Dynamics of Social Capital and Their Performance Implications: Lessons from Biotechnology Start-ups

Abstract

Based on comparative longitudinal case analyses of six new biotechnology firms, this paper explores how the configuration, management, and evolution of entrepreneurial firms' social capital affect firm performance. Findings suggest that firms can realize performance benefits when their members repeatedly adapt the configuration of their social capital to changing resource needs, while inertia turns a firm's social capital into a liability. Our research provides a dynamic view of the conditions and processes that produce such inertia, allow firms to overcome it, and develop a firm's social capital to organizational advantage. A core theoretical contribution of our study is to identify and theorize how the internal organization of firms' management of relationships with external partners, through horizontal and vertical differentiation and integration, affects the dynamic of firms' social capital, adaptive capacity, and performance.