Impact of Entrepreneurial Networks on the Novice Nascent Entrepreneur


Entrepreneurship is the result of a well controlled, systematic method of applying creativity and discovery to desires and possibilities in the marketplace. It involves applying concentrated schemes to new concepts and new insights to conceive a product or a service that satisfies customers' desires or explains their problems. Millions of persons come up with creative ideas for new or different goods and services; most of them, although, not ever do anything with them. Entrepreneurs are those who attach their creative ideas with the purposeful action and structure of an enterprise. Thus, thriving entrepreneurship is a constant method that relies on creativity, discovery, and submission in marketplace. (Cooper, Gimeno-Gascon & Woo, 1994) Entrepreneurship in the 21st years will be more comparable because of technological innovation, competitiveness, and demands and troubles from workers.

The study of new venture creation or entrepreneurship has been the subject of many studies. The subject has also obtained attention of policy makers and governments as new ventures are viewed important for the economic growth and development of any country, because it generates both capitals for the economy of the country & employment opportunities. Baumol (1990) stated that the production elements in this regard might be essential but are not adequate for economic health of the country. For example, it has been observed in many studies that enormous funds in physical and human capital in many centrally planned and developing economies are unsuccessful to generate enough wealth as development of economies are not reliant on the simple aggregation of the elements of productions. In sequence for the different elements of production to interpret into economic growth, productivity and human creativity are necessary. Thus, it is now completely understood that entrepreneurship is desirable to unite the inputs in beneficial ways. (Cooper, Gimeno-Gascon & Woo, 1994)

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Mostly entrepreneur are viewed as living treasures for a nations that is why they are considered as the most important factors that push countries into a spiral of increasing financial health. (Greene and Brown, 1997) Practically most of the countries to fulfill the aim of growth and development focused on increasing the entrepreneurial activity and potential inside their country by creating an attractive and compassionate organizational infrastructure to encourage the creations of new enterprises, i.e. by grants, sustaining infrastructure and providing tax incentives. (Audretsch and Thurik, 2000; Audretsch et al., 2001) The simple hypothesis is that an institutional atmosphere that promotes dynamic entrepreneurship is the critical determinant of economic health. Present econometric studies' results indicate the fact that entrepreneurship is surely a crucial determinant of economic growth (Baumol, 1990). Additionally it has also been discovered that poor entrepreneurship results in costs in terms of predetermined economic growth, therefore poor entrepreneurship can have adverse cost results for the countries (Aldrich, 1990). Although entrepreneurship has been considered significant to the financial development and growth of a nation, many previously conducted research had not highlighted what significance entrepreneurship can incorporate in economies. (Carree and Thurik, 1999; Carree et al., 2002)

This study will evaluate the impact that entrepreneurial networks will have on the beginner nascent entrepreneur setting up a business for the first time. From the above mentioned importance of entrepreneurship, the importance of this subject can be drawn. As the findings of this study would be significant and will help new entrepreneurs to assess the impacts of entrepreneurial networks on novice nascent entrepreneurs. (Audretsch et al., 2002)

Novice Nascent Entrepreneurship

Researches have made a difference amid novice (that is people with no past ownership knowledge as founder of the business, purchaser of a company or as successor) and nascent (i.e., people thinking about launching of a new firm). There is an augmented demand of the desire for better understanding of the strategies and processes chosen by various kinds of entrepreneurs to develop their business (Hornaday, 1990; Rosa, 1998).

The focuses of the researchers have started to shift to the pre venture creation stage in which the entrepreneurs are known as nascent entrepreneurs. (Delmar and Davidsson, 2000) It has been found out in a study that nascent entrepreneurs are not the possessors of identical characteristics but different and their age and past employment status are the main factors that makes them different from others (Reynolds, 1997; Carree and Thurik, 1999; Carree et al., 2002).

It has been revealed in a study that the people who actually want to establish a venture have to take on added activities, together with accumulation of the essential resources, to make sure that the concepts of their business is practical and applicable compare to those who had quitted. Longitudinal researches are significant in order to find out insights in which nascent entrepreneurs in reality can start ventures and the processes. Further studies in this area may usefully scrutinize the connection between venture success rates and pre startup activities. (Carter, Gartner and Reynolds, 1996)

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Efforts have been made to categorize the relevant traits of entrepreneurs that may be connected to new enterprise success. A number of studies have recommended that entrepreneurs who are involved in whether buy-outs, buy-ins and start-ups (Robbie and Wright, 1996) can be separated into two different types, namely, opportunists or craftsmen with differing potential of growth. Woo, Cooper and Dunkelberg (1991) have challenged this separation of entrepreneurs in two parts, as they believe that there are still other types of entrepreneurship that haven't been recognized yet. One aspect of the heterogeneous types of entrepreneurship, which has been ignored till now, is the likelihood that entrepreneurs might be operating more than one business at a time.

The Entrepreneurial Process

Information Search and Opportunity Realization

Whilst the opportunity realization and information retrieval is generally considered to be the initial key step in the business process although limited empirical research has been carried out around this process (Shane and Venkataraman, 2000). It has been suggested in many studies that in entrepreneurship research one of the most ignored questions is that where chances come from. Venkataraman also stressed that individuals can help researchers to explain why some people can identify opportunities more easily while others cannot. In this regard he highlighted three main areas: cognitive differences, differences in behavior and knowledge (information) of the differences. (Christensen, Madsen & Peterson, 1994; Venkataraman, 1997)

Ability to make specific knowledge of business opportunities and connections between the skills required, ability, insight, and such situations are neither widespread nor uniform (Venkataraman, 1997) in settings. Recognition to the amount which individuals realizes the opportunity and investigates for relevant information is reliant on different aspects of a person's human capital. Kirzner (1973) states that business owners can identify the opportunities in the market through noticing the alerts of the opportunity that market offer. Woo, Folta, and Cooper, (1992) argues that search and opportunity identification process may be subject to cognitive behavior of entrepreneurs. The behavior to search can be restricted by the ability to process information of decision maker and how to collect the adequate amount of information. Entrepreneurs with inadequate experience can use the simplified decision making model to guide their search, while the opposite may be related to (Gaglio, 1997) the situation experienced entrepreneurs.

Some experienced entrepreneurs may have experience in past of business ownership, and then there are likely to identify profitable projects for additional thoughts. Over time, habitual entrepreneurs may obtain contact information and provide opportunities, information flow about them. (Gaglio, 1997) Therefore, habitual entrepreneurs may need to reduce active and novice entrepreneurs. After winning the recognition as a credible entrepreneur, consultants, financiers, entrepreneurs and other business proposals can be sent to successful habitual entrepreneurs in past.

The skills of entrepreneurs to learn from past experience can affect the quantity and quality of the subsequent ownership of the information accumulated (Gaglio, 1997). Past experience of entrepreneurship provides a framework for processing information or mental mode. Furthermore, it permits experienced and informed entrepreneurs to determine the possible opportunities and take benefit of profitable opportunities. (Kaish and Gilad, 1991) This exceeds the capability of business owners to learn more and to get various amount of information by connecting the previous related information which have not been connected. Establishment of these inferences come from the personal experiences and history and often stands for of 'out of the box' thinking. Inspiration may be essential to link these new explanations. (Cooper, Gimeno-Gascon and Woo, 1994)

Some people habitually process information to activate their mental mode which could be noticed in between otherwise vast amount of stimuli (Gaglio, 1997). This may explain why the pursuit of a set of ideas inevitably lead to more opportunities and innovation for entrepreneurs which have not be realized or availed in the past (Ronstadt, 1988). McGrath (1999) states that entrepreneurs have access to most of the shadow option (that is, the opportunity has not yet confirmed.) Over time, valuable information about the real options available or suitable business opportunity arises. Although McGrath's has focused on the ability to learn from business failures, whereas, shadow option may also produce more successful entrepreneurs.

Limited evidences are available regarding the search behavior of habitual entrepreneur. The most noteworthy is that it is unclear whether the envisaged transactions and projects are followed by entrepreneurs or whether they initiate them. (Wright, Robbie and Ennew, 1997)The case studies of habitual entrepreneurs reveal that habitual buy in / but out entrepreneurs may be less active than the entrepreneur regarding the process of search they adopt in subsequent businesses. Ucbasaran, Wright, Robbie and Westhead, 1999)

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Through the team owned enterprise generally have extensive social and business networks and more diversified skills and abilities and have more chances to learn (Slevin and Covin, 1992). Proper networks creation in the shape of innovation setting (such as the Science Park) can offer a context for business owners (and their companies) to obtain the experience and knowledge (Thrift, 1996). Though, it's still unclear that what the effectiveness of these is supported or sponsored networks in equipping business owners and their companies with the capability to choose effective approaches to ensure limited resources outside a sponsored milieu (Felsenstein, 1994; Westhead and Batstone, 1999).

Business Strategies and Resource Acquisition

Current researches have tried to observe entrepreneurs in connection with their resource acquisition strategies and resource endowments. The key resource for a business is the person (s) who is the owner. (Katz, 1994; Pisano and Shuen, 1997; Bates, 1998) On the other hand owner (s) may be proven as the key constraint for the acquisition of resource on business. Both tangible and intangible assets and resources are gathered during the entrepreneurial careers (Katz, 1994; Teece, Westhead, 1995; Brown & Kirchhoff, 1997), for instance, social, financial, human, organizational and physical capital. A large number of studies have tried to find a connection amid the probability of venture failure, success and / or survival and the human capital of entrepreneurs (Mosakowski, 1993). It has been found in a study that business with broader varieties and higher levels of resources is likely to grow quicker and are bigger in size. (Brush, Greene, Hart and Edelman, 1997) Whereas; other studies in this regard have observed, how the bundles of resources of relative importance differs by the age of the business. (Chandler & Hanks, 1994)

Though resources are vital in the performance of a firm, but resources unaided are not enough to attain a long lasting competitive benefit. Therefore, entrepreneurs must develop the skills and competitiveness of strategic choice for better usage of resources and to facilitate their use. (Zahra, Jennings and Kuratko, 1999) Basic theory of enterprise resources based on a research by (Chandler & Hanks, 1994) suggests that enterprises should choose their own strategies to competency-based resources. They believe that when there are resources available to the joint venture between the competitive strategies are appropriate to strengthen business performance. (Chandler and Hanks, 1994; Westhead, 1995) However, this study would be useful to understand the enterprise level to find out the relation between entrepreneurial resources (and their management and acquisition) as well as competitive strategy pursued by organizations. (Gimeno, et al, 1997; Bates, 1998)

Entrepreneurial Networks

The concept of networking and networks was initially developed in anthropology and sociology, and then used in small business development and organizational behavior. Studies in these areas usually see networks as a particular set of relations among different groups/actors (Aldrich and Whetten 1981, Curran et al. 1993, Donckels and Lambrecht 1995, Johannisson 1986, Szarka 1990). In accordance with this definition: first the network is a set, and second within the set specific types of relationships obtains (Curran et al. 1993, Donckels and Lambrecht 1995, Szarka 1990). The first is that networks and networking have become fashionable conceptual devices for theorizing about the internal organization of larger businesses.

Impact of Entrepreneurial Networks on Novice Nascent Entrepreneur setting up the Business for the First Time

By the above discussion it is clear that entrepreneurial networks have their own impacts on setting up the new business. Networking is of high importance for new business as it helps new business to grow. Entrepreneurial networking creates new opportunities for nascent entrepreneur, and is considered key for the success of new business. For setting up a new venture, it has been recommended that entrepreneur should create strong network in the market, so that s/he can avail maximum opportunities. (Hart, Greene and Brush, 1997) On the other hand, networking helps novice nascent entrepreneur to minimize any possible risk because of strong relations in the target market, which keep new entrepreneur updated regarding current happenings in the market that ultimately helps them to avoid any possible threats to the new business. (Cooper, Gimeno-Gascon and Woo, 1994)