Entrepreneurial growth expectations and information flows in networks.

The study analyzes entrepreneur’s expectations regarding future growth by analyzing the relationship between information flows from networks and the perceived risk of decisions associated with the future size of a firm. The main proposition is that growth expectations might be the outcome of superior judgment stemming from privileged information derived from networks. To provide evidence in support of this hypothesis a sample selection model is estimated using a two-step estimation procedure. Cross-section questionnaire data are used in the empirical analysis. Evidence is provided on the role of inter-firm contacts and relationships as a mechanism able to assist entrepreneurs in better assessing and even reduce the risk and uncertainty associated with their present and future decisions regarding firm growth. The study provides evidence on the factors affecting expected growth rates while it explicitly formulates and tests the hypothesis that expectations regarding growth might be the outcome of superior judgment stemming from privileged information derived from networks. Analysis indicates that networks are indeed information mechanisms, however, such information should be specific to problem solving firm processes. Better informed entrepreneurs are those that foresee higher growth in the future, yet they are not blocked in only local networking