Entrepreneurial Success through Networks and Social Capital: Exploratory Considerations from GEM Research in New Zealand

Article excerpt

Introduction

From 2001 to 2004, New Zealand consistently had the highest entrepreneurial rating in the Global Entrepreneurship Monitor (GEM) for any developed country (Frederick, 2003-04). This paper explores the contribution of communication networking to the production of social capital which enables New Zealanders to be so entrepreneurial. Communication networks produce both social and human capital. Social capital is defined as "who you know" while human capital is defined as "what you know" (Krebs, 1999; Burt, 2000). Portes (1995, 2000a) defines social capital as having the capability to secure resources or benefits from social networks or other social structures. The amount of social capital that a person has depends on the type of networks and the volume of social capital that people within a network have (Bourdieu, 1986). The literature indicates that entrepreneurs have more extensive communication networks (Frederick, 2001) than non-entrepreneurs and that entrepreneurs communicate more intensively than other people.

This paper explores the contribution and significance of communication networking to entrepreneurial business development in New Zealand by using GEM methodology. We consider specific communication-related questions that were asked only of New Zealand entrepreneurs in the GEM 2003 adult population survey. We compare the survey results with qualitative data gathered from GEM 2003 interviews with entrepreneurs and experts on entrepreneurship to explore three questions within the New Zealand context which are as follows: how communication networks both support and limit entrepreneurial enterprises; how the reach and diversity of female communication networks is limited; and how communication technologies are being used to enhance communication networking.

Literature Review

The literature examines the communication networking behaviour of entrepreneurs and the links between networks and social capital. Communication networks are the patterns of interactions created by message exchange between communicators (Monge and Contractor, 2001). The role of networking has become an important aspect of entrepreneurial research over the last three decades as networks provide the critical elements of trust and support for the establishment of new businesses and extend their potential resource base (Aldrich and Zimmer, 1986; Birley, 1985; Carsrud and Johnson, 1989; Burt, 2000). These networks enhance the entrepreneur's likelihood of success (Brijderl and Preisend6rfer, 1998; Johannisson, 1987, 1988, 1990). Other studies have shown that networking is essential to survival (Brilderl and Preisend6rfer, 1998; Burt, 2000). It is also recognised that networks evolve over time (Dodd, Anderson and Jack, 2004).

Social Capital and Entrepreneurs

Communication networks produce both the social and human capital that is essential to entrepreneurs. The amount of social capital that a person has depends on the type of networks as well as the volume of social capital that people within a network have (Bourdieu, 1986). Social capital is also described as an essential determinant of entrepreneurial activity (De Bruin and Dupuis, 2003). The term social capital has been defined in a number of ways (Adler and Kwon, 2002) and is broadly defined as an asset that inheres in social relations and networks (Leanna and Van Buren, 1999), but a consensus definition has been arrived at by Portes (1995, 2000). He describes social capital as having the capability to secure resources or benefits from social networks or other social structures.

In their exploration of social capital in entrepreneurial networks, Anderson and Jack (2000) define social capital as a relational artifact that appears to have an important role in facilitating interactions. Social capital is an outcome of structures, but Anderson and Jack (2000) say it is more than this in that it includes many aspects of the social context of social interactions, such as social ties, trusting relationships, and value systems that facilitate the actions of individuals in particular social contexts. …