Social Networks and Entrepreneurship: Evidence from a Historical Episode of Industrialization

Abstract

English Abstract: This paper explores the relationship between social networks and entrepreneurship by constructing a dynamic social network from archival records. The network corresponds to the elite of a society in transition to modernity, characterized by difficult geographical conditions, market failures, and weak state capacity, as in late 19th- and early 20th-century Antioquia (Colombia). With these data, I estimate how the decision to found industrial firms related to the position of individuals in the social network. I find that individuals more important bridging the network (i.e. with higher betweenness centrality) were more involved in industrial entrepreneurship. However, I do not find individuals with a denser network to be more involved in this type of activity. The rationale of these results is that industrial entrepreneurship was a highly-complex activity that required a wide variety of complementary resources. Networks operated as substitutes of markets in the acquisition of these resources. Thus, individuals with network positions that favored the combination of a broad set of resources had a comparative advantage in industrial entrepreneurship. I run several tests to prove this rationale. Spanish Abstract: Este documento explora la relaci´on entre las redes sociales y el emprendimiento mediante la construcci´on de una red social din´amica a partir de registros de archivo. La red corresponde a la ´elite de una sociedad en transici´on a la modernidad, caracterizada por condiciones geogr´aficas dif´iciles, fallas de mercado y una baja capacidad estatal, como Antioquia (Colombia) a fines del siglo XIX y principios del XX. Con estos datos, estimo c´omo la decisi´on de fundar firmas industriales se relacion´o con la posici´on de los individuos en la red social. Encuentro que los individuos m´as importantes conectando la red (es decir, con un mayor betweenness centrality)est˜Ain m´as m´as involucrados en el emprendimiento industrial. Sin embargo, no encuentro evidencia de que individuos con una red m´as densa est´en m´as involucrados en este tipo de actividad. La l´ogica de estos resultados es que el emprendimiento industrial era una actividad altamente compleja que requer´ia una amplia variedad de recursos complementarios. Las redes operaban como sustitutos de los mercados en la adquisici´on de estos recursos. Por lo tanto, las personas con posiciones en la red que favorec´ia la combinaci´on de un amplio conjunto de recursos ten´ian una ventaja comparativa en el emprendimiento industrial. Realizo varias pruebas para probar este razonamiento.