INSTITUTIONAL POLYCENTRISM, ENTREPRENEURS’ SOCIAL NETWORKS, AND NEW VENTURE GROWTH

Abstract

What is the interrelationship among formal institutions, social networks, and new venture growth? Drawing on the theory of institutional polycentrism and social network theory, we examine this question using data on 637 entrepreneurs from four different countries. We find the confluence of weak and inefficient formal institutions to be associated with a larger number of structural holes in the entrepreneurial social networks. While the effect of this institutional order on the revenue growth of new ventures is negative, a network’s structural holes have a positive effect on the revenue growth. Furthermore, the positive effect of structural holes on the revenue growth is stronger in an environment with a more adverse institutional order (i.e., weaker and more inefficient institutions). The contributions and implications of these findings are discussed.