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Introduction
In light of the unique market characteristics of the Chinese apparel industry, more and more research has been focused recently on Chinese apparel new ventures (Li, 2014). There were over 130,000 apparel enterprises operating in China in 2014 (Li, 2014). According to China’s National Bureau of Statistics, during the first quarter of 2016, China’s textile and apparel industry realized a total profit of 348.2 billion yuan (US$54 billion), representing an increase of 4.4 percent over the first quarter of 2015 (Ni, 2016). Meanwhile, the consumption patterns and preferences of Chinese apparel consumers have also evolved, showing an increasing desire for diversification and differentiation (Cao et al., 2014). Many new apparel ventures have been born and perished as Chinese consumer demands and preferences have changed. It has been estimated that two-thirds of today’s apparel output are produced by small- and medium-sized enterprises (SMEs), and most of those SMEs are new ventures (Feng, 2008).
Despite their positive contributions, new ventures have a poor survival rate and many fail in their early stages (Shirokova and Shatalov, 2010). Studies have shown that about 8 out of 10 businesses fail within the first 18 months worldwide (Wagner, 2013). In the Chinese apparel industry, approximately 80 percent of new ventures are reported to fail within the first five years of being established (Ong, 2007). Among the many reasons for this is the lack of product variety that new ventures offer, which can make them less competitive than established companies (Li and Atuahene-Gima, 2001). In addition, new ventures typically start out as small businesses and struggle to compete against large companies (Aldrich and Fiol, 1994).
To successfully navigate the uncertainty of resource exchange and the competitive market environment, firms establish connections with key resource providers in the external network to stabilize their input and output (Salancik and Pfeffer, 1978). Social network theory argues that firms take advantage of such external network relationships. These relationships become critical resources for firms and enhance competitive advantages and performance, as supported by the resource-based view of the firm (Barney, 1991). Particularly in China, where the long-lasting culture of guanxi, a mixture of personal and public relationships that affect all individual and organizational lives (Yum, 1988), holds sway, the personality traits of their founders...