Winners and losers

Mar 01 2007 by Brian Amble Print This Article

As research published this week by recruiter Hudson has found, almost four out of 10 Americans earning between $75,000-$100,000 say they found their job through networking, contacts or word of mouth.

But social networking isn't just important when it comes to landing a job. According to researchers from MIT's Sloan School of Management, the breadth of executives' networks with colleagues at other firms plays a crucial role in deciding which tech start-ups will live or die.

Writing in the Management Insights section of the journal Management Science, Ornit Raz and Peter A. Gloor claim that firms whose managers have more social relationships with peers at other software start-ups have a better chance of surviving external shocks, such as the burst of the dot-com bubble earlier in the decade.

Their research was based on a multi-year study of 100 software start-ups in Israel. Original data was collected from start-ups during the dot-com economic growth. Eight years later, the authors examined new information about the ability to survive the bubble's burst.

What emerged is that firms tend to gravitate towards either the "club of winners" or the "club of losers" Ė and do so well before the winners and the losers are known.

In other words, small start-ups which survived tended to cultivate relationships with successful larger firms. while larger firms that failed tended to talk too much among themselves.

These results, they suggest, may help us predict future winners and losers.