Social Networks, Funding, and Regional Advantages in Technology Entrepreneurship: An Empirical Analysis

Abstract

With the increased penetration of digital technologies into entrepreneurship, the traditional need for proximity to specific locations or large amounts of funding for infrastructure development has diminished. Instead, digital entrepreneurs now pursue locations that provide more opportunities for funding (rounds) and greater social network support. Analyzing data for entrepreneurial ventures that were successful in receiving some external funding, we found that the number of funding rounds per year plays a significant and positive role in influencing start-up creation in that location—interestingly, amount of funding does not. Furthermore, local social network density creates stickiness to that location, thus negatively influencing entrepreneurs' willingness to relocate. If entrepreneurs do relocate to create a start-up after a short delay, larger social network density (in a new location) positively affects start-up creation decision in that location. Additionally, we find that midcareer individuals (such as millennials) are more likely than early-career or late-career stage individuals to create a successful technology start-up. Also, entrepreneurs are less likely to relocate for an Internet-based start-up but are likely to move if they have larger social network density in the new location. This research enhances our understanding of the factors that influence decisions to launch a start-up in a particular location and provides policy implications for creating a rich entrepreneurial ecosystem in a city.