Effects of Social Capital on Start-up Outcomes

This thesis explores the effects of social capital on start-up outcomes. Entrepreneurs’ ability to access and utilise social capital, through bonding and bridging relationships of various types, facilitated by trust, is essential to the success of their start-ups. This study identifies and differentiates two key forms of bonding, surfacing tribal bonding as a new concept distinct from bonding as traditionally recognised. Traditional bonding depends on developing ties and trust over time, while tribal bonding is built on individuals’ inherent desire to contribute towards the value of the group. Tribal bonding requires less time than traditional bonding to develop relationships, results in reduced monitoring, and facilitates faster tacit knowledge transfer; all of these factors reduce costs relative to traditional bonding. Particularly during the start-up stage, reduced cost and faster decision making are crucial for entrepreneurs, who are typically short on cash and time as their ventures have not started generating revenues or profits. The type of bonding extant in a given situation is also an important factor in establishing commonalities among consumers, which affects how a start-up accesses and benefits from its consumers. A start-up has a better chance of faster acceptance and more useful developmental feedback if the consumers share a tribal bond and an existing need for the product, as compared to creating a product for a target consumer segment and using marketing to persuade the consumers. The adoption of open innovation practices and novel applications of technology have provided platforms for individuals who focus on similar causes to collaborate. Often these individuals do not know each other at the start but are connected through tribal bonding; this furnishes entrepreneurs the opportunity to access resources and support, as well as consumer tribes, through means other than traditional bonding or bridging. This shift from an individualist to a collectivist approach echoes the conceptual progress from modernism to postmodernism. To examine the impact of various forms of social capital on entrepreneurial start-ups, this study collected primary data through interviews with 41 current and former students of universities in New Zealand, who among them had generated a total of 69 start-ups. These universities, through their curriculum-based and extracurricular entrepreneurial programmes, have created entrepreneurial ecosystems rich in social capital, facilitating student start-ups, thereby constituting an ideal environment for this study. Abductive reasoning – a back-and-forth approach directed by theory juxtaposed with data – enabled the discovery of tribal bonding social capital, a previously unidentified form with features differing from those of bonding as traditionally conceived. Abductive reasoning further divided people who affect start-ups into two broad groups: those who affect supply and those who affect demand. The Qualitative Comparative Analysis (QCA) method, based on set theory, enabled examination of tribal bonding alongside traditional bonding, bridging, and trust. QCA identified multiple pathways to start-up outcome. The identified pathways were categorised into two major approaches, one reliant on traditional bonding and the other on tribal bonding. This study contributes to theory through the separation of tribal bonding and traditional bonding, leading to the creation of a conceptual model indicating the relative cost implications of engaging the two types of bonding as well as a framework that differentiates the impacts of groups that affect supply from groups that affect demand. The methodological accomplishments of this study include the successful combination of abduction and retroduction, incorporating QCA to examine the effects of tribal bonding on start-up outcomes. From a practical perspective, the derived model and framework may guide practitioners regarding how to optimally mix their interactions with various types of groups affecting start-ups, including (but not limited to) how to access required resources at the lowest cost