When do close ties to service intermediaries lead to entrepreneurial improvisation?

Abstract

AbstractResearch SummaryPrior research suggests that the founders of new ventures leverage their existing networks, such as close ties to service intermediaries, as a source of entrepreneurial improvisation. We draw attention to the trade‐off between the benefits (trust and access to information and resources) and the costs (dependence and a constrained growth opportunity), and identify two contingency conditions for using close ties to improvise: a shorter time horizon for failure and less turbulent market. Analysis based on an original survey of founding teams in China in the period 2015–2016 provides empirical support for our argument. Our study contributes to research on entrepreneurial improvisation by exposing the tension involved in working with close contacts and enriches the literature on the role of service intermediaries.Managerial SummaryWe consider the trade‐off involved in relying on close ties to service intermediaries and identify conditions under which founders of new ventures are more likely to rely on such intermediaries to improvise. Although close ties can foster trust and facilitate access to a wide range of information and resources, they may also foster a dependency that could constrain future growth. A survey of founding teams in China from 2015 to 2016 reveals that founding teams leveraged such ties when given a shorter time horizon within which to succeed or fail, and when the market was less turbulent. Our findings can help entrepreneurs decide when to resort to close‐tied intermediaries as an aid to improvisation, that is, when the benefits of doing so outweigh the costs.