Embeddedness in Indian Tech Startups: An Empirical Study of Antecedents, Configuration, and Impact of Networking

Abstract

Tech startups are integral to a nation’s economic progress due to their immense potential to foster innovation, job creation, exports, and investments. However, tech startups face considerable hurdles in accumulating the necessary resources and collecting relevant information due to the liabilities of newness and smallness. These difficulties result in a high failure rate in the creation, stability, and growth stages. To overcome the resource challenges critical for survival, tech startups depend on networks. However, it is not yet clear in general and in the Indian context in particular what kind of networks are critical in the creation, stability, and growth stages, and how these different networks are essential for the growth of startups. Against this backdrop, the present study examines the key constructs of the tech startup networking phenomenon in the context of Indian tech startups. We explore 1) Network dynamics over the tech startup’s lifecycle stages. 2)a) Optimum network configuration for the entrepreneurial process of opportunity recognition and resource mobilisation. b) Interaction effect of entrepreneurial motivation on the network embeddedness. 3) The network’s role in the tech startups' propensity to protect innovation and make their first international expansion. 4) The influence of the network on the tech startup’s developmental milestones. To study the networking phenomenon over a tech startup’s lifecycle, at the outset, we define the network in terms of network embeddedness, i.e., measured using structural and relational embeddedness. Structural embeddedness is measured using network efficiency calculated using the H-H index. Relational embeddedness is calculated using the strength of the ties. We gathered data using the primary method of a semi-structured questionnaire and in-depth interviews with the founders/CEOs of these startups. We find that the network efficiency and weak ties vary with the tech startup’s lifecycle stage. However, strong ties are significant across all the stages of a startup. Further, a high network efficiency does not contribute to identifying lucrative opportunities; instead, strong ties are helpful. However, for a startup whose primary purpose is to gather resources, lower network efficiency turned out to be more useful than high network efficiency, and relationally, strong and weak ties are essential for accumulating the resources. Furthermore, our study also finds the moderating effect of entrepreneurial motivation on the networks for executing the entrepreneurial process. Moreover, the information and resources thus obtained through networks play a deterministic role in the speed of applying for a patent and making the first international market entry. Lastly, the different networks a tech startup approaches influence meeting milestones differently. Based on the analyses, we derive appropriate managerial and policy implications encouraging networking for the startup’s growth.