Networks as institutional support: law firm and venture capitalist relations and regional diversity in high-technology IPOs

Abstract

Networks connecting two important supporting institutions – law firms and venture capital partnerships – explain regions’ disparate abilities to sustain diverse high-technology ventures. In order to explain the diversity of entrepreneurial activity in a region, we distinguish between institutional capacity (the number of law firms and venture capitalists in a locale), strong interinstitutional connections that span legal and financial domains, and cohesive structural communities of directly and indirectly connected supporting organizations. We argue that strong connections and cohesive communities are essential, but little examined contributors to the development of diverse research-based economies. We find support for the argument in an empirical analysis of initial public offerings (IPOs) by U.S. high-technology companies in five industries between 1993 and 2005. Linking regional outcomes to strong ties that span local legal and financial institutions and to cohesive structures that weld them into communities offers new insights for research on the institutional and network underpinnings of entrepreneurship and regional economic development.

Citation

Buhr, H. and Owen-Smith, J. (2010), "Networks as institutional support: law firm and venture capitalist relations and regional diversity in high-technology IPOs", Sine, W.D. and David, R.J. (Ed.) Institutions and Entrepreneurship (Research in the Sociology of Work, Vol. 21), Emerald Group Publishing Limited, Leeds, pp. 95-126. https://doi.org/10.1108/S0277-2833(2010)0000021008