Obstacles, Networking Approaches and Entrepreneurial Network Changes

• Published date: 01 June 2018
• Author: Danny Soetanto,Sarah Jack,Qihai Huang
• DOI: http://doi.org/10.1111/emre.12183
• Date: 01 June 2018

Obstacles, Networking Approaches and

Entrepreneurial Network Changes

DANNY SOETANTO,

1

QIHAI HUANG

2

and SARAH JACK

1,3

1

Lancaster University Management School, Lancaster University, Lancaster, UK

2

Keele Management School, Keele University, Keele, United Kingdom

3

Department of Management and Organisation, Stockholm School of Economics, Stockholm, Sweden

While recent work has considered network change, little is known about how certain factors determine such

changes. This studyfocuses on two factors –the type of obstacles entrepreneurs face and theirnetworking approach

–and employsa two-stage researchdesign and network visualisation approachto capture entrepreneurs’experiences

in managing networks during their entrepreneurial journey. Using an inductive approach, the first stage of the study

identifies the obstacles and networking approaches that influence different types of network changes. The second

stage employs a deductive approach to test the hypotheses developed from the first stage using a larger sample.

We find that in experiencing obstaclesfrom internal sources, entrepreneurs are more likelyto find support from weak

ties while strongties are beneficial forovercoming obstacles fromexternal sources. In havingdifficulties in acquiring

entrepreneurial knowledge and skills, entrepreneurs are more likely to develop a low-density network consisting of

many structural holes. Conversely, dealing with difficulties in accessing market and resources imposes over-

reliance on high-density network. Furthermore, the entrepreneurs’networking approaches also influence network

changes and partially mediate the relationship between the networks and the obstacles they face.

Keywords: entrepreneurs; obstacles; networking approach;network change

Introduction

Social networks are especially important for

entrepreneurs, helping to mitigate the liability of newness

and smallness (Aldrich and Reese, 1993). When

entrepreneurs face uncertainty about their future and/or

experience challenging tasks, such as exploiting

opportunities, exploring markets, and engaging with

customers (Dyer et al., 2008), they resort to their network

for help and resources (Elfring and Hulsink, 2007). How

entrepreneurs engage their networks for resource

acquisition has long been studied (e.g., O’Donnell et al.,

2001; Hoang and Antoncic, 2003; Street and Cameron,

2007; Jack, 2010; Sullivan and Ford, 2014; Perry-Smith

and Mannucci, 2017). These studies have tended to focus

on the characteristics of networks, such as typology,

structure, and the quality of relationships (Nahapiet and

Ghoshal, 1998; Anderson and Jack, 2002; Reagans and

McEvily, 2003; Semrau and Werner, 2014). What studies

have also shown is that networks are not static, butevolve

in response to changing resource needs, which in turn

compel changes in the entrepreneurs’networks

(Johannisson,1986; Hite, 2005; Koka et al.,2006; Hallen,

2008; Slotte-Kock and Coviello,2010). By changing their

networks, entrepreneurs are more likely to survive

environmental jolts (Venkataraman and Van de Ven,

1998) and experience superior performance (Baum

et al., 2000). However, this dynamic nature of networks

and the factors that might influence change have not been

addressed to any real extent. Therefore, we fail to fully

recognize that the pr oblems entrepreneurs’face may

actually constitute a key reason to strategically choosing

to build and maintain different network relationships

(Porter and Woo, 2015). Therefore, the network

antecedentsand what contributes to the network dynamics

and configurations require further study (Brass et al.,

2004).

Addressing research questions on how entrepreneurs’

networks change as a result of new emerging needs, is

decidedly challenging due to ambiguities relating to the

individual’s situation and context. The difficulty of

investigating network changes is compounded by the fact

that this is difficult to observe. Following Vissa’s(2012)

Correspondence: Danny Soetanto, Department of Entrepreneurship,

Strategy and Innovation, Lancaster University Management School,

Lancaster University, Lancaster LA1 4YX, United Kingdom. E-mail d.

soetanto@lancaster.ac.uk

European Management Review, Vol. 15, 171–189, (2018)

DOI: 10.1111/emre.12183

©2018 European Academy of Management

suggestion, the present study uses a two-stage research

design to overcome this difficulty. In the first stage, an

inductive approach using visualisation techniques in the

form of network mapping is used to identify the factors

that force a network change and the network

characteristics entrepreneurs develop as a response to

these factors. In the second stage, a survey is used to test

the model developed in stage 1. As we will show, the

research focuses on obstacles entrepreneurs come across

in their entrepreneurial process that may force a network

change. Furthermore, such obstacles may trigger different

networking actions aimed at adding new contacts versus

managing existing contacts (Vissa, 2012; Perry-Smith

and Mannucci,2017), which in turn may inducea network

change. As networks can change through coincidental

events or can bestrategically developed as a sensemaking

process (Simsek et al.,2003),thisstudyattemptsto

capture network c hange as a result of adaptively

responding to the entrepreneurial challenge of

overcoming obstacles or acquiring resources (Birley,

1985; O’Donnell, 2014).

The study makes three key contributions to the

literature. First, it enhances understanding of how

networks changeduring the venture developmentprocess.

In this respect, we offer a response to calls to focus on

factors explaining the evolution of entrepreneurial

networks (e.g., Hoang and Antoncic, 2003; Jack, 2010;

Slotte-Kock and Covielo, 2010; Gedajlovic et al.,2013;

Porter and Woo, 2015). Second, our research sheds light

on how obstacles can influence social network changes

by revealing the direct and indirect mechanisms, with

the latter mediat ed by the entrepreneur’s networking

approach. Third, visualisation techniques, such as the

network mapping used in this study, provide a new

nuance to traditional data collection methods to study

networks. While therehas been some recent development

among network scholars in using visualisation as a tool,

the use of this method to understand entrepreneurial

networks is still limited. This study shows that by asking

respondents to visualise their network in the form of a

map, the study was able to collect rich quantitative and

qualitativedata of how network develops overtime.Taken

together, the study highlights important considerations

to understanding network changes in the context of

entrepreneurship and offers new research avenues on

how networks evolve to meet entrepreneurial

requirements.

The need to understand network changes

There is extensive discussion in the entrepreneurship

literature about the key benefit of networks in providing

information, advice, and access to valuable resources.

Early studies on entrepreneurial networks (e.g., Van de

Ven, 1964; Aldrich and Reese, 1993) find successful

entrepreneurs tend to be more network oriented and that

their networks can involve a variety of individuals who

are drawn on in the entrepreneurial process.Relationships

with venture capitalists, professional, and business service

organisationsare a means of tapping into resources, talent,

and market information (Sapienza, 1992; Sorenson and

Stuart, 2001). Networks with distributors, suppliers,

customers, and competitors can be an important conduit

of information and knowledge (Jarillo, 1988; Brown and

Butler, 1995; Street and Cameron, 2007). A number of

studies (e.g., Birley, 1985; Jack, 2005) also find that

entrepreneurs consistently use networks to obtain and

refine ideas, gather information, and recognise

entrepreneurial opportunities. As entrepreneurs

experience constant change in their business needs and

context, we may assume that entrepreneurial networks,

as a means for survival,are dynamic and change overtime.

Research hasfurther examined how networkschange to

support entrepreneurial activities. For example, Birley

(1985) explored the transition of informal to formal

relationships and how these relationships change when

assembling key elements for the development of new

firms. Larson and Starr’s (1993) concept ual work on the

role of networks in the venture creation process provides

a model illustrating the change of network activities used

to secure critical economic and non-economic resources

for entrepreneurship. Jack (2005)finds that entrepreneurs’

networks have a dynamic nature where dormant ties can

be reactivated again as strong ties to support business

activities. Hite (2005) argues that at the early stage,

entrepreneurs rely on identity networks characterised by

strong and close ties, butlater expand their networks with

more structural holes, known as calculative networks.

More recent research examines how the evolution of

entrepreneurial networks can influence venture growth

and development (Hite and Hesterly, 2001; Davidsson

and Honig, 2003; Schutjens and Stam, 2003; Jack, 2005;

Elfring and Hulsink, 2007; Hite, 2008). Overall, these

studies show that networks are not static but change as

they evolve, so that the content and stru cture of the

network can vary in response to entrepreneurial

requirements at a specific point in time (Johannisson,

1986; Hite, 2005).

While the changing nature of networks has attracted

much interest from scholars, the understanding on the

nature of change and the factors that influence the change

is relatively limited. Entrepreneurs may intentionally

change networks for exploring opportunities and

overcoming obstacles (Vissa, 2011) and therefore

research must address two questions. The first question

relates to the nature of the networks that are created by

entrepreneurs in response to their entrepreneurial needs.

In network studies, the literatureis still debating what type

of network, that is, structural or relational (Adler and

172 D. Soetanto et al.

©2018 European Academy of Management