Cohesive Entrepreneurial Network The Network Structure Commerce Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

This article discusses whether cohesive entrepreneurial network, the network structure is more conducive to the entrepreneurial process to proceed smoothly. There is more realistic analysis of the role of entrepreneurial network in which entrepreneurial process into the different phase enterprise. The purpose of this study is the use of entrepreneurial networks to check the potential role of development of a successful career in the stage of process. We suggest that the networks of firm progress adapt to the firm's developing resource demands and resource ventures. After then, based on the three cases, give some opinions to analyses these cases as firms emerge, their networks make up of socially connections and almost based on entrepreneur competency; as firms move into the early growth stage, their networks enriched develop denser and more branches based on economic costs and profits. And then we put forward some discussion about what kind of entrepreneurial network during the two phases of entrepreneurial process, and to explain the role in the two phases. And the best networking is to support to collaborate which types of networks could develop firms' dynamical progress proceed quickly, as well as they will complement each other.

Keywords: Entrepreneurial Networks, Dynamical Network of the Entrepreneurial Process, Two Stages of Entrepreneurial Firm's Progress, Entrepreneurial Network Model.


In this part, we provide background information and which field is this paper study in. In addition, it concludes what we want to answer and which method we want to use.

"A broad consensus has emerged among both strategy and entrepreneurship scholars that networks play a central role in successful firm emergence and growth" (Julie M. Hite and William S. Hesterly, 2001). From both the relational view (Dyer and Singh, 1998) and the resource-based view ( Portes and Sensenbrenner, 1993)that we establish our key terms and describe the focus of our firms in the life cycle stages of emergence and early growth demands. Therefore, it shown that occupy key positions in more connected type of networks would have the greatest chances for business success.

An increasing the interest is shown that entrepreneurship is viewed beneficial to a nation's economic growth and development since add to the personality traits and socio-cultural approaches, Aldrich and Zimmer (1986) suggested a new approach which they termed "Networks Approach to Entrepreneurship", in order to illustrate the reason why certain entrepreneurs are more successful than others in starting up and continuing their businesses, building their suggestion on resource dependence theory. The networks approach to entrepreneurship is basically based on premise that entrepreneurs build relations with the external environment, and need a speedy yet economical means for the access of different information, in order to define potential business opportunities, and obtain required resources to start-up and continue their businesses successfully. Entrepreneurs usually obtain these resources through their networks in the entrepreneurial process (Dodd, et al., 2002). Accordingly, entrepreneurial process involves gathering of scarce resources from external environment. Existing literature suggests that networks of entrepreneurs are really an opportunity set, which helps entrepreneurs to access both tangible and intangible resources. Building on the above researchers exhibited an increasing appreciation of the utility, application, and importance of entrepreneurial networks.

A careful review of the related literature on the subject of entrepreneurial networks revealed that the most cited entrepreneurial network types are: social network, business network, and inter-organizational strategic network (Butler and Hansen, 1991). From simple consider that a network is described as the overall unit links with some type of relationship. There are two generic types of network, entrepreneurs, so you can start with the development of his business - social networks and professional networks ( Birley 1985, Sweeney 1987).

Furthermore, Jack et al (2010) asserted that the entrepreneurial networks are important and beneficial to many businesses and business owners (Jack et al 2010 refer to in the Azzam Abou-Moghli & Ayed Al Muala,2012 ).

Butler and Hansen (1991) have explained that a successful enterprise needs development the importance of networking in entrepreneurial process.

In this section, still there is paucity in studies at the present times dealing with the impacts of entrepreneurial networks process usage in the success of business start-up stage and On-going stage. Therefore, research concerning the impact of the entrepreneurial networks and the success of two stages is deemed among the most important justifications of the current study. The following section provides a brief review of the nature and importance of networks to businesses. The methodology of this study, as well as the results and analysis are then provided.

In addition, the problem of this approach is that it largely ignored the dynamic nature of the firm up and running process - collection and the necessary resources. Recently, no further concrete analysis in the two firm stages in the process of entrepreneurial stage effective by the entrepreneurship network, with this entrepreneurial process of network is always dynamic on the nature of objective facts, the influence of the interaction between in this process, which should have operate the effective of entrepreneurial networks to become business successful.

Accordingly, there is indeed our understanding as follow questions:

In the two stages of a firm development, such as the start-up stage and the on-going stage, which they operate the entrepreneurial network in the enterprise to be appropriate and promote?


The following section describe the theoretical review of the definition of entrepreneurial network, entrepreneurial process which focuses on two phases and using networking model analyze the dynamic processes into the study of three cases. And then introducing and emphasize that the entrepreneurial network plays a crucial role in which enterprise want to be start-up successfully and developing from outside.

2.1 Entrepreneurial Network

Since the 1990s, with the rapid development of entrepreneurial research, as well as the degree of raising attention to network, entrepreneurial network has become an important role in the field of business. However,the researchers also admitted that theory of entrepreneurial network is still researching in this domain because it is lack of the core of the definition. Based on the existing research, follow this part with discussing different scholars from the different definition of entrepreneurial network, and then there will be a relatively systematic explanation about entrepreneurial network.

As follow, the author understands the entrepreneurial network in different ages. We just find simple and typical theory about entrepreneurial network to make appropriate comprehension.

Birley (1985) point out that the entrepreneurial network should be consisting of formal and informal form. There are different relations between formal and informal networks, such like the formal network relations to banks, organization agencies and so on. And the informal network relations to friends, families, employers and acquaintances and so on. That is based on the Aldrich and Whetten (1981) mention that the two form can be belong to the communicate content which is the way of passing the information.

And then, Szarka (Szarka 1990 refer to in the Sandaram P. Premaratne, 2002) focused on the three kinds function of trading, communicating and social skills. He made three components to be the entrepreneurial networks: transaction networks, communication networks and social networks. He has a further detailed division and classification for the entrepreneurial networks. However, there are something overlap in his categories.

The Butler and Hansen (1991) make a crystal understanding of entrepreneurial networks; they divided into three different fields to make the entrepreneurial networks dynamically, namely social network, business network and inter-organizational strategic network. They suggest that the entrepreneurial networks should be influence and develop the enterprise at the entrepreneurial process, such as the entrepreneur will organize the ideas and achieve the opportunity to capitalize on it by social networks. And then the business focused business networks to research more professional resources and develop gradually .The final processes, the enterprise sustain the development of manufacturing and producing as well as avoid the its risk of failure that is the ongoing phase, so this phases need inter-organizational strategic networks to help the company keep on-going constantly.

In this study, entrepreneurial networks are regarded as network relationships between an entrepreneur and outsiders. The outsiders, in another words "external actors", would make up of two parts, it is individual part and organization part. (Aldrich and Zimmer, 1985;Johannisson,1988) That is affiliate of connected and superposed by the multiple actors, and then become an integrity network in the development process of entrepreneurs or new enterprise.

Sandaram P. Premaratne(2002) said :"However, entrepreneurial network is a dynamic process." The actors in network and their functions change over the entrepreneurial process. Importantly, networks are not action less: they are dynamic in the entrepreneurial process. (Butler and Hansen 1991)

2.2 Entrepreneurial network to the influence of the entrepreneurial process

"The process of starting a new venture is embodied in the entrepreneurial process, which involves more than just problem solving in a typical management position. An entrepreneur must find, evaluate, and develop an opportunity by overcoming the forces that resist the creation of something new. "(Hisrich, Robert D., Michael P. Peters and Dean A. Shepherd, 2005) It means that the entrepreneurial process is the process of forming new enterprise usually includes a value of entrepreneurial opportunity in market, as well as the process of collecting resources and managing the growth of the new enterprise.

In order to explore the network how to influences the entrepreneurial process, from the stage of a firm, the entrepreneurial process will mainly divided into two stages of opportunity identification and financing venture resources, and then explain the network to the influence of the entrepreneurial process.

To the exaltation, there are closely relationship between opportunity identification and available private information achieved, so differencing personal status will affect the entrepreneurial process between opportunity recognition and the creation of new enterprises (Aldrich and Zimmer, 1986).

In addition, the network characteristics of transmitting information can also affect the entrepreneurial process to gain the resources. This "resources" means that enterprises use any form of resources in the process of creating new ventures, including the capital, human, business partners, new customers and so on. Many entrepreneurs through the set its network can obtain information to identify opportunities, and investors through the search the networks to find candidate with promising investment (Sorenson and Stuart, 2001). Therefore, entrepreneur need have more extensive connection, which will not only easier to identify business opportunities, and more likely attractive capital holder invest object they looking for.

2.3 The entrepreneurial networks of two stages business

From the 2.1 mentioned that it is a dynamic process of entrepreneurial networks to play a critical role into new business development. That means entrepreneur should enrich their network in which development needs in the different phases of a business venture. So the firm's network will be influenced by the entrepreneurial process of developing a company, which the networks have to be developed in different stages business. "Life cycles" are used to apply that business growing through simple stages of emerging, early growth, late growth, mature and death (e.g., Churchill and Lewis, 1983; Gartner and Brush, 1999) If each stage of life cycle theoretical represents a unique, strategic context ,it will influence a firm's external opportunity finds and resource acquisition risking. Therefore, it must overcome the new enterprise venture of each stage so that the enterprise will be survived successfully and grow quickly (Bhide, 1999). While we recognize the full spectrum of life cycle stages, our focus is on emergence and early growth. Hite and Hesterly decide to choose two stages in the life cycle. They focus is on the emerging and early growth because their networks characterized seem most likely to bring benefits to firms in these stages. (J. M. Hite and W. S. Hesterly, 2001)

Other theoretical models mentioned the view of the business creating process within the life cycle. For example, Galbraith (1982) applied a stage of developing enterprise model. In his model, the start-up phase (the emerging stage) officially began production, and then the company gets the first sales. ( Jianwen Liao & Harold Welsch, 2003.)

However, the present acknowledge that business on-going phase (early growth stage) division into the terms of growth and profitability satisfaction.( Azzam Abou-Moghli, Ayed Al Muala, 2012). Brockner and colleagues (2001) suggested that one approach to estimate entrepreneurial process successfully of on-going stages business is to weigh to business the degree of meets the demands and stakeholders interested needs.

As followed, the figure 2.1 shown that even for those who part of the formal system, it is the social relations of dominance. On the other hand, where entrepreneurs begin to force provide advice and help from social network to move into more professional network. That figure means to require an understanding the dynamic pattern of networks simply.

Figure 2.1 illustrates the dynamic nature of the entrepreneurial networks.

Original source :Birley and Cromies,1988 (Sandaram P. Premaratne, 2002)

However, Birley and Cromie (1988) just only focuses on analysis of the social and professional network in the early stages. Steven Chu (1996) also found that, for different stages through the maintenance of the existing network and looking for new members, members to join the network and improve the opportunities of business progress.

For example, social networks play an important role into the beginning of the entrepreneurial process and the start-up firms (Birley 1985, Butler and Hansen 1991), as well as business networks are also significant important (Greve 1995). And then ,on the other hand, focusing on an on-going business firm, which links with other organizations and other firms to become important inter-organizational networks. It includes that supporting agencies (namely government institutions, banks ) and other firms(namely large or small firms). The entrepreneur makes use of cooperating with other firms, which is an approach to achieve information and resource with exploring markets and channels. At the same times, enhancing their market places and ability of their competition (Aldrich and Zimmer 1986). However, these variables are important for researching entrepreneurial networks. We can also emphasize that on-going firms to grow constantly is attributed to the supporting network, it is also most important which includes providing advice, information, and capital to firms. (Curran et al., 1993)

In 1991, Butler and Hansen also appraise entrepreneurial network model. They make a use of model to recognize entrepreneurial opportunities, to experiment and explore the network process in the role of start-up firms and on-going firms. However, entrepreneurial network is a dynamic process. The members in networks and their roles change over time.


Aldrich, H., Reese, P. R., and Dubuni, P., (1989), 'Women on the Verge of a Breakthrough: Networking among Entrepreneurs in the United States and Italy', Entrepreneurship and Regional Development, pp. 339-56.

Aldrich, H., and Whetten, D. A., (1981),'Organization-sets, Action-sets, and Networks', In Nystrom, P. C., and Starbuck, W. H., (Eds.) Handbook of Organizational Design, Vol. 1,Oxford University Press, pp. 385-408.

Aldrich, H., and Zimmer, C., (1986), 'Entrepreneurship through Social Networks', In Sexton, D.L., and Smilor, R., (eds.), The Art and Science of Entrepreneurship, Cambridge, pp. 3-23.

Azzam Abou-Moghli & Ayed Al Muala, Impact of Entrepreneurial Networks in The Success of Business On-going Stage in Jordanian Manufacturing Companies, American Academic & Scholarly Research Journal Vol. 4, No. 2, March 2012.

Bhide A., The Origin and Evolution of New Businesses, The Oxford University Press: Oxford, 1999.

Birley, S., (1985), 'The Role of Networks in the Entrepreneurial Process', Journal of Business Venturing, Vol. 1 (1), pp. 107-17.

Birley, S., Cromie, S., and Myers, A., (1988), 'Entrepreneurial Networks in Northern Ireland', Ulster Business School, Belfast.

Brockner, J., Ackerman, G., Greenberg, J., Gelfand, M. J., Francesco, A. M. F., Chen, Z. X., Leung, K., Bierbrauer,G., Gomez, C., Kirkman, B. L., & Shapiro, D. 2001. Culture and procedural justice: The influence of power distance on reactions to voice. Journal of Experimental and Social Psychology, 37: 300-315.

Brockner, J., Chen, Y.-R., Mannix, E. A., Leung, K., & Skarlicki, D. P. 2000. Culture and procedural fairness: When the effects of what you do depend on how you do it. Administrative Science Quarterly, 45(1): 138-159.

Butler, J., and Hansen, G. S., (1991), 'Network Evolution, Entrepreneurial Success, and Regional Development', Entrepreneurship and Regional Development, Vol.3, pp.1-16.

Chu., P., (1996), Social Network Models of Overseas Chinese Entrepreneurship: The Experiencein Hong Kong and Canada, Canadian Journal of Administrative Sciences, Vol. 13 (4), pp. 358- 365.

Churchill NC & Lewis VL, The five stages of small business growth, Harvard Business Review 61(3): 30-50,1983.

Curran et al. (1993) Curran, J., and Blackburn, R A., (1993), 'Local Economies and Small Firms: A View from the Ground', In Chittenden, F., Robertson, M., and Watkins, D., (Eds.), Small Firms: Recession and Recovery, Institute for Small Business Affairs, Paul Chapman Publishing.

Dodd, S., Jack S., and Anderson A., Scottish Entrepreneurial Networks in the International Context, International Small Business Journal, 20(2), 2002, pp213-219.

Dyer JH, Singh H., The relational view: cooperative strategies and sources of inter-organizational competitive advantage. Academy of Management Review23 (4): 660-679, 1998.

Gartner WB, Brush CB, Entrepreneurship as organizing: emergence, newness and transformation, Academy of Management Conference, 7 August 1999, Chicago, IL.

Greve, A., (1995), Networks and Entrepreneurship- An Analysis of Social Relations, OccupationalBackground, and Use of Contacts During the Establishment Process', Scandinavian Journal of Management, Vol. 11, No. 1, pp.1-24.

Hansen, E. L., (1995), 'Entrepreneurial Networks and New Organization Growth',

Entrepreneurship Theory and Practice, Summer, pp. 7-19.

Hoang, H. & Antoncic, B. (2003). Network-based research in entrepreneurship: A critical review. Journal of Business Venturing, 18(2), pp. 165-87.

Hisrich, Robert D., Michael P. Peters and Dean A. Shepherd, Entrepreneurship. 6 ed. New York: McGraw-Hill Irwin,2005

Jack, S., Moult S., Anderson, A., and Dodd S., (2010). An Entrepreneurial Network Evolving: Patterns of Change. International Small Business Journal, 28 (4): 315-337.

Johannisson, B., (1988), 'Business Formation: A Network Approach', Scandinavian Journal of Management, Vol. 31 (3/4), pp. 83-99.

Julie M. Hite and William S. Hesterly, The Evolution of Firm Networks: From Emergence to Early Growth of the Firm, Strategic Management Journal, Vol. 22, No. 3 (Mar., 2001), pp. 275-286

Kazanjian RK, Drazin R., An empirical test of a stage of growth progression model, Management Science 35: 1489-1503, 1989.

Premaratne, Sandaran P. Entrepreneurial networks and small business development : the case of small enterprises in Sri Lanka / by Sandaram P. Premaratne. - Eindhoven : Technische

Universiteit Eindhoven, 2002. - Proefschrift. -ISBN 90-386-1667-8 NUGI 684

Sorenson,O.&Stuart,T.E., Syndication networks and the spatial distribution of venture capital investments, American Journal of Sociology, 106, 1546-1588, 2001.

Sweeney, M. and Zabin, J. (2002), 'Managing and measuring relational equity in the network economy', Journal of the Academy of Marketing Science, Vol. 30 No. 4, pp. 313-32.

Szarka, J., (1990), 'Networking and Small Firms', Journal of International Small Business, Vol. 8,No.2, pp. 10-22.

Woolcock M., social capital and economic development: toward a theoretical synthesis and policy framework, Theory and Society 27: 151-208, 1998.

4.3 Liko AB

The present owners of Liko AB,Gunnar and Brabro Liljedahl were founded the company in 1979. Liko mainly focus on development ,manufacturing ,and marketing of patient lifts. Liko is ranked the third largest company within this segment of the market share.