Why Networks Enhance the Progress of New Venture Creation: The Influence of Social Capital and Cognition

By De Carolis, Donna Marie; Litzky, Barrie E. et al. | Entrepreneurship: Theory and Practice, March 2009 | Go to article overview

Why Networks Enhance the Progress of New Venture Creation: The Influence of Social Capital and Cognition


De Carolis, Donna Marie, Litzky, Barrie E., Eddleston, Kimberly A., Entrepreneurship: Theory and Practice


Why does social capital influence the progress of new venture creation for some entrepreneurs more than others? Our investigation suggests that social capital is not enough; that the type of person involved in network relationships matters to new venture creation. We test the effects of the interplay of social capital and cognition on a sample of 269 entrepreneurs. Our results confirm that social networks and relational capital enhance levels of illusion of control, which is directly related to the progress of new venture creation. We find marginal support for the relationship between social capital and risk propensity.

Introduction

Entrepreneurship is a field of business that seeks to understand how opportunities to create something new are discovered or created by individuals who then use various means to exploit or develop them, and in doing so produce a wide range of outcomes (Baron & Shane, 2005). This perspective of entrepreneurship reflects the core of entrepreneurship research--the investigation into how and why opportunities are discovered and exploited. Entrepreneurship is significant on many levels as evidenced not only in public policy initiatives that encourage new business development but also within established organizations that actively encourage the development and pursuit of new opportunities. While the impact of entrepreneurship to economic progress is apparent, knowledge of the factors that encourage opportunity exploitation remains ambiguous. This ambiguity has spawned a vast theoretical and empirical literature that seeks to identify the antecedents to individual entrepreneurial behavior--seeking a model of new venture creation.

Research has pointed to the importance of networking and building social capital to the new venture creation process (e.g., Baron & Markman, 2003; DeCarolis & Saparito, 2006; Liao & Welsch, 2005; Ostgaard & Birley, 1996). In particular, it has been argued that new venture creation is the result of the interplay of entrepreneurs' social networks and cognitive biases. As the presence of entrepreneurial opportunities in a network increase, the odds of entrepreneurial behavior increase, but only if someone is inclined toward entrepreneurial behavior (Burt, 1992; DeCarolis & Saparito, 2006). Accordingly, DeCarolis and Saparito argued that cognitive biases may explain why social capital has a greater effect on the progress of new venture creation for some entrepreneurs but not others. Social cognitive theory (Bandura, 1986; Wood & Bandura, 1989) posits that social environments play an important role in shaping individuals' cognition, and ultimately, their behavior. This perspective appears to support Shane and Venkataraman's (2000, p. 218) view of entrepreneurship as "the nexus of two phenomena: the presence of lucrative opportunities and the presence of enterprising individuals." Thus, we examine how external (social capital) and internal factors (cognition) affect new venture creation and progression. We expect that individuals with the greatest social capital, coupled with the enhanced propensity to enterprise, will make the greatest progress in creating a new venture.

Drawing from DeCarolis and Saparito's (2006) work on the importance of social capital and cognition in explaining the exploitation of entrepreneurial opportunities, we develop and test a model of new venture creation that incorporates the influence of social capital and cognition on the progress of new venture creation. Accordingly, this paper makes several contributions to the entrepreneurship literature. First, we extend research on the progression of new venture creation by exploring the impact of social capital on individual cognition. Second, this paper helps to explain why social capital may encourage some individuals to start new ventures but not others. Third, we show how two specific types of social capital--social networks and relational capital--contribute to the progression of new venture creation. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Why Networks Enhance the Progress of New Venture Creation: The Influence of Social Capital and Cognition
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.