Network Ties, Reputation, and the Financing of New Ventures

2002/03/01 by Scott Shane, Daniel M. Cable, Daniel Cable · 1,680 citations
Business, Management and Accounting · #Business #Corporate Finance and Governance #Economics #Entrepreneurial finance #Entrepreneurship #Entrepreneurship Studies and Influences #Finance #Industrial organization #Information asymmetry #Interpersonal ties #New Ventures #Obligation #Premise #Private Equity and Venture Capital #Process (computing) #Reputation #Sociology #Venture capital

paper · doi:10.1287/mnsc.48.3.364.7731

published in Management Science 48(3), 364-381 (Institute for Operations Research and the Management Sciences)

openalex publication_date 2002/03/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/06

Abstract

Explaining how entrepreneurs overcome information asymmetry between themselves and potential investors to obtain financing is an important issue for entrepreneurship research. Our premise is that economic explanations for venture finance, which do not consider how social ties influence this process, are undersocialized and incomplete. However, we also argue that organization theoretic arguments, which draw on the concept of social obligation, are oversocialized. Drawing on the organizational theory literature, and in-depth fieldwork with 50 high-technology ventures, we examine the effects of direct and indirect ties between entrepreneurs and 202 seed-stage investors on venture finance decisions. We show that these ties influence the selection of ventures to fund through a process of information transfer.

Citations

• The Sources and Consequences of Embeddedness for the Economic Performance of Organizations: The Network Effect
• Market Uncertainty and the Social Character of Economic Exchange
• The Norm of Reciprocity: A Preliminary Statement
• Interorganizational Endorsements and the Performance of Entrepreneurial Ventures
• RESEARCH NOTES. THE PAST IS THE PAST--OR IS IT? THE USE OF RETROSPECTIVE ACCOUNTS AS INDICATORS OF PAST STRATEGY.
• Economic Action and Social Structure: The Problem of Embeddedness
• Social Capital in the Creation of Human Capital

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• Drivers and Performance Implications of Frontline Employees’ Social Capital Development and Maintenance: The Role of Online Social Networks*
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• The Development of Geographical Specialization of Venture Capital
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• Bootstrapping in small firms: An empirical analysis of change over time
• Coping Humor of Entrepreneurs: Interaction Between Social Culture and Entrepreneurial Experience. [europepmc]
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• Opportunity Finding by Nascent Entrepreneurs: Accidental or Purposeful? [europepmc]
• Approaches combining methods of Operational Research with Business Process Model and Notation: A systematic review. [europepmc]
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• The role of five big personality traits and entrepreneurial mindset on entrepreneurial intentions among university students in Saudi Arabia. [europepmc]
• Antecedents of entrepreneurial networking behavior and its impact on business performance - a systematic literature review. [europepmc]

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