The impact of institutional quality on social networks and performance of entrepreneurs

Abstract

Entrepreneurs exert much effort in pursuit of new ideas that can lead to innovations. Relevant knowledge and resources can often be found outside an entrepreneur’s immediate competencies and expertise. For this reason, entrepreneurs use social relations to get access to these resources. This paper analyzes the role of such social relations when it comes to entrepreneurial performance; it also explores how entrepreneurial choices regarding social networks depend on the quality of the institutions for whom they work. Low-quality institutions create environmental uncertainties that have significant effects on an entrepreneur’s strategic choices and the usage and usefulness of their social networks. This paper uses cross-sectional survey data from entrepreneurial firms in the Middle East and North Africa to show that institutional context directly influences various characteristics of entrepreneurial network choices and that it also affects the relevance of strong and weak ties with significant impact on entrepreneurial performance.