Network Isolates: Entrepreneurial Bootstrapping and the Social Disconnection of New Organizations in the Mobile App Ecosystem

Abstract

Extensive prior literature has studied how young organizations are impacted by and often benefit from embeddedness in key industry networks. Indeed, some research advises that entrepreneurs “don’t go it alone” (Baum, Calabrese, and Silverman, 2000). This literature has also highlighted a dynamic whereby young organizations with higher quality are most likely to sort into these networks. Yet this perspective often fails to consider the drivers and prevalence of high-quality young organizations not becoming embedded, and instead remaining network isolates. Drawing on resource dependence and exchange theory’s emphasis on network ties arising from mutual and balanced interdependence, we explicate how organizational design decisions, current performance, and competitive pressures influence whether a young organization remains a network isolate. We test and find support for our arguments using an unusually rich, complete, and large “big data” dataset that captures all competitors in the mobile app ecosystem on the Apple iPhone ecosystem over a period of 5 years, showing that a substantial fraction of high-performing mobile app developers remain outside of the venture finance network.