Abstract

Our study aims to explain the possible roles of social network structures (Dodd & Patra, 2002) and informal investors (Bygrave et al., 2003) in determining countries’ new firm formation rates. It is difficult to capture informal investment activities (Mason & Harrison, 2008), and even more difficult to figure out their social network structure (Hoang & Antoncic, 2003). To overcome these difficulties, simulation can be a useful tool. Simulation is regarded as an effective way to elaborate on theories (Davis, Eisenhardt, & Bingham, 2007); furthermore, agent-based modelling and simulation (ABMS) can test lower-level mechanisms that produce stylized facts on the aggregate level (McMullen & Dimov, 2013). This study tries to explain the opportunity-driven new firm formation rates across countries by simulating nascent entrepreneurs’ networking activities with informal investors, and to propose a new agent-based model (ABM) of venture creation process.

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