Lukewarm or Hot? Comparing Investor Tie Formation of Entrepreneurs in Silicon Valley and Berlin

Abstract

This study contributes a contextual perspective on tie-formation practices that is relevant to both entrepreneurship- and network research. Existing research has highlighted that forming personal ties to investors requires skillful networking from entrepreneurs. We shift attention to how such activities are shaped by local values, norms, and taken-for-granted assumptions about what is considered socially legitimate networking behavior in different institutional contexts. We present results from an embedded, multiple case study, in which we compared two types of entrepreneurs (start-up entrepreneurs and academic spin-off entrepreneurs) across two different institutional contexts that both provide a dynamic environment for entrepreneurial activities (Silicon Valley and Berlin). Our study offers theoretical insights into how institutional contexts shape tie-formation practices through tie-formation scripts. We identify practices and scripts that are distinct to the two different contexts. Moreover, we offer novel insights into how tie-formation scripts shape the quality of entrepreneurs’ networks over time, as well as how they constrain (or enable) their ability to move from one institutional context to another. In particular, we introduce the novel concept of tie warmth to explain why strategies of network broadening may be appropriate in some contexts, network deepening is appropriate in others, and in some contexts, forming personal ties to investors may not be useful at all.