Authors: Daniel Armanios (Saïd Business School, University of Oxford))

Abstract: Does physical infrastructure shape which organizations are most likely founded as a consequence? While we increasingly know that the physical environment matters for organizational life, which configurations matter and for whom this matter remains still largely unknown. Our core premise is that variation in the physical environment leads to differences in the information channels that one can more easily access to identify the problems and solutions already tackled by other firms, and these differences catalyze different kinds of organizational founding. In particular, we argue that regions with higher inward connectedness are better equipped at narrowing search, which is more vital when problems are known-unknowns; this thereby leads to more convergent founding (i.e., new firms reflect similar sectors and focus as do existing firms in the same locale). Conversely, greater outward connectedness enables a widening mode of search, which is more vital for addressing unknown-unknowns; this thereby leads to more divergent founding (i.e., new firms that reflect different sectors and focus as do existing firms in the same locale). To capture adequate spatial and founding heterogeneity, we focus on all startups founded and reported from 2010-2016 on Crunchbase (N=82,152) at the county level (N=3,143), and we find support for our core assertions. To deal with concerns of omitted variable bias, we further apply commuting zone and year fixed effects, and instruments based on historic city planning and topography. This study advances a physical infrastructure perspective to search that has implications for the literatures at the nexus between organizational theory and entrepreneurship.

Host: Holger Patzelt