The role of network community characteristics for firms' rapid business scaling

Which factors lead to firms' massive rapid business scaling? The prior work has predominantly focused on factors inside the firm, assuming that the possession of internally controlled idiosyncratic resources and capabilities largely explains the phenomenon. We extend this work by arguing that the alliance network community in which a scaling firm is embedded represents a distinct valuable channel through which it can access and orchestrate resources needed for its rapid growth. Network communities are structural groups of firms that are densely connected internally and sparsely linked to firms in other groups. We focus on three key characteristics of network communities: size, density, and stability. We theorize that the access to and orchestration of diverse and complementary network community resources influence firm rapid scaling through the expansion, replication, and synchronization of resources and business practices. Using a sample of firms publicly traded on the North American stock exchanges and observed over 1990–2020, we find that these firms' business scaling positively relates to the size and density of their network communities, yet the relationship between firm scaling and network community stability is negative.