Abstract

This paper investigates the association between the number of sources of advice entrepreneurs utilize and subsequent performance. Specifically, we explore diminishing returns to scale between the amount of advice received and performance.

The emerging theory of outsider assistance suggests that outsider assistance leads to creation of knowledge that positively influences performance. At some point in the learning process an entrepreneur will have obtained most of the relevant information, and obtaining advice beyond this point will have a detrimental effect on performance. Social network research present similar findings; a larger network is more likely to provide entrepreneurs with more information and more non-redundant information. An inverted U-shaped relationship between network size and performance has been suggested, resulting in an optimum level of resources that should be devoted to networking. The purpose of this research is to apply these propositions to a representative sample of new businesses in Norway.

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