The value of capabilities and networks in technology start-ups

Empirical evidence suggests that an organization’s set of capabilities is a resource that influences performance. Similarly, firms seek out alliance partners to access information and other complementary assets. Most empirical studies confirm that a firm’s network characteristics impact its performance. However, both the capabilities and networks literatures tend to explore these issues independently and often focus on the static impact of internallydeveloped capabilities and externallysourced network resources on performance. We examine the temporal changes in the relative impact of these resources by investigating the dynamic relationship between capabilities, networks and firm valuation with panel data from 156 biotechnology startups and a minimum distance estimation technique. We find that the marginal effect of network characteristics on firm valuation decreases while internal capabilities become more critical over time