Legitimizing through entrepreneurial networking

This chapter presents an entrepreneurship-as-networking perspective on new venture legitimacy. New ventures are more likely to survive and perform when various audiences and stakeholders perceive their activities as legitimate. This is especially true when new ventures are pursuing something novel and innovative. Therefore, it is crucial for new ventures to gain legitimacy. In this chapter, viewing legitimacy predominantly as a process and concurrently distinguishing processes related to types of legitimacy, the authors theorize how entrepreneurs incorporate various audiences and their judgments into their active networking, thus shaping the legitimacy process. The interactions between various audiences and the entrepreneur take form through different legitimacy strategies—that is, identity-seeking strategies, associative strategies, and networking strategies—resulting in legitimacy judgments by audiences. Under conditions of high uncertainty, the legitimacy judgment as the outcome of the social interactions is co-created by audiences and entrepreneurs and is diffused outside local networks to the broader society through distributed brokerage.

Network agency and network dynamics

The literature often has assumed, explicitly or implicitly, that entrepreneurs use networks to develop opportunity, access resources, and gain legitimacy in order to perform and achieve success. Entrepreneurs’ networks have become a powerful explanation of success and performance in academia, in the business world, and in the popular press. However, research so far predominantly has relied on static pictures of entrepreneurs’ networks, which potentially provide incomplete and inadequate understanding of what actually occurs. Rather than relying on such static pictures of networks, research should rely on and build on a more social-interactive and dynamic understanding of networks. This chapter develops a social-interactive network dynamics framework that outlines various theories, perspectives, and empirical results related to network agency and network dynamics. Thus, this network dynamics framework becomes the core of the authors’ entrepreneurship-as-networking perspective. The chapter ends with discussions of potential avenues for future research.

Accessing and acquiring resources

Given the scarcity of resources in new ventures, a key challenge for entrepreneurs is the mobilization of external resources from their social networks to combine with already available internal resources in their attempts to develop and exploit opportunities. Prior research has been insightful in providing explanations on how mobilizing external resources through network ties predicts entrepreneurial success. However, conflicting and “murky” findings simultaneously indicated a need for further theorization. The authors suggest that a more thorough emphasis on networking agency, uncertainty, and the various steps in the resource process may help converge prior inconsistencies and provide a more realistic picture of entrepreneurs’ struggles to combine external and internal resources into valuable bundles. Specifically, by combining the social-interactive network and resource-based perspectives, we develop a “network-based resource model” to explain entrepreneurship in terms of building and exploiting networking relationships to develop new combinations. The model aims to explain how entrepreneurship as networking, with its social-interactive network agency, brings external resources into the uncertain and reiterative process of developing new combinations to capture value from acting on opportunities.

Perceiving and capturing opportunities through social interaction

This chapter presents an entrepreneurship-as-networking perspective on opportunity perception, evaluation, and action. Entrepreneurial opportunities are seen as relationally constituted; thus, social networks are a fundamental aspect of all opportunity-related processes. The network ties upon which entrepreneurs can draw largely influence their opportunity perceptions and, conversely, entrepreneurs intentionally shape their networks to get to those opportunities. In opportunity evaluation, the feedback of others is essential to identify an opportunity’s feasibility and desirability. At the same time, these others often engage in shaping and co-creating the opportunities. In opportunity action, entrepreneurs tend to create strong embeddedness by forming their teams and hiring their employees from among their close ties. By discussing the key networking mechanisms of embedding, accessing, transferring, diversifying, and socializing for each of these opportunity-related processes, the authors highlight both the positive and negative generative aspects of the social interactions and social networks in relation to entrepreneurial opportunities.

Introduction

This chapter introduces the entrepreneurship-as-networking perspective. The authors argue that a focus on the social-interactive aspects and action orientation of entrepreneurship is needed. They contribute an integrated account in which the entrepreneur’s agency is combined with a greater emphasis on the social environment. The importance of social relations and the associated interactions between entrepreneurs and their environment give insight into key entrepreneurial processes. These are (a) the origins of opportunities, (b) how entrepreneurs access resources and subsequently mobilize and deploy them, and (c) the ways entrepreneurs build legitimacy, facilitating them to act on perceived new combinations and thereby exploit their potential.

Conclusion

Throughout this book, based on several literatures, the authors have developed the entrepreneurship-as-networking perspective. That is, networking among entrepreneurs—in their attempts to develop opportunity, mobilize resource, and obtain legitimacy—is the key and primary component of entrepreneurial action. Entrepreneurship always involves networking, and therefore networking is entrepreneurial action. This conceptual model answers two guiding questions. First, what kind of network helps entrepreneurs become successful? Second, how do networking activities of entrepreneurs affect their networks and entrepreneurial endeavors? Whereas the first question primarily focuses on structural issues and related networking mechanisms, the second question primarily relates to network agency of entrepreneurs.

Networking mechanisms

Entrepreneurs benefit from their social network positions. In this chapter, we question how entrepreneurs get those benefits. We distinguish two broad perspectives on the way networks are conceptualized—namely, the entrepreneur’s business network perspective and the social network perspective. The business network perspective, with strong links to the strategy field, focuses on the potential beneficial effects of formal relationships with suppliers, customers, trade associations, and other professional connections. The content of the ties represent value and influence performance. In contrast, the social network perspective has its roots in sociology. Its central idea is that position within a social structure influences entrepreneurs’ attitudes and behaviors and thus affects their performance. These two perspectives jointly point at underlying mechanisms that explain how particular network dimensions in fact turn into social capital with positive and/or negative impacts on performance and how entrepreneurs can actively shape their networks and resulting benefits. Our mechanism-based approach aligns and synthesizes these two perspectives and benefits from their complementarity.