Organizational Endowments and the Performance of University Start-ups

The question of how initial resource endowments-the stocks of resources that entrepreneurs contribute to their new ventures at the time of founding-affect organizational life chances is one of significant interest in organizational ecology, evolutionary theory, and entrepreneurship research. Using data on the life histories of all 134 firms founded to exploit MIT-assigned inventions during the 1980-1996 period, the study analyzes how resource endowments affect the likelihood of three critical outcomes: that new ventures attract venture capital financing, experience initial public offerings, and fail. Our analysis focuses on the role of founders' social capital as a determinant of these outcomes. Event history analyses show that new ventures with founders having direct and indirect relationships with venture investors are most likely to receive venture funding and are less likely to fail. In turn, receiving venture funding is the single most important determinant of the likelihood of IPO. We conclude that the social capital of company founders represents an important endowment for early-stage organizations.