Comparing the structure of virtual entrepreneur networks with business effectiveness

Abstract In this paper we look at the effectiveness of business networks created by alumni of different universities. In particular, we analyze the networking behavior of entrepreneurs in Germany through the emergent structures of their virtual social networks. We automatically collected the publicly accessible portion of the German business networking site Xing.com by crawling the Web. We then filtered the people by attributes indicative of their university, and roles as founders, entrepreneurs, and CEOs. We constructed alumni networks of 12 German universities, identifying over 50,000 alumni, out of which more than 15,000 had entrepreneurship attributes. We also manually evaluated the financial success of a subsample of 80 entrepreneurs for each university. Universities, which are more central in the German university network provide a better environment for students to found more and more successful startups. People in alumni networks whose members have a stronger “old-boys-network”, i.e. a larger share of their links with other alumni of their alma mater than with outside people, are more successful as founders of startups. We repeated this analysis on the individual level, combining all 15,000 founders, confirming the same result. Finally, the absolute amount of networking matters, i.e. the more links entrepreneurs have, and the higher their betweenness in the online network of university alumni, the more successful they are.