Entrepreneurial growth expectations and information flows in networks

Abstract

Purpose The paper aims to analyse entrepreneurs' expectations regarding future growth by analysing the relationship between information flows from networks and the perceived risk of decisions associated with the future size of a firm. Design/methodology/approach The paper's main proposition is that growth expectations might be the outcome of superior judgment stemming from the privileged information derived from networks. To provide evidence in support of this hypothesis, a sample selection model was estimated using a two‐step estimation procedure. Cross‐section questionnaire data were used in the empirical analysis. Findings Analysis indicates that networks are indeed information mechanisms; however, such information should be specific to problem‐solving firm processes. Better‐informed entrepreneurs are those that foresee higher growth in the future; yet, they are not blocked in only local networking. Research limitations/implications The small sample size might be viewed as a limitation; yet, the very satisfactory fit of the estimated model allows empirical findings to be a useful comparison with future evidence in the field. Practical implications Evidence is provided on the role of inter‐firm contacts and relationships as a mechanism able to assist entrepreneurs in better assessing and even reduce the risk and uncertainty associated with their present and future decisions regarding firm growth. Originality/value The paper provides evidence on the factors affecting expected growth rates, while it explicitly formulates and tests the hypothesis that expectations regarding growth might be the outcome of superior judgment stemming from the privileged information derived from networks.

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