Network Relations and Startups: Bridging the muddy waters between Effectuation and Entrepreneurship Theory

Lasse Grosen Jensen & Brian Langarica Nielsen

Student thesis: Master thesis

Abstract

Early-stage ventures are characterised by their limited resources (Stinchcombe, 1965; Baum, 1996) and acting in an environment characterised by Knightian Uncertainty (Knight, 1921). To accommodate for their limited resources, research has shown that engaging with network relations can provide valuable resources for a startup. Only to a limited degree has research empirically shed light on further qualifying what resources the early-stage entrepreneurs seek externally. We also lack academic knowledge on how entrepreneurs engage with their network relations. Hence, this research paper focused on the network relations of early-stage startups, in relation to what resources they provide, and how these relationships have been engaged. Research on network types and the reasoning for engaging represent two different strings of literature. Therefore, these were initially assessed individually, as to allow for an in-depth understanding of the related concepts. The main objective of the project was to explore the link between these strings of literature, namely the network types with the reasoning for engaging. We collected empirical data in several rounds of interviews from four case companies within the industry of Information and Communication Technology (ICT). This led to interesting findings, both within the individual analysis of network types and reasons for engaging, respectively, but also for the link between these. For exploring network types, this paper adopted a typology by Lechner and Dowling (2003). The typology has empirical strength in its direct association of the four network types with relation to resources. We found that the early-stage startups mainly engaged in network relations that provided marketing and reputational resources, while also engaging in technology relations. Investigating the reasoning for startup’s relation engagement, this paper applied the four principles of effectuation, an emerging entrepreneurship theory (Sarasvathy, 2001, 2008). As the principles have not previously been applied for the purpose of investigating the reasoning for engaging in relationships, this study was a first attempt. This led to interesting findings, as all four principles were represented in our findings. Linking the two theoretical concepts, it was found that the framework could be explanatory. The empirical findings, however, gave rise to a discussion, as there were pronounced limitations within the framework. Namely, some interesting findings were not captured in the framework. This thesis nonetheless contributed to the field with a first attempt to operationalize the effectuation principles, in relation to network types. The findings furthermore lead to interesting reflections for the limitation of the framework, serving as important insights for future research.

EducationsMSc in Management of Innovation and Business Development, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2013
Number of pages178