Social networks and entrepreneurship.

We study network activities of entrepreneurs through three phases of establishing a firm in four countries. Entrepreneurs access people in their networks to discuss aspects of establishing and running a business. We find that entrepreneurs build networks that systematically vary by the phase of entrepreneurship, analyzing number of their discussion partners, and the time spent networking. Entrepreneurs talk with more people during the planning than other phases. Family members are present in their networks in all phases, particularly among those who took over an existing firm. However, women use their kin to a larger extent than men, and even more than men when they take over an existing firm. Experienced entrepreneurs have the same networking patterns as novices. Moreover, these networking patterns are the same in all countries. However, there are country differences in size of discussion networks and time spent networking.

Introduction

Students of entrepreneurship increasingly recognize that entrepreneurs embed their business decisions in social structures (Borch, 1994; Hansen, 1995; Larson & Start, 1993; Reynolds, 1991; Start & MacMillan, 1990). We use a structural approach to study how entrepreneurs use social relations to get advice and resources to launch a business (Granovetter, 1985, 1992). We note that establishing a business requires different contacts and resources in different phases. The structural approach further implies that entrepreneurs in diverse cultural settings access their social relations in similar ways to get these resources.

In this paper, we study the use of social relations in the business establishment process. We describe how entrepreneurs develop and maintain social contacts during three early phases of establishing a business in four countries. Our comparative focus on structural features of entrepreneurship enables us to understand how entrepreneurs in similar phases of establishment use their contacts to acquire resources. Some structural analysts find that social networks have similar properties in different countries (Wellman, 1999). Therefore, we look for common features and what may distinguish the entrepreneur's networks in diverse cultures. We identify how entrepreneurs draw on social networks to discuss aspects of establishing and running a business in the initial phases of entrepreneurship.

An entrepreneur is commonly defined as one who owns, launches, manages, and assumes the risks of an economic venture. This definition also includes people who take over an existing business. We distinguish entrepreneurship from a corporate or intrapreneurial effort (Gartner, Shaver, Gatewood, & Katz, 1994).

The Social Network Approach. Focusing on social network analysis turns attention to relationships between entrepreneurs and others that provide the resources that are important in establishing a business (Johannisson, 1988; Larson, 1991). Entrepreneurs have ideas to test, and some knowledge and competence to run the business, but they also need complementary resources to produce and deliver their goods or services (Teece, 1987). They get support, knowledge, and access to distribution channels through their social networks. Entrepreneurs are also linked to people and organizations that interact among themselves, and these contacts can widen the availability of resources that sustain a new firm (Hansen, 1995).

Social networks are not fixed; they are the social context of businesses and can be activated according to different needs (Granovetter, 1985; Burt, 1992). To fit their enterprise needs, entrepreneurs bring both those that are closer and distant to them into their business decisions. Family members can play a critical part. As they entertain, plan for, and actually set up a firm, entrepreneurs call on their family and others in their networks for different kinds of help and support (Rosenblatt, de Mik, Anderson, & Johnson, 1985).

To analyze entrepreneurial networks, we draw on cross-sectional surveys that query entrepreneurs from four countries on their discussions with others about establishing and running a business. We compare entrepreneurs in three phases of the establishment of a firm (Aldrich et al., 1991). To develop our arguments, we first discuss features of social networks, then go on to a description of entrepreneurial phases. Our main hypotheses relate network activities to establishment phase. If the phase of establishing the enterprise requires particular combinations of resources, entrepreneurs will organize those they know in ways that will help them get these resources. We also entertain other factors that may influence network activities, such as entrepreneurial experience, as seen in differences between novice and multiple entrepreneurs, and having family members with entrepreneurial experience. Finally, we compare network structures across four nations.

Theory: Entrepreneurs and Network Activities

Social Capital and Social Network

Entrepreneurs require information, capital, skills, and labor to start business activities. While they hold some of these resources themselves, they often complement their resources by accessing their contacts (Aldrich & Zimmer, 1986; Aldrich et al., 1991; Cooper, Folta, & Woo, 1995; Hansen, 1995). The contacts that lead to successful outcomes are their social capital and they are a key component of entrepreneurial networks (Burt, 1992). Gabbay & Leenders (1999) define social capital as the set of tangible or virtual resources that accrue to actors through the social structure, facilitating the attainment of the actors' goals (Lin, 1999; Portes, 1999). By this they include contacts that help them getting things done. These are people the actor knows, or who are known by others that the actor knows. When the entrepreneurs' contacts contribute to their entrepreneurial goals, these social contacts are their social capital (Burt, 1992). The contacts are often informal work and non-work connections. These relations may extend across professional networks, reaching friends, and colleagues from earlier jobs. Entrepreneurial networks span relations to organizations, clusters of firms, as well as to other people that help them set up the firm (Hansen, 1995).

Networks have several useful properties for entrepreneurs. The first is size. Entrepreneurs can enlarge their networks to get crucial information and other resources from knowledgeable others. The next is positioning. Entrepreneurs position themselves within a social network to shorten the path to knowledgeable others to get what they need (Blau, 1977; Burt, 1992; Granovetter, 1973). Finally is relationship structure. Social contacts may be related to the entrepreneur or to each other through several types of relations or interactions. In single stranded relations, each person performs only one activity with the entrepreneur and is related to that person through only one type of relation. Multiplex ties, in contrast, have several layers of different content or types of relationships (Scott, 1991). They may play numerous roles in the entrepreneur's support group. Researchers pay special attention to the contribution of multiplex ties to entrepreneurship. They especially note that social network members can contact and organize themselves, expanding the opportunities they make available to the entrepreneur (Burt, 1992; Hansen, 2001).

Over time, entrepreneurs accumulate social capital, which is crucial for starting a new business (Hansen, 2001). Census data from the US find that entrepreneurs are older and slightly more educated than employed workers. Immigrant entrepreneurs have lived a long time in their new country before starting an enterprise (Portes & Zhou, 1996, 1999). Age and length of residence help them accumulate social capital for new firms.

Discussion Networks: The Dependent Variable

The total network size refers to all first order contacts, regardless of type of interaction. We refer to a subset of this network as discussion network size, defined as the number of people that the entrepreneurs turn to when they discuss aspects of establishing and running a business (Renzulli, Aldrich, & Moody, 2000). To establish a firm, potential entrepreneurs look for relations on the basis of common interest or experience in establishing and running a business (Nohria, 1992). Discussing their new enterprise with a number of persons gives them leads to where to obtain resources such as information, property, capital, and credit. Here, we explore variations in the number of network participants that discusses the start-up.

By limiting our focus to discussion partners, we describe only one aspect, albeit an important strand, of social capital. Our concept differs from the total number of people to whom entrepreneurs turn for a wide range of business related matters. Thus, the discussion network may not include the whole entrepreneurial action set (Hansen, 1995, 2001). Nor do we have data on how the members of the discussion network are related to the entrepreneur. Some members of the discussion network may have only that single relation to the entrepreneur. Others with whom the entrepreneurs discuss their firms may become providers of further resources as well.

Entrepreneurial Phase: The Independent Variable