Entrepreneurs’ searching for capital through their network ties: An empirical study in the

Greek semiconductor industry

Master Thesis

Coach: Dr. Willem Hulsink

Co-Reader: Dr. Vareska Van de Vrande

MscBA Entrepreneurship and New Business Venturing

Rotterdam 2008

Nikolaos Nakos

MscBA Entrepreneurship and New Business Venturing

Entrepreneurs’ searching for capital through their network ties: An empirical study in the

Greek semiconductor industryStartup entrepreneur: the person who sets up a

new company

MscBA Entrepreneurship and New Business Venturing

Entrepreneurs’ searching for capital through their network ties: An empirical study in the

Greek semiconductor industry

seed capital : financial resources that entrepreneurs need at the initial stages of

their firm to conduct a market research,buy equipments and

facilities and pay the operational costs

MscBA Entrepreneurship and New Business Venturing

Entrepreneurs’ searching for capital through their network ties: An empirical study in the

Greek semiconductor industryNetwork ties: Strong

ties (Family,Friends,close (ex)colleagues )

Weak ties (business contacts, acquaintances)

MscBA Entrepreneurship and New Business Venturing

Entrepreneurs’ searching for capital through their network ties: An empirical study in the

Greek semiconductor industry

The empirical setting: high-tech Greek firms

which design microprocessors for several applications

Purpose & value of the study

the use of social networks influence the new venture creation process

the use of social networks can lead entrepreneurs to resources

Financial resources are fundamental for the startup of a firm

Relarionship between social networks and financial resources

This relationship is understudied

The first research ever made in the Greek Semiconductor industry

Purpose & value of the study

the use of social networks influence the new venture creation process

the use of social networks can lead entrepreneurs to resources

Financial resources are fundamental for the startup of a firm

Relarionship between social networks and financial resources

This relationship is understudied

The first research ever made in the Greek Semiconductor industry

Main research question: How startup entrepreneurs of the high-tech sector use their

network ties to get access to sources of capital?

Theoretical Concepts

Entrepreneurship

Human Capital

Social Capital

The strength of ties

Sources of Funding

35 firms & 15 research institutes

organizations: Hellenic Semiconductor association & Corallia (Clustering initiative)

700 employees

60 mil. € turnover

30 mil. € investments

Future projections: 150 companies & > 300 mil. € turnover in 2012

The Greek Semiconductor Industry

Qualitative method

Comparative case study (Within & cross case analysis)

Semi-structured interview

Methodology

Research Design

Measuring networks ties (Granovetter, 1973)

Frequency of contact

Emotional intensity of the relationship

Degree of intimacy

Reciprocal commitments within the relationship

The Case Studies

7 Case Studies

Founding year from 2000 to 2007

Specialized in designing services & consulting

Founder’s Background: Master & PHD studies in electronic engineering, no prior entrepreneurial experience, some of them prior working experience

Located in the two main technological centers of Greece: Attica & Patras

Analysis

CompaniesType of Ties

Strong Ties Weak Ties

ALMA TechnologiesBootstrapping:

- Family’s funds- Co-founders’ funds

-

Diaplous Ltd. Bootstrapping:Co-founders’ funds -

Elxys Innovations Bootstrapping:Co-founders’ funds -

InAccess Networks Bootstrapping:Co-founders’ funds

European and State subsidies

Think Silicon Bootstrapping:Co-founders’ funds -

Analogies S.A. Bootstrapping:Co-founders’ funds

Private equity company

& European and State subsidies

Helic Bootstrapping: Family’s funds

Venture Capital Company

The firms were founded by teams of engineers

Additional members in the founders’ team brought financial resources

Bootstrapping methods appearedin all cases

Weak ties were used only in the private - financed firms

The use of strong ties lead to the acquisition of capital through bootstrapping

Weak ties found to be significant for the acquisition of external financing (equity finance)

Entrepreneurs who did not raise funds from investors did not make use of weak ties

Weak ties are more important than strong ties for the acquisition of external financing at the startup stage

Findings

Limitations & Further Research

Limitations

Single static point of time

Identification criteria of ties

Time & resource restrictions

No previous research in the specific context

Conduct the research in other emerging economies like Balkans and Eastern Europe

Measure the influence of human capital

Implications for nascent entrepreneurs

Further Research

Keep your contacts warm!

entrepreneurship

strong tiesweak ties

networksbootstrapping startups

venture capital

human capital

social capital

high - tech

Greece

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