Network dimensions are very crucial in the network capability and reinforce the entrepreneur’s attempts to acquire social capital. The size is a significant factor, since more actors in a network, the more resources, information and knowledge transfer can occur. Stability and density are also very important, while the openness dimension can determine support, criticism, and encouragement to the entrepreneur at the first stages of firm’s establishment and can determine the rate of expansion of a business at later stages. Strong and weak ties
Granovetter (1973) stressed the difference between strong and weak ties. A strong tie is a person with whom you interact regularly, relationships are based on common interests and information that is passed through networks reinforces the existing one. Strong ties however, may restrict some information, but the exchanged information is rich and detailed. On the other hand, weak ties provide better access to information that is not redundant and are define as the relationships among the friends and family or more generally acquainted people.
Weak ties give a variety of ideas and tastes and usually a small amount of new information is highly useful. The following figure pictures the strength and amount of information each tie offers to the reference person – the entrepreneur. Figure 1. 2 Strong and weak ties by Powell and Grodal (Chapter 3:61) Weak ties are more likely to help and advice the entrepreneur at the beginning of the business, motivation phase. They will often encourage and discuss with him/her the concept of the business and as weak ties consist of family members and close friends, the entrepreneur will not commit himself or herself early.
However, in the later phases of establishing a firm, entrepreneurs use their strong tie relationships in order to gain access to resources, labor, knowledge and information they need. Thus, the entrepreneur must turn to strong tie actors to acquire the social capital needed for the establishment and expansion of the firm. For a skilled entrepreneur this is easy, as ‘successful entrepreneurship may depend on entrepreneur abilities to gain access to resources that are not under their control’ (Westhead & Wright, 2000).
Formal and informal network relationships A distinction is also made between formal and informal or personal relationships. Formal relationships include joint ventures, franchising, licensing agreements and supply chain linkages with suppliers or users. Informal or personal relationships help to generate support at the beginning of entrepreneurship, gain valuable encouragement, and generally they build the basis for the entrepreneurial activities which follow in formal levels.
For Freeman (1991:503) however, ‘behind every formal network, giving it the breath of life, are usually various informal networks’. The issue of trust is also important in both formal and informal relationships, while interpersonal skills are considered to be very crucial in networking processes. Tsai and Ghoshal (1998) found that social ties lead to a higher level of trustworthiness among business units and that trust increases the probability of resource-exchange and collaboration between business units, which lead to innovation and expansion of the business.
However, according to Powell and Grodal, elements such as trust, cognitive understanding and cooperation require time to develop (Powell & Grodal, 2000:65). Case Study Let’s now see an example of entrepreneurial networks. The case taken for study is the Amazon. com enterprise and its founder Jeff Bezos, while some of the networks around Jeff Bezos and the Amazon. com will be examined. Source: Carole Howorth, Week 9 Networks, Entrepreneurship 207, Lancaster University Amazon. com is the one of the most recognized brands in the world and the number one online service globally today.
It was founded by Jeff Bezos in 1995 that recognized the power of internet very early and decided to start with selling books online due to their low price and the size of the global market share. At the age of 30, he finished his Bachelor Degree in electrical engineering and computer science (education). He and his wife decided to take the risk of starting their business, while the first months of the business operations they were doing the manual work (family). By 1997 Amazon.
com reached one million costumers around the world and by 2003 they managed to serve around ten million costumers worldwide (costumers). The major competitors for Amazon. com are Barnes and Nobles with a strong physical infrastructure which started expanding later on the web. By 2003 though, the competitors multiplied as the range of categories and products expanded (competitors). Bezos decided to include in Amazon. com some strong names for the management of his company. The management team through years comprised by Richard Dalzell as CIO (1996), Jimmy Wright as CLO (1997) and Warren C.
Jenson as CFO in 1999 (enterprise company). This is the entrepreneurial network of Amazon. com, founded by an ambitious young entrepreneur in 1995, making Amazon. com one of the strongest brands today. Jeff Bezos managed to expand his business in a global dimension through alliances and other successful networking attempts (Johnson, Scholes and Whittington, 2006:647). Conclusion An entrepreneur can acquire anything that is needed for the establishment and expansion of his/her business through networking.
Networks can give the social capital and resources entrepreneurs need for their entrepreneurial activities and make their ideas come to reality. As was examined above, networking can give access to information, identify opportunities inside a social structure, overcome resource constraints by acquiring adequate resources for the business, give support from both weak and strong ties relationships, confirm existing decisions and link to important contacts inside the business and non-business world and the community that the entrepreneur acts in.
Entrepreneurs, despite the fact that they are individually working and self-employed, not embedded in organization’s structures, must be social aware of their social structure because it is within this structure that they will identify and exploit opportunities. Social networks, work as leverage for entrepreneurs, giving them the opportunity to explore new opportunities by offering them social capital thus the establishment and expansion of the business is very likely to succeed.
Aldrich, H. E. and C. Zimmer (1986). Entrepreneurship through social networks. The art and science of entrepreneurship. D. L. Sexton and R. W. Smilor. New York, Ballinger: 3-23. Anderson, A. R. and S. L. Jack (2002). ‘The articulation of social capital in entrepreneurial networks: a glue or a lubricant? Entrepreneurship & Regional Development 14(3):193-210. Bob Reiss, successful entrepreneur and author of Low-Risk, High-Reward: Starting and Growing Your Small Business with Minimal Risk. Burt, R. S 1982. Toward a structural theory of action. New York: Academic press. Carole Howorth, Lecture Slides of Week 9 Networks, Entrepreneurship 207, Management School, Lancaster University Carter S. and Jones-Evans D. (2006) Enterprise and Small business Prentice Hall: Financial Times