Business incubators & organization survival

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March 2, 2015

Organizational Sponsorship and Founding Environments: A Contingency View on the Survival of Business Incubated Firms, 1994-2007

Organizational sponsorship refers to attempts to mediate the relationship between new organizations and their environments by creating a resource-munificent context intended to increase survival rates among those new organizations. This includes efforts such as business incubation, venture capital, and governmental policies that create resource munificent environments for entrepreneurial activity. Existing theories are prone to treat such resource munificence as the inverse of resource dependence, indicating that the application of new resources in an entrepreneurial context should always benefit new firms. These existing theories, however, often overlook heterogeneity in both the types of applied resources as well as the founding environmental conditions. By attending to these nuances, we reveal that resource munificence is not necessarily predictive of organizational survival. Employing a dataset of 178 university-based incubators hosting 2110 new organizations from 1994 to 2007, we find that the resource munificence related to sponsorship can potentially decrease or increase survival rates among new organizations, and that these effects are contingent on the fit of the resource type with the geographic-based founding density. These findings confirm the need for a more nuanced theory of sponsorship that attends to the mechanisms and conditions whereby resource munificence is likely to alter new organization survival rates.

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