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How Can Start Ups Grow?

For new ventures a lack of resources makes growth difficult to come by—just ask those nine out of ten fledgling firms that fail. Professor Mukti Khaire says the key may be in acquiring intangible resources such as legitimacy, status, and reputation.

The track record is well known and sobering for any entrepreneur: 90 percent of all new ventures fail. It’s not hard to see why. Start-ups often lack vital resources, must compete against established companies, and have little or no track record with which to woo customers and investors. So how do those one-out-of-ten firms grow into successful, sustained enterprises?

Assistant professor Mukti Khaire believes that small companies can grow by developing intangible social resources such as legitimacy, status, and reputation. In an interesting twist, her research on this insight is that these intangible resources may be best acquired by following a road of conformity in how your company is organized and presented to the outside world. Conventional business titles such as Marketing Director are much better than Chief Evangelist. Organizationally, a hierarchical structure will be much better understood and accepted by outsiders than a flat, decentralized decision-making structure.

by Sarah Jane Gilbert

Full Story: http://hbswk.hbs.edu/item.jhtml?id=5089&t=entrepreneurship

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