Academic journal article Academy of Entrepreneurship Journal

The Influence of Entrepreneurial Social Networks and Online Networking on Firm Performance: Focused on the Technology-Based Start-Ups Less Than 5 Years Old

Academic journal article Academy of Entrepreneurship Journal

The Influence of Entrepreneurial Social Networks and Online Networking on Firm Performance: Focused on the Technology-Based Start-Ups Less Than 5 Years Old

Article excerpt

ABSTRACT

Most start-ups fail in the middle of developing technology due to a lack of technical skills caused by a lack of human, material and technical resources. Others fail because they fail to raise funds for mass-production or lack marketing ability even though they have developed a prototype of their products. Thus, procuring external resources in time is critical to the survival and growth of start-ups.

Since entrepreneurial social networking serve as an effective tool to acquire information on how to procure and access various resources, we can deduce the social network can determine the performance of companies. Research into the performance of companies tends to focus on entrepreneurship and entrepreneurship education. Whereas the research addressing the online networking activities of entrepreneurs are seldom conducted, and the results of said research varies significantly in terms of the relationship of influence depending on the interpretation of both the researchers and the research subjects.

Thus, in this study, the author analyzed early start-ups lacking resources in all sectors, specifically, technology-based start-ups within 5 years of their foundation, with the aim of empirically verifying the influence of specific characteristics of the entrepreneurial social network (i.e. relationship, range, frequency, trust, and online networking activities, etc.) on the financial and non-financial performance of companies.

The results of this study revealed that the characteristics of the entrepreneurial social network (i.e. relationship, range, frequency and trust) serve as the sub-factors of entrepreneurial social network; social networking and online networking activities have a positive influence on the financial and non-financial performance of companies; and, this suggests that the level of importance of entrepreneurial social activities is far greater than previously considered.

In addition, the results of an analysis of the differences in influence for respective networking sources indicated that the influence of a formal network is greater than that of an informal network. Furthermore the results indicated that the frequency of entrepreneurs' access to SNS leads to a difference in the financial performance of companies. Entrepreneurs who actively participate in SNS activities perform better financially than the entrepreneurs who passively participate in SNS activities.

The above results imply that to improve the performance of companies, it is essential that entrepreneurs strengthen their networking relationships and expand the range of their network; endeavor to establish trusting relationships with network sources through frequent meetings; and intentionally invest more time in the management and expansion of their social network. In particular, it is essential that entrepreneurs invest more time to strengthen relationships with their formal network and expand the range of those relationships. Even if they are not able to have frequent offline meetings with them due to time restraints, it is essential that they maintain and strengthen network-based relationships by using SNS to maintain a presence in online networking activities.

Keywords: Network Relationship, Network Range, Network Frequency, Network Trust, Online Networking, Firm Performance.

INTRODUCTION

Many entrepreneurs and their start-ups fail in early stages, in spite of the strong and zealous motivation that drove them to establish the business. Multiple studies have been conducted to look for the variables that influence the success of start-ups. An entrepreneurial spirit, innovative thinking, challenging spirit and risk-taking, entrepreneurial education, and subject expertise are regarded as prime variables. There are few sufficient studies that look into entrepreneur's social network as one of these independent variables.

Networks are believed to be the path of obtaining knowledge and external resources in the modern complex information society (Min, 2014). …

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