Third Actors Initiating Business Relationships for a Medical Device Start Up: Effect on Network Embedding and Venture Creation Processes

Tamara Oukes and Ariane von Raesfeld on behalf of the PCDIAB consortium

Introduction

It is widely recognised that it is essential to the survival and growth of start ups to initiate, develop and maintain business relationships (e.g. Aaboen, Dubois & Lind, 2011; La Rocca, Ford & Snehota, 2013). Only through establishing business relationships can start ups embed themselves in the preexisting developing, producing and using setting (Hakansson, Ford, Gadde, Snehota & Waluszewski, 2009). However, start ups often experience difficulties in initiating the necessary business relationships (Prashantham & Birkinshaw, 2008). To cope with this challenge, Oukes and Raesfeld (2014) found that a start up used the mediating function of its partners to initiate new relationships. They showed that after it was made aware of, introduced to or referred to a potential partner by one of its existing partners, the start up could mobilise valuable resources from new partners.

T. Oukes (h) • A. von Raesfeld on behalf of the PCDIAB consortium

Center for Entrepreneurship, Strategy, International Business and Marketing (NIKOS), University of Twente, Enschede, The Netherlands

© The Author(s) 2017

L. Aaboen et al. (eds.), Starting Up in Business Networks, DOI 10.1057/978-1-137-52719-6_3

Other researchers (e.g. Aarikka-Stenroos, 2011; Aarikka-Stenroos & Halinen, 2007; Kirkels & Duysters, 2010; Yin, Wu & Tsai, 2012) have also highlighted the important role of ‘third actors’ in initiating relationships. Nevertheless, these studies focused on the perspective of the third actor—the one who connects—rather than the actors that are connected. Yet, the connection function of a start up itself is usually limited due to a lack of power, influence, information and control benefits, as well as the constraints on network activities with which it is confronted (Shipilov, Li & Greve, 2011; Yin et al., 2012). Nonetheless, the connection function of its partners can support the initiation of a start up’s business relationships in two ways. First, third actors reduce the uncertainty associated with the competencies and resources of a start up’s potential partners by connecting complementary partners in a way that is beneficial to all parties (Howells, 2006). Second, a start up can mitigate the possible detrimental effects of its limited network by relying on its partners to connect some of their existing relationships to the start up (Holmen & Pedersen, 2003).

In addition, research has shown that the initiation of business relationships will affect the extent to which the start up embeds itself in the pre-existing network and develops its business (Lamine, Jack, Fayolle & Chabaud, 2015). For example, Mainela, Pernu and Puhakka (2011) define four specific behaviours—internal problem-solving, external solution creation, opportunity selling and opportunity organising—as the primary drivers of the development of start ups and embedding them in networks. Although these studies have given us a valuable understanding of the network-embedding process and start up business development, this type of study usually looks at the initiation of several dyads, that is, the relation between two organisations (e.g. Aaboen et al., 2011; La Rocca et al., 2013), or the initiation of a portfolio, that is, the relations of a single organisation (e.g. Anderson, Dodd & Jack, 2010; Huggins, Izushi, Prokop & Thompson, 2015; Mainela et al., 2011). However, relatively little research has investigated the effect of third actors on the network embeddedness and business creation processes.

I n summary, only limited research has been undertaken into how third actors influence the process of start up relationship initiation and how this in turn affects the process by which they embed themselves in the pre-existing network and develop their business. Therefore, our aim is to investigate how third actors influence a start ups business relationship initiation and subsequent network embedding, as well as its business development. This research’s aim is addressed in a case study of a start up. The company involved is developing a medical device for the treatment of persons with diabetes. In the medical device industry, innovation is located within networks in which universities, start ups, established firms, venture capitalists and professional service firms collaborate. Especially in such a network-based structure, centrally positioned third actors can support the emergence of resource constellations and activity patterns between start ups and other members of the network (Styhre & Remneland-Wikhamn, 2016). This chapter starts by sketching a framework of the relevant theory. After that, the method used to address the research aim is briefly discussed. The ‘Results’ and ‘Discussion’ sections describe the findings of the case study, analysing the key findings in light of the theory. The chapter ends with our conclusion, discusses the limitations and avenues for future research .

 
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