Networks and Local Environmental Characteristics in the Survival of New Firms

Abstract

This study seeks firstly to clarify which networks at start-up situation and early in life influence the survival of new firms. Secondly the study examines regional differences in the success of new firms. The subjects were firms which had closed down during their fourth to sixth year of operations, and they were compared with firms continuing in business. The results indicate, firstly, that it is networks internal to firm that create competitive advantage, innovation and efficiency. Secondly, management based on working in groups was emphasized in the firms that continued in business. In a typical family enterprise, ownership, management and family are united in a single entity. In other types of firms networks are seen as participating in the strategic management of the firm. Thirdly, close-downs were often caused by uncontrolled risks. A firm which fails after a successful start-up often tends to grow rapidly in the beginning, leaning on its product idea, but this rate of growth is too high from the viewpoint of the financing and the management of the firm. In firms which closed the growth objectives were too ambitions compared with the resources of the entrepreneur.