THE EFFECTS OF NETWORK’S STRUCTURAL HOLES: POLYCENTRIC INSTITUTIONS, PRODUCT PORTFOLIO, AND NEW VENTURE GROWTH IN CHINA AND RUSSIA

Abstract

This study examines the effect of network’s structural holes, i.e., the absence of a link between two contacts who are both linked to an actor, on product development and profit growth of software ventures in two different institutional contexts of China and Russia. Using interview data of 159 software entrepreneurs in Beijing and Moscow, the study found that the effect of structural holes is contingent upon country institutional context and venture development stage. Specifically, structural holes have a positive main effect on product portfolio but a negative main effect on profit growth in the second revenue year - early stage of venture development. Structural holes are more useful in the Russian institutional context compared to the Chinese institutional context due to the polycentricity of institutions. The research implications of the findings are discussed.