Skip to main content
SpringerLink
Log in

Networks and Local Environmental Characteristics in the Survival of New Firms

  • Published:
Small Business Economics Aims and scope Submit manuscript

Abstract

This study seeks firstly to clarify which networks at start-up situation and early in life influence the survival of new firms. Secondly the study examines regional differences in the success of new firms. The subjects were firms which had closed down during their fourth to sixth year of operations, and they were compared with firms continuing in business. The results indicate, firstly, that it is networks internal to firm that create competitive advantage, innovation and efficiency. Secondly, management based on working in groups was emphasized in the firms that continued in business. In a typical family enterprise, ownership, management and family are united in a single entity. In other types of firms networks are seen as participating in the strategic management of the firm. Thirdly, close-downs were often caused by uncontrolled risks. A firm which fails after a successful start-up often tends to grow rapidly in the beginning, leaning on its product idea, but this rate of growth is too high from the viewpoint of the financing and the management of the firm. In firms which closed the growth objectives were too ambitions compared with the resources of the entrepreneur.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Almus, M. and E. A. Nerlinger, 1999, ‘Growth of New Technology-Based Firms: Which Factors Matter ?’, Small Business Economics 13, 141–154.

    Google Scholar 

  • Armstrong, H. and J. Taylor, 1985, Regional Economics and Policy, Oxford: Philip Allen Publishers.

    Google Scholar 

  • Argenti, J., 1976, Corporate Collapse, the Causes and Symptoms, London: McGraw-Hill Book Company Limited.

    Google Scholar 

  • Audretsch, D., 1991, ‘New Firm Survival and the Technological Regime’, Review Economics and Statistics 73(3), 441–450.

    Google Scholar 

  • Baldwin, J. R. and P. K. Gorecki, 1991, ‘Firm Entry and Exit in the Canadian Manufacturing Sector 1970–1982’, Canadian Journal of Economics 24, 300–323.

    Google Scholar 

  • Barrow, C., 1993, The Essence of Small Business, Exeter, U.K.

  • Bird, B., 1989, Entrepreneurial Behavior, Glenview, IL/London, U.K.: Scott, Foresman and Company.

    Google Scholar 

  • Birley, S., 1985, ‘The Role of Networks in the Entrepreneurial Process’, Journal of Business Venturing 1, 107–117.

    Google Scholar 

  • Borch, O. J. and M. Huse, 1993, ‘Informal Strategic Networks and the Board of Directors’, Entrepreneurship Theory and Practice 18, 23–36.

    Google Scholar 

  • Bruderl, J., P. Preisendörfer and R. Ziegler, 1992, ‘Survival Changes of Newly Founded Business Organizations’, American Sociological Review 57, 227–242.

    Google Scholar 

  • Bygrave, W. D. and C. W. Hofer, 1991, ‘Theorizing about Entrepreneurship’, Entrepreneurship Theory and Practice 16(2), 13–22.

    Google Scholar 

  • Cachon, J. C., 1990, ‘A Longitudinal Investigation of Entrepreneurial Teams, Part One: Who is Involved and What Makes Them Succeed’, in N. C. Churchill, W. D. Bygrave, J. A. Hornaday, D. F. Muzyka, K. H. Vesper and W. E. Jr. Wetzel (eds), Frontiers of Entrepreneurship Research, Wellesley, MA: Center for Entrepreneurial Studies, Babson College, pp. 100–102.

    Google Scholar 

  • Calton, J. M., 1993, ‘What is at Stake in the Stakeholder Model ?’, in D. C. Ludwig (ed.), Business and Society in a Changing World Order, Lewiston: The Edwin Mellen Press.

    Google Scholar 

  • Carland, J. W., F. Boulton and J. A. Carland, 1984, ‘Differentiating Entrepreneurs from Small Business Owners: A Conceptualization’, Academy of Management Review 9(2), 354–359.

    Google Scholar 

  • Carroll, A., 1993, Business and Society, Business Ethics, and Stakeholder Management, Dallas: South Western Publishing.

    Google Scholar 

  • Carroll, A., 1995, ‘Stakeholder Thinking in Three Models of Management Morality: A Perspective with Strategic Implications’, in J. Näsi (ed.), Understanding Stakeholder Thinking, Jyväskylä, Finland: LSR Publications, pp. 47–74.

    Google Scholar 

  • Chrisman, J. J., A. Bauerschmidt and C. W. Hofer, 1998, ‘The Determinants of New Venture Performance: An Extended Model’, Entrepreneurship Theory and Practice 23(1), 5–30.

    Google Scholar 

  • Curran, J., R. Jarvis, R., R. A. Blackburn and S. Black, 1993, ‘Networks and Small Firms: Constructs, Methodological Strategies and Some Findings’, International Small Business Journal 11(2), 13–25.

    Google Scholar 

  • Cooper, A. C. and W. C. Dunkelberg, 1987, ‘Old Questions, New Answers, and Methodological Issues’, American Journal of Small Business 11(3), 11–23.

    Google Scholar 

  • Cooper, A. C. and F. Gascon, 1992, ‘Entrepreneurs, Processes of Founding, and New firm Performance’, in D. Sexton and J. Kasarda (eds.), The State of the Art of Entrepreneurship, Boston: PWS-Kent, pp. 301–340.

    Google Scholar 

  • Cressy, R., 1994, ‘Staying with It: Some Fundamental Determinants of Business Start-up Longevity’, University of Warwick, SME Centre, Working Paper No. 17.

  • D'Arcy, E. and B. Giussani, 1993, ‘Local Economic Development: The Role of the Development Ethos’, paper presented at the 33th European Congress, Regional Science Association, Moscow, Russian Federation, August.

  • Das, T. K. and Bing-Sheng Teng, 1997, ‘Time and Entrepreneurial Risk Behavior’, Entrepreneurship Theory and Practice 22(2), 69–88.

    Google Scholar 

  • Dubini, P. and H. Aldrich, 1991, ‘Personal and Extended Networks are Central to the Entrepreneurial Process’, Journal of Business Venturing 6, 305–313.

    Google Scholar 

  • Eisenhardt, K. M., 1989, ‘Making Fast Strategic Decisions in High-velocity Environments’, Academy of Management Journal 32, 543–576.

    Google Scholar 

  • Ensley, M. D., J. W. Carland, J. C. Carland, J. M. Näsi, S. Näsi and M. Banks, 1998, ‘Entrepreneurial Teams in High Growth Ventures: A Cross-cultural Comparison’, International Journal of Entrepreneurship 2, 13–25.

    Google Scholar 

  • Ensley, M. E. and M. C. Banks, 1992, ‘Raising Questions about Entrepreneurial Teams’, in M. Schnake (ed.), The Proceedings of the 1992 Southern Management Association Meeting, pp. 438–440.

  • Evans, D. S. and L. S. Leighton, 1990, ‘Small Business Formation by Unemployed and Employed Workers’, Small Business Economics 2(4), 319–330.

    Google Scholar 

  • Foley, P. and H. Green, 1989, Small Business Success, London: Paul Chapman Publishing Ltd.

    Google Scholar 

  • Freeman, R. E., 1984, Strategic Management – A Stakeholder Approach, Boston: Pitman.

    Google Scholar 

  • Freeman, R. E., 1995, ‘Stakeholder Thinking: The State of the Art’, in J. Näsi (ed.), Understanding Stakeholder Thinking, Jyväskylä: LSR Publications, pp. 35–46.

    Google Scholar 

  • Gartner, W.B., 1985, ‘A Conceptual Framework for Describing new Venture Formation’, Academy of Management Review 10(4), 696–706.

    Google Scholar 

  • Gaskill, L. R. and H. E. van Auken, 1993, ‘A Factor Analytic Study of the Perceived Causes of Small Business Failure’, Journal of Small Business Management 31(4), 18–31.

    Google Scholar 

  • Gibb, A., 1990, ‘Small Business in the U.K., State of Development, Expectations and Policy’, Durham University Business School, Small Business Centre, Occasional papers no. 9094.

  • Gilad, B. and P. Levine, 1986, ‘A Behaviour Model of Entrepreneurial Supply’, Journal of Small Business Management 24, 45–51.

    Google Scholar 

  • Hoy, F. and T. G. Verser, 1994, ‘Emerging Business, Emerging Field: Entrepreneurship and the Family Firm’, Entrepreneurship Theory and Practice 19(1), 9–23.

    Google Scholar 

  • Isaksen, A., 1996, ‘Towards Increased Regional Specialisation? The Quantitative Importance of New Industrial Spaces in Norway, 1970–1990’, Norsk Geografisk Tidsskrift 50(1), 113–123.

    Google Scholar 

  • Johannisson, B., 1990, ‘Building an Entrepreneurial Career in a Mixed Economy: Need for Social and Business Ties in Personal Networks’, paper presented at the Academy of Management Annual Meeting, San Francisco, CA, 12–15 August.

  • Johannisson, B., 1987, ‘Entrepreneurship and Creativity – on Dynamic Environments for Small Business’, in Reports of the University of Växjö, series 1, Economics and Politics, no. 7.

  • Johannisson, B., 1985, ‘Management Technology for Entrepreneurship and Change’, paper presented at the seminar ‘Entrepreneur 85’ at the Institute of Finnish Entrepreneurs, Dipoli Conference Center, Helsinki, Finland, November 11–12.

  • Johannisson, B., 1998, ‘Personal Networks in Emerging Knowledge-based Firms: Spatial and Fuctional Patterns’, Entrepreneurship and Regional Development 10(4), 297–312.

    Google Scholar 

  • Kazanjian, R. K., 1988, ‘Relation of Dominant Problems to Stages of Growth in Technology-based New Ventures’, Academy of Management Journal 31(2), 257–279.

    Google Scholar 

  • Krueger, N. F., 1993, ‘The Impact of Prior Entrepreneurial Exposure on Perceptions of New Venture Feasibility and Desirability’, Entrepreneurship Theory and Practice 18(1), 5–21.

    Google Scholar 

  • Krueger, N. F. and D. V. Brazeal, 1994, ‘Entrepreneurial Potential and Potential Entrepreneur’, Entrepreneurship Theory and Practice 18(3), 91–104.

    Google Scholar 

  • Krueger, N. F. and A. L. Carsrud, 1993, ‘Entrepreneurial Intentions: Applying the Theory of Planned Behaviour’, Entrepreneurship and Regional Development 5, 315–330.

    Google Scholar 

  • Lechler, T. and H. G. Gemuenden, 1999, ‘Social Interaction: A Determinant of Entrepreneurial Team Venture Success’, European Council For Small Business, London, U.K., November 25–26, 1999.

    Google Scholar 

  • Lehti, M., 1990, The Formation of the Resource Allocation Strategy of the Firm and the Underlying Performance Related Mechanism. An Empirical Study of the Finnish Consumer Goods Trade, The Helsinki School of Economics and Business Administration, Helsinki.

    Google Scholar 

  • Littunen, H., 1992, The Success of Newly-established Firms: Implementation of the Study and Review of Start-up Situations, University of Jyväskylä, School of Business and Economics, Publications of Centre for Economic Research 124 (in Finnish).

  • Littunen, H. and K. Hyrsky, 2000, ‘The Early Entrepreneurial stage in Finnish Family and Non-family Firms’, Family Business Review 13(1), 41–54.

    Google Scholar 

  • Littunen, H., E. Storhammar and T. Nenonen, 1998, ‘The Survival of Firms over the Critical First 3 Years and the 70 Hannu Littunen Local Environment’, Entrepreneurship and Regional Development 10(3), 189–202.

    Google Scholar 

  • Low, M. B. and I. C. MacMillan, 1988, 'Entrepreneurship: Past Research and Future Challenges', Journal of Management 14, 139–161.

    Google Scholar 

  • Niittykangas, H., E. Storhammar and H. Tervo, 1994, Yrittäjyys ja yritysten synty paikallisissa toimintaympäristössä (The Entrepreneurship and Start-up of Firms in the Local Environment), University of Jyväskylä, Centre for Economic Research, Publications 132.

  • Niittykangas, H., 1992, Maaseudun yritystoiminnan kehittymismahdollisuudet, Jyväskylä Studies in computer science, economics and statistics 21, Jyväskylän yliopisto, Jyväskylä.

    Google Scholar 

  • Norman, R., 1976, Creative Management of Firms, Lund, Sweden: Aldhus.

    Google Scholar 

  • Näsi, J., 1995, ‘What is Stakeholder Thinking? A Snapshot of a Social Theory of the Firm’, in J. Näsi (ed.), Understanding Stakeholder Thinking, Jyväskylä: LSR Publications, pp. 19–32.

    Google Scholar 

  • Pahkinen, E. and R. Lehtonen, 1989, Otanta-asetelmat ja tilastollinen analyysi (The Sampling Techniques and Statistical Analysis). Helsinki: Gaudeamus.

    Google Scholar 

  • Phillips, B. D. and B. A. Kirchoff, 1989, ‘Formation, Growth and Survival: Small Firm Dynamics in the U.S. Economy’, Small Business Economics 1, 65–74.

    Google Scholar 

  • Pikkarainen, M., 1993, Aluetalouksien haasteet Suomessa 1990-luvulla (The Challenges of the Local Economies in Finland in the 1990s), Helsinki: Suomen Kuntaliitto.

    Google Scholar 

  • Porter, M. E., 1980, Competitive Strategy, New York: The Free Press.

    Google Scholar 

  • Porter, M. E., 1985, Competitive Advantage: Creating and Sustaining Superior Performance, New York: The Free Press.

    Google Scholar 

  • Ray, D., 1993, ‘Understanding the Entrepreneur: Entrepreneurial Attributes, Experience and Skills’, Entrepreneurship and Regional Development 5, 345–357.

    Google Scholar 

  • Reynolds, P. D., 1992, ‘Predicting New Firm Births: Interactions of Organizational and Human Populations’, in D. L. Sexton and J. D. Kasarda (eds), The State of the Art of Entrepreneurship, PWS-Kent Publishing Company, pp. 268–297.

  • Reynolds, P. D., 1995, ‘Who Starts New Firms? Linear Additive versus Interaction Based Models’, in W. Bygrave, B. Bird, S. Birley, N. Churchill, M. Hay, R. Keeley and W. Wetzel (eds), Frontiers of Entrepreneurship Research 1995, Proceedings of the Fifteenth Annual Entrepreneurship Research Conference, Babson College, pp. 32–46.

  • Rich, S. R. and D. E. Gumpert, 1985, ‘How to Write a Winning Business Plan’, Harward Business Review 63, 156–166.

    Google Scholar 

  • Sandberg, W. R. and Hofer, C. W., 1987, ‘Improving new venture performance: The role of strategy, industry structure, and the entrepreneur’, Journal of Business Venturing 2, 5-28.

    Google Scholar 

  • Sapienza, H. J. and C. M. Grimm, 1997, ‘Founder Characteristics, Start-up Process, and Stratgey/Structure Variables as Predictors of Shortline Railroad Performance’, Entrepreneurship Theory and Practice 22(1), 5–24.

    Google Scholar 

  • Shapero, A. and L. Sokol, 1982, ‘The Social Dimensions of Entrepreneurship’, in C. Kent, L. Sexton and K. Vesper (eds), Encylopedia of Entrepreneurship, Englewood Cliffs, NJ: Prentice Hall, pp. 72–90.

    Google Scholar 

  • Smallbone, D., 1990, ‘Success and Failure in New Business Start-ups’, International Small Business Journal 22(2), 34–47.

    Google Scholar 

  • Smallbone, D., R. Leigh and D. North, 1995, ‘The Characteristics and Strategies of High Growth SMEs’, International Journal of Entrepreneurial Behaviour and Research 1(3), 44–62.

    Google Scholar 

  • Smallbone, D., D. North and R. Leigh, 1993, The Growth and Survival of Mature Manufacturing SMEs in the 1980s: An Urban-rural Comparison', in J. Curran and D. Storey (eds), Small Firms in Urban and Rural Areas, London and New York, pp. 79–131.

  • Spilling, O., 1996, ‘Regional Variation of New Firm Formations: The Norwegian Case’, Entrepreneurship and Regional Development 8, 217–243.

    Google Scholar 

  • Statistics Finland, 1995, EU-Reportseries: Firms (1):4, International Business Statistics (in Finnish).

  • Stinchcombe, A. L., 1965, ‘Social Structure and Organizations’, in J. G. March (ed.), Handbook of Organizations, Chicago: Rand McNally, pp. 142–193.

    Google Scholar 

  • Storey, D., 1994, Understanding the Small Business Sector, London: Routledge.

    Google Scholar 

  • Storey, D. and P. Wynarczyk, 1996, ‘The Survival and Non Survival of Micro Firms in the U.K.’, Review of Industrial Organization 11, 211–229.

    Google Scholar 

  • Storper, M., 1995, ‘The Resurgence of Regional Economies, Ten Years Later: The Region as a Nexus of Untraded Interdependencies’, European Urban and Regional Studies 2, 191–221.

    Google Scholar 

  • Timmons, J. A., 1979, ‘Careful Self-analysis and Team Assessment can Aid Entrepreneurs’, Harvard Business Review (Nov-Dec), 198–206.

  • Timmons, J. A., 1976, ‘Characteristics and Role Demands of Entrepreneurship’, American Journal of Small Business 3, 5–17.

    Google Scholar 

  • Vesper, K. H., 1992, ‘New-Venture Ideas: Do not Overlook the Experience Factor’, in W. Sahlman and H. Stevenson (eds), The Entrepreneurial Venture, Boston, MA: Harvard Business School Publications, pp. 73–80.

    Google Scholar 

  • Vesper, K. H., 1990, New Venture Strategies, Revised Edition, Englewood Cliffs, NJ: Prentice Hall.

    Google Scholar 

  • Watson, J. and J. E. Everett, 1996, ‘Do Small Business Have high Failure Rates? Evidence from Australian Retailers’, Journal of Small Business Management 34(4), 45–62.

    Google Scholar 

  • Williams, M. L., 1993, ‘Measuring Business Starts, Success and Survival, Some Database Considerations’, Journal of Business Venturing 8(4), 295–299.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. School of Business and Economics, Centre for Economic Research, University of Jyväskylä, P.O. Box 35, FIN-40351, Jyväskylä, Finland

    Hannu Littunen

Authors
  1. Hannu Littunen
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Littunen, H. Networks and Local Environmental Characteristics in the Survival of New Firms. Small Business Economics 15, 59–71 (2000). https://doi.org/10.1023/A:1026553424833

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/A:1026553424833

Keywords

Search

Navigation