DYNAMICS - BOTH CHANGE AND STABILITY

Contemporary organization research is heavily influenced by institutional theory proposing strong pressures toward conformity and stability (Powell & DiMaggio, l983). Recent applications of chaos theory have also reminded us that amplifying feedback loops in interactive systems make future environments unknowable (Stacey, l992). Stevenson and Harmeling (l990) suggest that these insights are highly relevant for inquiries into entrepreneurship. Entrepreneurship is generically associated with both stability and change, both order and chaos. Schumpeter (l934) argued that entrepreneurs cause radical restructuring of a hitherto stable market but also gradually, and inevitably, invite followers who bring about a new institution. To Kirzner (l973) entrepreneurship is about persistent brokerage in a generically imbalanced market aiming at creating local stability in time and space.

The entrepreneur as an interactive subject is both a destructor and an organizer. Stacey (l992) argues that self-organizing, i.e. the spontaneous creation and dissolution of interactive teams according to issue, is the (only) way to balance environmental turbulence. Gartner et al. (l992), drawing upon Weick (l979), perceives entrepreneurship as emergence of organization, as organizing. Cf. also Bouwen & Steyaert, l990, Johannisson l992, Larson & Starr, l993, Frank & Lueger, l995). Carter et al., l996 try to track the characteristics of the emerging firm by identifying what activities are pursued. However, only if the mapping of these activities is combined with a tracking of the social exchange which fit them into a coherent pattern can an understanding be established of how activities combine, organize, into ventures and entrepreneurial careers, cf. Stevenson & Jarillo, l990.

The adoption of the network metaphor to illustrate the social embeddedness and associated dynamics of economic exchange has become increasingly popular over the last decade, cf. e.g. Granovetter, l985, Powell & Smith-Doerr, l994. According to Sjöstrand (l992) exchange may take place in either of three forms on the basis of origin: (1) calculative pursuit of own interest, (2) shared values and (3) mutual emotional attraction. Calculative ties are in an entrepreneurial setting associated with business exchange, either commercial or professional, i.e. transfer of expertise. Calculative exchange usually is a major ingredient in what below is addressed as business ties. Shared values and mutual sentiments build social ties, e.g. those originating in kinship and friendship. Social ties are, just as business ties are, instrumental in the entrepreneurial pursuit; they add to the entrepreneur´s self-confidence and to the legitimacy of the firm on the market, among other things. This means that in practice business and social aspects of ties combine in networks which entrepreneurs build. Whether business ties are reinforced through mainly shared values or through emotional ties may be a matter of culture. Irrespective of cultural context, we would expect genuine entrepreneurs to be keen to promote their personality and uniqueness, to reinforce business ties with emotional commitments. Imitative behaviour according to norms, in contrast, is assumed to characterize traditional owner-managers, those faithful to their trade.

Genuine entrepreneurs in particular and owner-managers in general are thus assumed to build personal networks. "Personal" implies uniqueness since two persons with each their special history and expectations engage in mutual commitments, cf. Dubini & Aldrich, l991. A personal tie or relationship has a number of characteristics. Business and social concerns appear as dimensions of any exchange relationship maintained by an entrepreneur. Relationships originating in either a business or social event, planned or casual, will in due course end up in a two-dimensional personal relationship. We also propose that when it comes to regulating exchange, entrepreneurs prefer informal personal encounters to formal apersonal contacts and contracts. First, personal exchange is more potent, flexible and committing than legal agreements. Second, casual encounters appear as opportunities may serendipitously initiate and direct the strategic development of the venturing process. Third, entrepreneurs typically listen to and learn from business partners such as peers, suppliers and customers, where long-term exchange has created a shared understanding and trust. Thus, to an entrepreneur the personalized exchange network also encompasses communicative and normative networks, cf. Mitchell, l973. Prospective entrepreneurs are especially concerned with building personal networks because, in order to overcome liabilities of newness, they have to mobilize all available resources - including social - to promote their emerging business, cf. Starr and MacMillan, l990.

 

DEFINING AND MODELLING PERSONAL-NETWORK DYNAMICS

Obviously not all human exchange is personal as defined here. The integration and separation of personal involvement and organizational, i.e. role, behaviour provide a number of theoretical and methodological challenges, cf. Larson & Starr, l993, Ring and Van de Ven, l994. Our argument is that it is of critical importance to the entrepreneur to be able to organize the business through personal networking. It is a way of keeping the business on a personal level. Personal networking is genuinely associated with entrepreneurship as human projecting, apersonal networking with the management of institutions. This image of the personal network indicates some important aspects of its dynamics. First, dynamics concerns the origin and emergence of individual (dyadic) ties as well as the core (primary) network and overall personal network of an entrepreneur - the egocentric network. Secondly, the interplay between the social and business dimensions must be considered. Third, the influences of networking on the outcome of the entrepreneurial process must be included. Cf. Figure 1.

FIGURE 1
Entrepreneurial Networks - their Origins, Dynamics and Outcomes

(Not Available)

The pivotal part of the model is the personal network and its intrinsic dynamics. As suggested above, the generic building block in the network is the dyadic, personal and therefore unique relationship. The balancing of business and social dimensions feeds the microdynamics of individual ties. Interacting individuals, each with an own egocentric network, create patterns of behaviour which sediment into ventures, both imagined and realized by an entrepreneur. Amplifying feedback loops, frequent in all human interactive systems, continuously initiate and impede processes which the entrepreneur tries to tame and energize in the interest of the business. There are fluid boundaries between business and social concerns as well as between the venture and its context.

The personal networking of the entrepreneur reflects the personal attributes of the entrepreneur and the profile of the venture. Female entrepreneurs are, e.g., supposed to more than men use their personal networks to promote their careers since they are yet to be recognized as equals to men as independent businessmen and will therefore have less access to institutional support. Higher education is assumed to give access to especially challenging arenas for building personal networks. The structure and dynamics of, as well as use of, personal networks may vary to fit the actual life-cycle phase of the venture. We expect the personal network to be relatively more important - and dynamic - during the earlier phases of the venture and of the entrepreneurial career. While the need for external supplementary resources then is greater, social ties are more easily accessible.

The need for networking may also differ depending upon the line of business of the new firm. In manufacturing industries, where investment in physical assets is important, personal networking may be less important than in some service industries where sense making and image building make interpersonal skills a generic asset, e.g. in knowledge-based firms. In sectors of industry where technology development is rapid, networking activity can be assumed to be generally high and the networks accordingly volatile.

Considering that we recognize the start of an entrepreneurial career as a restructuring of both the person´s private and professional life trajectory, the general socio-economic context of the venturing process must be taken into account. In a Scandinavian setting, the venture is typically launched where the founder lives. This means that regional variations in values and attitudes to entrepreneurship and, more importantly, differences in structural conditions have an impact on the creation and development of new ventures (Davidsson, l995). We have therefore in the model pointed out the domicile of the entrepreneur as an "organizing context" for the venturing process. In a socio-economic context dominated by cosmopolitan values personal networks are managed more flexibly than in contexts dominated by rural or small-town values.

While the region is primarily a socio-cultural setting with impact on venturing, some market settings create a focused socio-economic organizing context. If the former employer reappears as a founding customer, a core market relationship is created which obviously helps the new entrepreneur over a major entry barrier, that of access to the market. Cf. the notion of "extrapreneurship" (Johnson & Hägg, l987).

Further conditions not included in the model influence what venture concept is being realized and how, the way networks are created and operated, as well as the outcome of the venturing process. Such contingencies include for example technological development, structural changes in the market and reformed institutional conditions.

The personal network in turn influences the outcome of the venturing process in terms of both expectations and proven results. Since the entrepreneur, just as any strong-willed, creative individual, is guided by images as well as by objective facts (Gartner et al., l992), the perceived outcome of the venturing activities is included in the model. Official financial data are left out because of limited accessibility and reliability. Further, more generic outcomes of personal networking are enhanced legitimacy, increased flexibility and an elaborate business intelligence.

The model also suggests major feedback mechanisms. Thus, information and experience gained through personal networking may initiate a reorientation of the venturing activity. The potential for launching multiple ventures into a complex entrepreneurial career increases as the personal network evolves (Johannisson, l992). This potential includes e.g. increased knowledge by acquaintance as well as access to resources. Through her/his own networking the entrepreneur will co-create a supportive social and business context. This is especially evident in small-firm clusters such as industrial districts (Perrow, l992, Johannisson et al., l994). Venture performance as perceived will generally influence the entrepreneur´s commitment to her/his venturing career.

Obviously the ambiguous characteristics of network dynamics, i.e. both change and stability in networks, have considerable methodological implications for empirical research. Change within individual dyadic relationships may be initiated to ensure that the tie is maintained. Creation of new ties and closure of existing relationships may only be measures taken in order to preserve basic characteristics of the overall network. Envisaging the venturing process as embedded in the egocentric exchange network makes it natural to consider contemporary venturing activities as only a partial mobilization of a slowly changing overall network.

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Last Updated 1/15/97 by Geoff Goldman & Dennis Valencia

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