The history of entrepreneurship and network has long been a corner stone to the world economy with a nation’s economic development relying on the growth of new business ventures Coviello and Munro (1995). For decades, various academic research explored the impact of networks in business ventures thereby documenting on successful entrepreneurs. Interestingly, over the last decades, various body of researches linked the dynamics of network analysis to that of entrepreneurship to explain various phenomena throughout the entrepreneurial process. A lot of these studies were drifted towards the effect of gender, age, time, nationality, ethnicity, and the role of entrepreneurial network in the success of small and medium enterprises (Aldrich and Sakono, 1995, Conway and Jones, 2012). However, the creation of new business ventures and the process involved throughout the entrepreneurial process remains a debate till date. In this study, we perceive an entrepreneur as an innovator who generates new opportunities and business in the economy thereby combining existing technology and available resources. This is often done through creative destruction (Schumpeter (1942) ,Spilling, 2006).
Shane and Venkataraman (200, p.218) defined entrepreneurship as ” an activity that involves in the discovery, evaluation and exploitation of opportunities to introduce new goals and services, way of governing markets, processes, and raw materials through organizing efforts that previously had not existed”.
PROBLEM BACKGROUND AND RATIONAL
There are quite a number explanation why an individual connect; for instance to benefit from financial supports, resource acquisition or simply knowledge transfer. However, network is use for the attainment of their objectives. Studies so far attempts to show the role of network since entrepreneurs seek not only adequate resources, financial support and space but also information, knowledge transfer and reassurance (Birley, 1985). Erstwhile knowledge base prevails on the fact that, network is an influential factor in the entrepreneurial process. Enthused by Granovetter (1985), the overall argument in this study is that, entrepreneurs are embedded into the social system that influences their decision making ( Dowla, 2011, Grannovetter 1985)). Although it is necessary in this study to focus on the individual entrepreneurs’ network, entrepreneurial intentions, planning and realization obviously matters when exploring the relationship between the entrepreneurial networks and venture’s success.
The mainstream of past empirical studies examined how there exist a direct relationship between an SME’s success and social network. These old wave of researches, drifted their focus towards the typology of network which, classify entrepreneurial networks configurations in to structural complexity and flow complexity where, the variation in the complexity of structures and flows are joined to influence the form, function and performance of a network. Therefore, elements in a network interrelate to form an entrepreneurial network configuration (Bliemel et al (2010). An important implication of the role of network based on the network configuration is that the connection between actors in a network- regardless of the actor’s social status, be it a broker or client, could be extended ultimately. Thus, reinforcing the networking capabilities of an entrepreneur, new business venture competency and sustainable entrepreneurship (Bliemel et al 2010; Dowla, 2011; Lechner et al. 2005, Lan et al (2011); Peprah, 2011). However, Haong and Antonic (2003), Burt (1992), Huse (2014) and Serem (2016) stressed on the fact that the importance therefore of network, can not only be related to the creation of a new business venture, the entrepreneurial process and how network are formed but also its validity throughout the venture’s life cycle.
Given that the success of business ventures is one of the mechanisms of an economic GDP in developed and less developed countries (Serem, 2016), networking plays a predominant role in the attainment of an entrepreneur’s goals. Success in this study is classified under growth and innovation (Ahuja, 2000; Witt, 2007). An increase in a company’s value, growth in profit, incremental innovation, balance sheet total, profit and return in investment and finally, increase in the number of employees can be seen as an indicator of a business venture’s success (Aldrich, 1987; Foley and Green (1989), Losccoco et al. 1993). As a result, transaction cost tend to be reduce by business founders via networking (Hansen and Blake, 2009) .Jensen and Schott (2014), Jenssen (1999) advocated that, there has been a gab in prior literatures with regards to the network structure and formation during the entrepreneurial process and it influence on success in the following aspect;
The survival of the business ventures and their persistence in the market.
The discontinuity and exit of the start-up.
The focus on the effects of network composition.
Criteria developed for this study using the GEM includes: Owner/founder/co-founder/ manager/ CEO of a business – all sector firms – Located across 70 countries
Figure 1.1: General model for the Study
The aim of this study is to broaden the understanding of the entrepreneurial journey using the impact of networking all along the entrepreneurial process there by taking into consideration how individuals come up with the entrepreneurial intentions, how this is developed, when network is been applied during the business phases and finally, the success of this new business ventures
SIGNIFICANCE OF STUDY
The significance of entrepreneurial networks on new business performance, will be examined at the later part of this section using several researches from various academics. The importance of entrepreneurial network would be analysed on various levels for instance from person- person, person- organisation, and country-country. For the analysis at the country level, countries are being divided into three categories according to the Global entrepreneurship monitor 2013: efficiency driven economies, Innovation driven economies, and factor driven economies
The entrepreneurial process is more of a means to an end rather than the end in itself. Hence, it is not just a measly task of starting a new business venture but more of a complex and elaborate procedures requiring a lot aspirations, devotions and patience. In all these procedures, networking plays an immense role to an end means. Dowla (2011) posited that, activities, functions and, actions being associated with opportunities and creating organisations are all components of the entrepreneurial process. Our aim therefore is to apprehend in-depth how networks interplay during these processes from the intentions to become and entrepreneur to the success of new business ventures.
STRUCTURE OF STUDY
2.1 An overview of the network perspectives in entrepreneurship
Several studies purport that individuals with entrepreneurial intentions uses networks to get notions and collect information when an opportunity is being recognised. The notion of networking into entrepreneurship studies was first initiated by Birley in 1985 followed by Aldrich (1986) and Johannisson (1988). However, it is to be noted that, the network theory is centred on the term “social capital”. The latter can be defined as, all current or potential resources that are linked to the possession of a sustainable or durable network of institutionalized relations of mutual acquaintance or Interknowledge and Interrecognition. Hence, individual entrepreneur who have the tendency of performing well are more or likely better connected (Bourdieu 1980, Burt 2000). According to Coleman (1988), social network plays a major role for an entrepreneur and social capital. Network is therefore a web of relationship which can be defined as a set of actors connected by a set of ties or the connections between single nodes (actors) and the linkages between these actors called dyads, which form a whole structure of network (Borgatti ; Foster (2003); Walker (1988)). Since social network consists of relationships between individuals, organisations, community and may span to boundaries; we therefore limit ourselves on individual entrepreneurs and his personal network. Aldrich and Reese (2014, p.125) defines personal network as:
“… Person with whom an entrepreneur has direct relation, example partners, suppliers, customers, bankers, and family members as part of an entrepreneur’s personal network. Typically, these are people with whom the entrepreneur meets on face-to-face basis and from whom they obtain services, advice and, moral support…”
Another narrow definition of networks was that of Aldrich and Zimmer (1985). They defined network as set of actors with whom and entrepreneur has a direct link and other actors with whom the entrepreneur has an indirect connection with the use of his direct contacts. It is therefore astute to say that; the private sphere of an entrepreneur forms the dominating part of networking and it influences start up there by speeding up the enactment of small firm’s success. Individuals therefore with an entrepreneurial personality such as the Big Five traits require information, knowledge and resource exchange, capital and, adequate skills to start up a new business organisation. These advantages gained through networking can be categorize as human and social capital. The former can be defined as expertise and knowledge that individuals attain through investments in schooling, traineeship, learning-by-doing. Any set of tangible or intangible resources that is linked to an entrepreneur via social network and helps in the achievement of the entrepreneurs goals can be referred as social capital (Leenders & Gabbay (1999); Gartner et al (1992), Unger . J et al, (2011)). ). In an embedded system, two central elements constitute the network structure (Jenssen, 1999) that is, nodes – actors in the network with whom the entrepreneur has a link and Linkages- the connection between actors in a network.
Since every human being behave rationally, human interactions are therefore characterised by voluntary exchange of resources. Therefore, it is important to separate one’s commercial behaviour with that of a networking behaviour. Transactions can be done one- on-one over a short period of time (buying an item from a boutique). Grannovetter (1985) coined such transactions in his theory of social embeddedness as ‘arm’s length relations’ since, there is no string attach or personal emotions involved. Notwithstanding of the quick and fast transaction, this form of exchange has its own short comings; competition among parties, problem of asymmetry and uncertainty which is quite analogous to the game theory and finally, departure from any future form of collaboration(Aldrich,2014). Networking behaviour on the other hand entails transactions where two parties expect a long-term relationship “embedded ties” with a lot of benefits accrued to it; trust – it is regarded as confidence in, or reliance on another party. Thus, entrepreneurial activities are all about interactions with other parties and how we rely on them. Voice – it is another advantage gain from such interaction; rather than quitting the long-term relations, individuals will prefer to speak out their complaints. Hence, allowing negotiations during the transaction process to set in. And finally, uncertainty is reduced given that the relationship is based on trust (Aldrich 2014).
Birley (1985) identified two forms of network: formal and informal network. Agencies such as banks, lawyers, and other formal institutes are the main components of a formal network. Whilst, informal network are contacts from our immediate environment such as family, friends, peers and colleagues. She further posited that, there exist knowledge spill over because the individual entrepreneur’s previous employment assists him in developing model for the new firm. Therefore, a network will be effective if the needs of an entrepreneurs are being diagnosed and transferred around the embedded system till these needs are met (Dowla, 2011).
(add entrepreneurship perspectives)
2.1.1 DIMENSIONS AND NETWORK FORMATION
Aldrich and Zimmer (1985) identified three dimensions which are useful in network analysis:
Density. The density of a network provides a canal that an individual entrepreneur can use to obtain resource diversification. It is therefore the ratio of linkages among different nodes (Hoang ; Antoncic, 2003). Birley et al (1991) claimed that, if all actors within the entrepreneur personal network have connections with one another, then the information will be dense, and the information required for the venture formation will diffuse rapidly. This measurement can also be termed „connectedness? and it is simply a measurement of the possible flow and not the actual transfer of information (Conway and Jones 2012). It can be measured as thus;
D = (?_i?di)/(n^2-n)where d_(i=?_j?a_ij )
It is the number of edges divided by the number of possible edges. Network with high density tend to have unique paths between two nodes (Granovetter, 2005).
Reachability. This dimension shows the distance between two actors in a network. It can also be termed as the path length in a network. According to Aldrich and Dubini (1999) , the number of mediators a path travels before an actor is indirectly linked with another actor, helps to rank an entrepreneur and a firm in a network.
Centrality. Freeman (1978) argued that, the more the entrepreneur reaches easily other actors in a network, the shorter the distance between these actors. There exist three types of centrality measures according to Kim and Aldrich (2005) that is, degree centrality, closeness centrality and, betweenness centrality. Degree centrality indicates the number of direct ties link to the actor. Actors benefiting from this centrality spot easily opportunities and new information. The reachability of actors in a configured network to an actor in the same network is the closeness centrality, which can be measured by the variance round the mean of various actors’ centrality scores. High variance scores imply few actors are accessible depending on the distance to other actors. Finally, the position of an actor in a chain relationship determines the betweenness centrality in a network. As per Kim and Aldrich (2005), individuals with high betweenness centrality can play the role of a broker and use the advantages obtained from their central spot.
Aside from the dimensions explained above, Baker (2000) identified three more dimensions which include; size, composition, and focus.
Size. As the name indicate, it refers to the size of the network. The size of the network is mostly influenced by some boundary set and not only does the size of a network matter, but the structure of the network ( Conway and Jones 2012). Sullivan et al. (2014) claimed that, there is a positive correlation between the weak ties of an entrepreneur and the size of the network. This is because, the former can be linked to other actors who might become future ties to the entrepreneur. Specifically, the interaction between an entrepreneur and weak ties are likely to foster the relationship between actors. Thus, the size of the venture will be greater during the venture development at the later phase.
Composition. These are the demographic elements in the network. They include gender, age, religion, and region.
As earlier studied, entrepreneurs use their personal network to expand their network. Burt (1992) illustrated the network creation showing how an individual entrepreneur will move from a simple network to a dense network.
Figure 2.1.1a Network expansion
Source: Burt (1992, p.17)
From figure 2.1.1a, we can observe that, “network A” consist of four actors in the network, which helps to double the actors into “network B” and finally quadruple the contact in “network C”. In this respect, the four-contact network expands to sixteen contacts as shown in the figure. Of course, more contact might lead an entrepreneur to vital information and referrals. Since network constitutes a vital tool in the entrepreneurial process, Burt (1992) clarified his view on network expansion by precising that, the number of non-redundant contacts matters when increasing the size of the network. Again, non- redundant contacts can be observed in a sparse network than in a dense network . As such, the former provides information benefits whilst, the latter in return have less diverse information because of the existence of strong ties. Hence, each actor in the dense network either know or have the same opportunities at the same time lapse ( Burt 1992, Dowla, 2011).
2.1.2 SOME MILESTONES OF THE ENTREPRENEURIAL NETWORK
In ordinary sense, entrepreneurship requires processes allowing connections between key dimensions throughout the entrepreneurial process (Fayolle et al . 2016). The pre-start-up phase of venture formation requires the entrepreneur to be embedded in the system to assure a larger opportunity recognition. The locus of an individual entrepreneur within a network might likely increase the speed and timeliness of the information been transferred (Butler and Hansen, 1999). As we shall examine in the following section, there exist different role played by strong and weak ties throughout the entrepreneurial process. With strong ties providing information, emotional support, skills, and, finances required for start-up whilst, weak ties such as suppliers, venture capitalist provide access to unique information thereby acting intermediaries in the web of relation (Anderson et al 2005, Burt 1992). Coway and Jones( 2012) claimed according to various academic contributors that, small firms has been assisted in the acquisition of ideas, knowledge, resources, finances, and the ability to compete with the help of social network. Hence, the greater the diversity of web relationships, the greater the probability of success for their new business ventures (Gibson, 1991).
Whilst focusing on the individual entrepreneur and the relationship between networking activities and success start-ups be it innovation and performance, it will be judicious to also discuss on the entrepreneurial intentions, entrepreneurial characteristics, business planning and realization throughout this dissertation. And how they all influence the future of a new business venture.
An important aspect we need to understand in this dissertation is that, an individual may have an entrepreneurial intention, knowledge and, even skills to run a business but then, he also need further assistance for a better performance of a business. Birley (1985) examined the degree to which the personal network and the entrepreneur interacts within the web during the start-up of a new firm. She went on to posit that, various components are required in the creation of a venture and what initially trigger one to start (entrepreneurial intentions). The EP is therefore the act of pursuing a new venture that entails a lot of problem solving involving activities connected to the creation of a new business venture- from idea generation to the realization of the firm, and its growth (Greve and Salaff, 2003). To understand the mechanism between entrepreneurial activities and the performance of an SME, both weak and strong ties are necessary for the entrepreneurial process since, they have each additive advantage. That is from fine-grained information to novel ideas (Burt, 1992; Elfiring and Halsink, 2003). Therefore, one need to go through various steps in order to establish an organism.
Wiken (1972) proposed a three phased model in the establishment of a new venture. This concept has gained ampleness in the history of entrepreneurship with various scholars having, differing opinions regarding the EP. For instance, the various phases are not the same and, each individual may not follow the progress at the same rate. Moreover, the transition between these phases are not automatic (Greve and Salaff, 2003). These phases include: motivation phase, planning phase, and the establishment and taking over phase.
Phase 1: Motivation phase. At this phase, entrepreneurs only exploit various opportunities and possibilities of starting a new business venture. They rely themselves on their personal network or strong ties such as family or friends for advices and ideas.
Phase 2: Planning phase. Entrepreneur get into this phase when they have acquired a lot of information, resources, and skills required for the start-up.
Phase 3 a: Establishment phase. According to Hansen (1995) entrepreneurs rather focus on key individuals who are able to support them there by providing resources, finance, and commitment.
Phase 3b: Taking over a firm. This happen when and entrepreneur don’t start from zero but inherit or purchase an existing firm having already social capital and assets.
Other distinct stages of the entrepreneurial model were asserted by (Hisrich et al., 2005): identification and evaluation of opportunity, development of the business plan, determination of the required resources, and management of the resulting enterprises.
Identification and evaluation of opportunity. It is regarded as the most difficult phase, it starts by thinking about a concept, idea which involve identifying market niche to the realization of the business plan. Most business idea may be as a result of important mechanism such as surveys and studies that help in opportunity recognition. Social network at this point guides the entrepreneur in the identification of opportunities against the risk and potential profit from the investment. Here, the description of the market segment, product or services, opportunity recognition, and resources needed throughout the creation of the new venture are been identified. The problem of an entrepreneur to identify and recognise opportunities are affected by other factors like prior knowledge, ability of cognitive learning, resource endowments, social conditions. Moreover, the past experience of an individual with an entrepreneurial intentions ( Huse (2014), Xiaondan et al. (2010). Casson and Guista (2007) asserted that, most often information obtained by entrepreneurs will be spillover information usually obtained from individuals who are unable to use it. That is, non- competing sources which is a plus for the new venture.
Development of business plan. After identifying an opportunity, the entrepreneur work on a business plan. This phase is quite similar to phase two of the entrepreneurial process by Wiken (1972). As earlier mentioned, the entrepreneur work on detailed scheme on how to attain his goals. It comprises of information about the firm, the market, and management team.
Determination of the required resources. Determination of resources and acquiring them has been examined in the social network theory with regards to information, explicit knowledge transfer and learning ( Fayolle et al., 2016). Acquiring the necessary resources such as assets, and capital are important for the commencement of a venture. Since different challenges exist via out the process, different resources such as knowledge, labour and, capital can be seen as problem solvers through the entire entrepreneurial process. Although, some resources are acquired through social networks with many brokers and weak ties, others can be acquired in a dense network having strong ties (Huse (2014), Greve and Salaff (2003). A complementary notion of resource acquisition can be that of Burns (2010) who pointed out that, resources required by an entrepreneur will depend upon the size of the business. This is thus difficult to predict at the start-up phases. He further claimed that, the method of acquiring resources is mostly reliant on credibility. For instance, an entrepreneur credibility shall determine if he or she can effectively manage a start-up. The entrepreneur in most case already have finance for their project but then, weak ties play a major role in resource acquisition (Aldrich 1999). According to Hills, Lumpkin and Singh (1997), majority of entrepreneurs use their social web in order to detect new ideas which in turn helps them to reduce risk signals about an opportunity. As a result, weak affiliations enhance the capability of a founder to spot opportunities ( Elfiring and Halsink, 2003).
Management of the resulting enterprises. This is the time when the entrepreneur implement the business plan developed earlier during the process. Key variables required for the business success and understanding of operational problems remains the main component in managing the enterprise.
2.2 THEORITICAL REVIEW
There have been a long debate and literature on the history of entrepreneurship with the term as network been an outstanding issue as mentioned earlier. Sophisticated relationship between networks and SME’s success and growth stage (Birley et al. 1991, Hitte 2001), benefits from having strong ties and weak ties (Granovetter 1985, Uzzi 1997), the importance of structural holes (Burt et al. 1998), causality between SME’s performance along with the importance and use of networks in the start-up phase (Tendai 2013). Other studies tilted their research on the role of entrepreneurial network in the creation of new business ventures (Hansen 1995).
Strong and Weak ties hypothesis
In a social network analysis, social ties remain an essential component of network. In the network study, distinction between direct and indirect ties and its influence remains a debate till date. Individuals who are directly connected to others in a network can be said to have a direct social tie which constitute of both strong and weak ties. Contrastingly, indirect ties consist of two actors in a network having no direct link. SME’s owners get to evolve from having such ties (indirect) in to direct tie with the help of a third party in their social network (Ahuja 2000, Bloch- Jorgensen, 2011).
By synthesizing ideas from pioneers on entrepreneurship and network theory such as Schumpeter who focused on entrepreneurship by means of economic and sociological factors, an influential sociologist and one of the pioneers of network studies Mark Granovetter (1973) in his famous treatise on “The strength of weak ties” gives a lucid view of an individual entrepreneur in an embedded economic system. He defined the strength of ties as a combination of the amount of time, emotional stability, intimacy, and reciprocal services that an actor embedded in a system is capable to give. According to Granovetter (1973) , individuals are embedded in social networks through strong or weak ties rather than operating unaided (Huse, 2014) .Weak ties here , consist of short term relationships which are mostly one-on-one transaction. It involves therefore, individuals with whom the entrepreneur connects or meet during the entrepreneurial process at any phase of the start-up (nodding acquaintance). They often have different views from that of an entrepreneur but, add additional information that is of great importance for the success of the new business venture there by allowing diversity to set in (Granovetter, 1983). Examples of information obtained by the entrepreneur from weak ties include: how to get resources, potential markets for goods and services, potential investors, loans, contracts and, subsidies (Dowla, 2011). Weak ties can link the entrepreneur to other members of different small group of the network. Granovetter (1978) explained further that weak ties play an immense role in an individual opportunity for mobility – that is, those who are weakly tied have a greater access to job information. Information in this case is “homogenous” and “redundant” since, innovative information is transferred through weak ties (Duling, 2013, Ganovetter, 1978). Even though, bridging network segments in the SWT (Strength of weak ties) remains a difficult task, the structure and the content of a personal network determines the access of job opportunities information Langlois (1977). A question remains – How do the network configuration and structure of a personal network affects the access of information? Langlois (1977) ensuing Granovetter (1978), analysed the diffusion of information with regards to job opportunity in an organisation and concluded that weak ties resulted in a new job, depending on the occupation variation.
Contrastingly, Strong ties mostly consist of individuals with whom an entrepreneur have a closer intimacy and are in a long-term relationship. For instance, family, spouse, close friends and, colleagues are usually available to support the entrepreneur throughout the entrepreneurial process. Granovetter (1983) stated that, these individuals often share same opinions as the entrepreneur. But then, such relationship does not help that much in the process given that, no necessary additional knowledge is acquired although they are of great sway in the entrepreneurial process (Rost, 2011, Huse 2014). Overlapping knowledge may be observed in the long run with the persistent usage of strong ties (Kim and Aldrich, 2005). Nevertheless, such tie relationship among actors in a network are mainly embedded and in this type of relationship, reciprocity between actors is perceptible, strong ties create trust and intimacy thereby forming a solid cluster of association (Aldrich, 1989:108; Dkodyakov, 2007).
There exist a common perception that, new business ventures will benefit from both strong and weak ties in the long run and necessary for the success of an organisation. It therefore implies that benefits might vary in various ways at different venture development phases (Elfing and Hulsink , 2003) . Hence, for the success of an organisation, it will also be beneficial for an entrepreneur to occupy a crucial position in the network structure ( Johannisson, 1988; Rost, 2011).
Burt (1992) expanded Granovetters’ ideology by drifting his attention on concept of multiple networks thereby identifying holes that exist in the absence of ties. He used the term structural hole to underpin the rational choice framework in a network. It can therefore be defined as, a gap between two actors in a network having complementary vital information ( Burt ,1992). A key assumption to Burt’s theory is that, every individual in a network are determined actors, who in order to improve their welfare takes into consideration the costs and benefits of their actions, as well as the structural constraints. Burt made known to the history of social capital, measure of network’s redundancy with actors often seen as redundant actors. Social capital benefit and comparative advantages (spill over) are noticed in thin network with redundant ties because, actors in each network positions faces the same constraints. The non-redundant ties on the other hand, helps to bridge other clusters and the probability to develop within clusters is low (Burt, 2005; Huse, 2014). A structural hole therefore exist when two actors in different networks are unable to connect themselves and share crucial information. As a mediator between these networks is a broker, who’s role is to link actors by constructing bridges. Brokers for instance play the role of a venture capitalists to provide funds and aid to upcoming entrepreneurs who required knowledge and expertise to run the new business venture Dubini and Aldrich (1991). Access to alternative perspectives in the network, early access to novel ideas and, capability to transfer these novel ideas in a network if there is any absolute advantage, are the three main benefits of being a broker Burt (2005: 23). Benefits in the form of information generated whether the link between an individual entrepreneur and his relations are weak or strong, can be seen when there is a bridge over a structural hole in a network.
Figure 2.1.1b Structural holes
Source: Burt (1992:27)
As shown in figure 2.1.1b above, three classes of structural holes emerge in this network: 1- holes between the cluster around contact B and every actors in the strong ties cluster; 2- holes between the cluster around contact A and every actors in the strong ties cluster; and 3- the holes in the middle of A and B. It has been argued in the context of small and medium sized enterprises that, the broker’s role is not only limited to the ones discussed above but that, they provide a more varied role for various clients throughout the innovation process (Howells (2006). In essence, Kirkels and Duysters (2010) identified five types of brokerages:
Coordinators: They enhances information flow between the actors in a network.
Gatekeepers: His role is to absorb information from other clusters and transfer these information to other actors in another cluster in which he belongs.
Representatives: A representative provides information from own cluster network to other group.
Cosmopolitans: Here, he act as an arbitrator in a cluster network in which he is not part.
Liaisons: The broker here plays the role of a mediator between two clusters and enhances the flow of ideas and information between these networks that he does not belong.
Although the opportunities acquired from past networks and constraints observed in these prior networks forms the fundamental principles related to the creation of social structures, the entrepreneurs prior position in the network will likely enable the exploitation of past opportunities (Zaheer and Soda, 2009). Therefore, homogenous information is not related to future holes, but past positions in which future networks leads to the formation of structural holes – valuable position may be that of a broker linking two disconnected alters throughout the structural hole ( Hahl et al, 2006; Zaheer and Soda, 2009).
The structural hole theory thus provide two main benefits as emphasized by Burt (1992) that is, informal benefits and control benefits. The former can be segmented into three parts namely; access, timing, and referrals. For instance, structural holes provide an actor with access to non-redundant information from other parts of the network at a very short period of time and other actors will definitely refer the focal actor in their own network cluster. The later in the contrary, result from the fact that, two distinct actors play out against each other (tertius gaudens) or working together (tertius iungens) (Wittek, 2014). Another ample literature by Aarstad ( 2012) adopting Burt’s similar logic of structural holes tell us that, the availability of resources and information flow increases whilst having multiplex ties which correlates with entrepreneurial performance. Structural holes and network connectivity in his research are highly correlated by assuming that the collaboration between actors in a network facilitates the connection between nodes. Covering structural holes with the use of ties in order join multiple local networks; taking advantage of brokering opportunity to amalgamate past disconnected actors together; and using ties to gain endorsement that establishes legitimacy and improve the SME’s portfolio, can also be seen as an exploitation of the network configurations (Kim and Aldrich, 2005).
Entrepreneurial opportunity and resources therefore can only be done through networking. Hence, network benefits are additive rather than overlapping (Burt 1992, Wittek 2014, Rost, 2011). Empirical research on networks has therefore, been profound with the help of the structural-hole theory. This theory is therefore a generalised version of the theory of weak ties (Wittek 2014, Burt 1992). Network can therefore be a key mechanism to the establishment, development and, success of entrepreneurial ventures. Indeed, there is a great supply of empirical literatures which we shall examine in the later part of the literature review, explaining the impact of entrepreneurial network on new business ventures’ success.
2.2.3- impact of network and network dimensions on entrepreneurial process and success ( growth + innovation) of start ups
Albeit the acknowledgement that entrepreneurial success stems from business planning to networking activities and finally business realization, the survival of these newly founded business relies on their aptitude to develop new knowledge ( Naude et al, 2014). (Phillips & Kirchhoff, 1988) viewed the survival diagnoses of small firms as being enhanced by the growth of the firms.
growth enhances the survival prospects of small firms. The combination of higher mortality and start-up rates among SMEs imply that on average SMEs are younger than their larger counterparts, making them susceptible to suffer what has been coined “the liability of newness” (Stinchcombe, 1965, p. 148). The liability of newness (Su, Xie and Li, 2011) attribute to three factors: First, it is well established that young SMEs tend to have limited resources (Hitt et al., 2001), impairing their ability to exploit opportunities for growth. Second, legitimacy (“a social judgment of acceptance, appropriateness, and desirability”) (Zimmerman & Zeitz, 2002, p. 414) and network ties are developed over time, implying that new firms lack both of these resources, which in turn inhibit their access to other resources needed to survive and grow (Delmar & Shane, 2004; Hite & Hesterly, 2001). Last, new firms lack formalised roles and routines,
Prominent enlightenments for networks influence on start-ups long explored the entrepreneurs personal network and their effect on new business ventures success with regards to growth, innovation (radical and incremental innovation) (Witt, 2007). New perceptions in which this dissertation also dig on is the “network success hypothesis” which underpins that, the span of an entrepreneurs’ actions increases if he\she maintain his\her private contacts to reduce their transaction cost- thus, comparative advantages on resource acquisitions through arm’s length transactions (Brüderl and Preisendorfer (1998); Witt, (2007); Dubini and Aldrich (1991). Although various academic contributors claimed that, the success of a business ventures can be seen from the attainment of the idea, planning and realization phase ( Birley et al. 1991, Huse 2014), the growth rate, survival of the business and, the persistence in the market ( Aldrich and Reese (1993); Bruderl and Preisendorfer (1998) ; Johannisson (1996)) ; the success of a business ventures may also rely on the diversity of the founders business and private contacts which allows them to gain access to resources they would not attain on markets (Witt,2007; Brüderl and Preisendörfer,1998).
2.2.4-national differences in entrepreneurial networking
2.2.5- problems of using social networks in the ent process
2.3 EMPIRICAL LITERATURE
Empirical studies in this zone of research had some difficulties in finding the positive correlation between the various networking variables and activities on newly founded firms’ success. However, To understand the mechanism through which the entrepreneurial benefits of networking transposes in to the start-up success, this empirical review is into three-fold: it tries to comprehend the strength of ties and structural holes in newly founded business, extensive analysis on the role of networking on the EP and the network success hypothesis by various authors, and finally national differences in entrepreneurial networking.
2.3.1 POSSITIVE AND NEGATIVE CORRELATION STRENGTH OF TIES AND STRUCTURAL HOLES
kozan and Akdeniz (2014) empirically, put forward the impact of the collectivistic nature of the Turkish culture were business founders were likely to count on in-groups rather than out-groups support. Using a data set from 139 firms operating in organized industrial districts in four cities in Turkey that is; Ankara 28%, Izmir 37%, Trabzon 22%, and Diyarbakir 23% formed the firms’ distribution across metal works, textiles, and food processing industries. The study tests whether strong rather than weak ties account for small business growth in Turkey. To achieve this, different measures were put into place. For instance, the General social survey (GSS) was used to measure the network strength among specific individuals in a network, growth measures were split into four categories (growth for demand to product, growth in total employment by sector, new firm entry, and overall judgement of sector growth). Regression analysis was used to test the relation of network strength to growth. Owner age and firm size were control variables and the level of education serving as a main variable in the study. Two proxies emerged labelled as production expansion growth and knowledge acquisition growth both serving as the dependent variables. The author used three models and steps to test their hypothesis that is; entering sector growth rate, firm’s size and age entry and lastly , weak and strong ties entry. The model revealed the following results:
The production expansion showed a significant R-square alteration for the above three models with ? = .51, t = 6.2, and p = .001 for the growth entered, firm size in model 2 (? = 0.24, t = 2.71, and p = 0.008) and strong ties having ? = 0.22, t = 2.92, and p = 0.004. This results indicates a low autocorrelation with a Durbin-Watson statistic of 1.77.
Contrastingly, the analysis with respect to knowledge acquisition showed that the R-square adjusted only for model 2 and 3 that is, (? = 0.28, t = 2.7, and p = 0.008) and (? = 0.30, t = 3.44, and p = 0.001) for firm size entered and strong ties respectively. The Durbin-Watson revealed a low autocorrelation in this analysis with a statistic 2.06.
The findings is in line with Bourdieu (1989) investigations on cultural capital by showing that strong ties had a positive influence on business ventures growth whilst weak ties has no effect.
Langlois (1977) proposed a deductive approach to demonstrate the importance of ties empirically by sampling on 2,553 individuals in the administrative public sectors of Canada. Unlike Granovetter who’s sample used informal networks to find a professional occupation, the sample study individuals who joined a governmental organization to formalize the recruitment of its members. To achieve this, different measures were put into place. For instance, by regrouping the respondents into five categories: executives and senior staff, practitioners of liberal professions, semi-professional employees, office workers, and finally workers employed in the service sector. The results showed that 42.7 percent of the sample used found a job with the help of private contacts but varied by occupations. 35.5 percent of managerial employees used weak ties, 15.8 and 48.7 percent for strong ties and intermediates respectively, 30.8 and 25.8 percent of the professionals and offices employees respectively used weak contacts, 13.1 percent of semi-professional and 19.1 percent of office worker got a job via weak ties with the former having 44.9 percent of job through strong ties and the later 19.1 percent.
In attempt to show the role of network based on the fact that an individual entrepreneur seeks not only adequate resources but also information, counselling and reassurance, Birley (1985) conducted a study in St. Joseph County, Indiana. The paper aimed at answering the following: What does the environment look like? does the environment require changes? , and in which manner does it change. Thus, helping in the understanding of the start-up process using a study survey that existed from 1977-1982. With the county population of only 220,000, the features of a St. Joseph county entrepreneur and their usage of network remained a main concern. The results from this study showed that the local people used both their formal business and informal contacts to start their firms. In line with Grannovetter (1984) study, informal source is used as a source of resource acquisition but then, leading to an underutilisation of formal infrastructures creating an obstruction to the formal structure rather than been a canal (Birley, 1985). The reason for the above-mentioned dilemma is that, the St. Joseph entrepreneur and his informal contacts were unaware about the existence of formal organisation.
…………….. Birley et al. (1991) argued that business owners in different countries uses different approaches in the entrepreneurial process. To exhibit the different networking styles in different countries, the paper used Northern Ireland, USA, Italy and Sweden as case study using an adjusted version of Aldrich et al (1986) questionnaire. They tackled various aspects of entrepreneurial networking for instance the importance of networking, the extent to which Swedish workers network than Northern Ireland founders and, the Italian devotion to networking. In sample study of 1,150 owner-managers with a mean age of 38 years, majority were already venture owners whereas ten per cent were in the process of venture creation. With hypothesis that individuals engage in clubs and societies are more likely to be effective networkers than others than others, the analysis revealed that the sample have a mean number of 7.2 direct link which is lower than the mean number 9.5 reported by Aldrich et al. (1989) (less immediate contact networks than American/ Swedish founders). That is, the direct contacts of an individual entrepreneur are less than those overseas. For instance, Italians spend much time in maintaining their existing contacts as compared to Irish and American founders.
(CORRECT THE FOLLOWING PARAGRAPH ON INNOVATION COPIED FROM GRONUM)ACCORDING TO GRONUM (2015) Innovation can be viewed as both an output and a process (Damanpour & Evan, 1984; Salavou & Lioukas, 2003). As an output it is the result of the innovation process, the types of innovation created by a firm, or the actual implementation of the new product, service, business process or method (Love et al., 2009). Innovation also indicates the development and commercial exploitation of a new idea or invention, “the process of innovation refers to the temporal sequence of events that occur as people interact with others to develop and implement their innovation ideas within an institutional context” (van de Ven & Poole, 1989, p. 32). Both the innovation process and the resulting innovation outputs can affect the firm performance of SMEs (Rosenbusch et al., 2011). Innovation heightens the SMEs ability to adopt the changing market. The performance reboustness of firms tends to be related to their innovative capabilities
EDUCATION AND GROWTH ( literature by kozan and akdeniz,2014) CHANGE CONTENT
The education level of the owner served as a personal background variable that may predict growth intentions requiring knowledge and technical skills 50. Growth intentions in these areas require what Mitchell et al.’s 57 label as ability scripts, which include skills and knowledge of the entrepreneur. Growth areas that are particularly influenced from education are technological improvements, which may involve the acquisition of new equipment and the computerization of current operations, and resource aggregation, which may include hiring of specialists, use of professional consultants, and training of employees. Educated owners are expected to explore outside opportunities more effectively for technical and financial support. Finally the recent growth rate in the industry in which the firm is operating is included as a control variable. The purpose was to test the effect of strong versus weak ties after the firms are brought to an even playing field in terms of growth opportunities provided by the environment. The dependent variable, growth is conceived in the literature both as a narrow or broad concept. Freel and Robson 58 measure growth in terms of employment, turnover, productivity, and profit margin. In contrast, Lebrasseur et al.’s 59 (p. 2) definition “emphasizes breadth of entrepreneurial activity and largely ignores the issue of effective use of resources”. The approach used in the present paper is closer to the broader conceptualization. It captures better the variety of venues through which both strong and weak networks operate in firm growth. Following Pistrui et al. 60,61, growth is conceived as a multi-dimensional construct consisting of the following areas: entering new markets