Friends, Family, or Fools: Entrepreneur Experience and its Implications for Equity Distribution and Resource Mobilization

• Main Authors: KOTHA, Reddi, GEORGE, Gerard
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2012
• Subjects: Equity Distribution; Resources; Specific Experience; Entrepreneurial and Small Business Operations; Strategic Management Policy
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/3625; https://ink.library.smu.edu.sg/context/lkcsb_research/article/4624/viewcontent/FriendsFamilyFools_2012.pdf
• Institution: Singapore Management University

Who helps entrepreneurs raise the resources they need and how much equity does an entrepreneur distribute in return? We use a sample of 611 entrepreneurs in the U.S. to examine why some entrepreneurs are more likely than others to distribute ownership selectively to helpers. We find that entrepreneurs with specific industry experience and start-up experience are able to provide ownership more selectively and raise more resources from their helpers. We refine the categorization of social ties further to make a distinction between professional and familial ties to show that the ownership distribution and types of resource contributions vary by the mix of ties in the entrepreneur's helper network. Our findings have implications for theories of resource assembly, social structure and entrepreneurship, and organization design.