Who you know: Small-town entrepreneurs' perceptions of the value of their social networks

Abstract

Entrepreneur networks have been recognized as an important factor in business success. Networks are embedded with valuable business resources, such as financial support, advice, and encouragement. This study examines the nature of business-related networking among small-town entrepreneur business owners. The purpose is to: 1.) compare the perceived benefits of strong and weak tie networks, 2.) compare the perceived benefits of different types of weak tie networks, and 3.) locate factors that may affect the benefits that entrepreneurs’ receive from their weak tie networks. The data comes from a survey mailed to all 228 businesses in one Iowa town. Entrepreneur business owners were asked about the resources and support they receive from three types of social networks: “strong tie networks” including entrepreneurs’ close friends and family; “informal weak tie networks” (business contacts, employees, and coworkers); and “formal weak tie networks” (the local chamber of commerce). Using Granovetter’s “strength of weak ties” as a theoretical framework, the study found that informal weak ties are most important, followed by strong ties, and least important is formal weak ties. The study also found that psychological and community perception factors help to explain variations in the benefits that entrepreneurs receive from weak tie networks, but business variables do not. This study has important implications for entrepreneurs, scholars, and theorists. It expands on the understanding of why it is important for entrepreneurs to develop networks and which types of networks are most beneficial. It suggests that scholars should pay attention to contextual factors, such as the community environment and entrepreneurs’ perceptions, when studying networks. Finally, it proposes a theoretical clarification of the term “weak ties” based on formality of the relationships.