clients (indirect ties) connecting the target to the acquirer. Two potential mechanisms could account for this pattern of results. Either managers hold (positively) biased beliefs about those connected to them through common clients, or they restrict their searches for potential acquisition partners to those they already know, despite the disadvantages of doing so.

Administrative Science Quarterly, 59 (2014): 301-329

Michael S. Dahl and Olav Sorenson

Entrepreneurs, even more than employees, tend to locate in regions in which they have deep roots. Here, we examine the performance implications of these choices. Whereas one might expect entrepreneurs with deep roots to perform better because of their richer endowments of social capital, they might also perform worse if their location choices rather reflect a preference for spending time with family and friends. We examine this question using comprehensive data on the Danish population. Entrepreneurs’ ventures perform better – survive longer and generate greater cash flows and cumulative profits – when they locate in regions in which they have deep roots (“home” regions). This effect appears substantial, similar in magnitude to the value of having prior experience in the industry entered (i.e. specific human capital).

Management Science, 58 (2012):1059-1071

 

The migration of technical workers

December 4th, 2009 | Posted by admin in 2010 - (0 Comments)

Michael S. Dahl and Olav Sorenson

Using panel data on the Danish population, we estimated the revealed preferences of scientists and engineers for the places in which they choose to work. Our results indicate that these technical workers exhibit substantial sensitivity to differences in wages but that they have even stronger preferences for living close to family and friends. The magnitude of these preferences, moreover, suggests that the greater geographic mobility of scientists and engineers, relative to the population as a whole, stems from more pronounced variation across regions in the wages that they can expect. These results remain robust to estimation on a sample of individuals who must select new places of work for reasons unrelated to their preferences—those who had been employed at establishments that discontinued operations.

Journal of Urban Economics, 67 (2010): 33-45

The mobilization of scarce resources

August 7th, 2009 | Posted by admin in 2008 - (0 Comments)

Bjørn Løvås and Olav Sorenson

We examine how the ability of one actor to gain access to resources controlled by another depends on two factors: (i) the number of mutual acquaintances connecting the prospective lender and borrower and (ii) the scarcity of the resources in question. We argue that the incentives to renege on an agreement grow as the resources being traded become increasingly scarce. Mutual acquaintances, however, dampen these incentives, and therefore become more important to facilitating exchange as demand for the good of interest rises. Our analysis of qualitative and quantitative evidence from a study of senior partners at an international consultancy supports these propositions.

Advances in Strategic Management, 25: 361-389

Olav Sorenson and Toby E. Stuart

Most existing theories of relationship formation imply that actors form highly cohesive ties that aggregate into homogenous clusters, but actual networks also include many “distant” ties between parties that vary on one or more social dimensions. To explain the formation of distant ties, we propose a theory of relationship formation based on the characteristics of “settings,” or the places and times in which actors meet. We posit that organizations form relations with distant partners when they participate in two types of settings: unusually faddish ones and those with limited risks to participants. In an empirical analysis of our thesis in the formation of syndicate relations between U.S. venture capital firms from 1985 to 2007, we find that the probability that geographically and industry distant ties will form between venture capital firms increases with several attributes of the target-company investment setting: (1) the recent popularity of investing in the target firm’s industry and home region, (2) the target company’s maturity, (3) the size of the investment syndicate, and (4) the density of relationships among the other members of the syndicate.

Administrative Science Quarterly, 53 (2008): 266-294

Toby E. Stuart and Olav Sorenson

Much research suggests that social networks shape the emergence and development of nascent ventures. Scholars have argued that founders’ and firms’ networks influence innovation and the identification of entrepreneurial opportunities, as well as facilitate the mobilization of resources for growth and the harvesting of value from fledgling firms. It is not an exaggeration to claim that existing empirical findings point to the centrality of networks in every aspect of the entrepreneurial process. However, with exceptions so few they may be counted on one hand, this research untenably treats network structures as exogenous—in other words, as if entrepreneurs and enterprises do not pursue valuable connections. In this article, we review the literature on networks in entrepreneurial contexts, argue that it disproportionately focuses on the consequences of networks at the expense of research on their origins, and consider the implications for the literature of the fact that most entrepreneurs and young ventures are strategic in their formation of relations. We then articulate a research agenda composed of five areas of inquiry we consider critical to a better understanding of networks and entrepreneurship.

Strategic Entrepreneurship Journal, 1 (2007): 211-227