Entrepreneurship and Networks
Despite the individualistic tradition of entrepreneurship, there is an increasing awareness that networks are crucial to entrepreneurs and that social relationships can influence economic outcomes. The emerging perspective is that since economic activity is embedded in society, the innovative entrepreneur develops and builds networks which provide external sources of information, support, finance and expertise allowing mutual learning and boundary crossing.
Networks, personal and financial, formal and informal, play vital, if shifting roles, in the careers of entrepreneurs throughout the life cycle of their firms. Relationships and social interaction clearly matter to entrepreneurs but understanding how networks actually function requires a wider perspective and an appreciation of social capital - in essence a relational phenomenon and a term that actually refers to the social connections entrepreneurs use to obtain resources - which would appear to reside in and between connections to others.
We know that networks matter and that they bring access to tangible and non-tangible resources. We also know that an entrepreneur’s networks are likely to be based on experience, which not only determines the range of contacts, but may also influence perceptions of opportunities and courses of action. Moreover, we recognise that access to social networks is based upon mutual trust and shared understanding, which means that many are exclusive rather than inclusive.
We know far less about how and why networks function or malfunction and the impact which this has upon entrepreneurial performance in different regional, international, sectoral, technological or organisational contexts. We also know relatively little about how networks affect different categories of entrepreneur, what role they play for the serial or portfolio entrepreneur and how the networking behaviour of social entrepreneurs may differ from conventional entrepreneurs.
These issues are confronted by practitioners in large and small organisations seeking to innovate, develop activities, facilitate entrepreneurial learning and when looking to build the potential of employees. They are also confronted by policy makers involved in regional development looking to encourage networking amongst entrepreneurs.
Networks become especially pertinent in an era of rapid technological change, where the spread of information technology alters the nature of communication and the potential for network building. So called ‘virtual communities’, contribute to globalisation. They are also associated with seemingly more flexible business models, linked to home offices and often mobile technologies. But the process is hazardous for this involves the development of different rules and routines and codes of behaviour and most especially trust building. For such businesses to be conducted successfully enhanced understanding of often unfamiliar cultural norms is required, even when business associates are not in a different country.
The assumption that the rise of information and communications technology (ICT) would mark the ‘end of everything’ and certainly the end of the importance of locality is highly controversial. A growing body of evidence shows that the marked rise in inter-regional networks has reinforced, rather than undermined, the role of regions. But we still know little about how the functioning of networks have changed with the use of ICT or the relationship between path dependent regional expertise and the opportunities offered by the new technology. Clusters, whether virtual or actual are knowledge based, and as such have a long gestation period.