Social Capital And Networks Help New Ventures

6682 Words27 Pages
ABSTRACT Social capital and networks help new ventures to overcome the liability of newness by creating organizational legitimacy. Legitimacy recognizes the presence of trust as customers, suppliers, and creditors enter into transactions with the new venture only after trust between and among the parties is created. This paper examines whether social capital or trust are important elements in business development. The authors interviewed two philanthropy professionals and two business professionals. Each interviewee was asked the same set of nine questions to determine the importance of trust. The respondents’ comments overwhelmingly support the proposition that social capital and trust are important to new venture development.…show more content…
Acquiring and managing social capital is an essential element in the development of new businesses and to the success of both individual entrepreneurs and organizations (Gedajlovic, Honig, Moore, Payne, & Wright, 2013). Social capital helps new ventures to overcome the liability of newness by creating organizational legitimacy. Legitimacy recognizes the presence of trust as customers, suppliers, and creditors enter into transactions with the new venture only after trust between and among the parties is created. Trust has been described as the “glue and lubricant” that holds social networks together (Anderson and Jack, 2002; Welter & Smallbone, 2006). The research on entrepreneurship, social capital and trust recognizes that social capital (interpersonal, intra-organizational, and inter-organizational relationships and networks) encompasses trust, but often only considers it indirectly (Welter & Smallbone, 2006). Some countries are incubators for successful entrepreneurs and a small business starting out need not worry about how big they can grow. The GEM (Global Entrepreneurship Monitor) research indicates that the presence of “entrepreneurial framework conditions (EFCs)” shape entrepreneurial activity and effect the creation of new ventures (Amorós, & Bosma, 2014). EFCs are those things that effect the business environment or climate including financial and government support, business regulations, market openness, R&D transfers,
Open Document