How Do Entrepreneurs Benefit from Their Informal Networks?

Abstract

The networks of an entrepreneur constitute a key resource channel for him. This follows from the perspective of viewing social networks as a resource channel thereby giving rise to the concept of ‘Social Capital’. The relationship an entrepreneur shares with fellow beings in entrepreneurial, alumni, and ex-colleague networks can also be a source of social capital for an entrepreneur. Through these networks, an entrepreneur can immerse himself in the business/social environment and seek to exchange certain tangible and intangible benefits. There are various kinds of professional networks that an entrepreneur would interact in. We call such networks as ‘Entrepreneurial Networks’. Industry bodies, interest groups, etc., also come under this category of networks. The networks that an individual builds by virtue of belonging to his/her school /college alumni association is called ‘Alumni networks’. Many entrepreneurs have past experience in various capacities in companies. In that process they would have worked with a many colleagues. Such colleagues constitute the ‘Ex-colleague networks’ of an individual. The goal of this study is to investigate and compare the benefits that entrepreneurs derive from their entrepreneurial network, alumni network, and ex-colleague network. The benefits considered are mentoring, information, visibility, technical help, contacts, and reputational endorsements. Friedman Test and Wilcoxon Signed-Rank Test is used to compare benefits that entrepreneurs derive from their entrepreneurial network, alumni network, and ex-colleague network. The results show that ex-colleague networks of an entrepreneur are the most useful in terms of the benefits that entrepreneurs derive in the form mentoring, information, technical help, contacts, and reputational endorsements. Entrepreneurial networks are useful to entrepreneur since they provide a forum for entrepreneurs to make their companies visible to the world. Entrepreneurs rarely derived benefits from their Alumni networks.