Social capital: entrepreneurs and their online networks

Social media is increasingly used by business and, for entrepreneurs, it can be a way of making contacts, networking and building business links. But is enough understood about how this works? Here, Professor Eleanor Shaw looks at the issues.

Social capital is broadly understood as the ability of entrepreneurs to extract and use resources from relationships to achieve desired outcomes (Adler and Kwon). Some researchers have argued that social capital – a network of social relationships - is a critical element of entrepreneurial success, but social capital research has not kept pace with entrepreneurial practice. Increasingly, entrepreneurs manage business relationships online, but little is known about how entrepreneurs' social capital works in this context.

Social capital is accrued much like energy in a capacitor, and is potentially available; in fact, whether social capital has been accrued at all is not clear until an entrepreneur tries to use it.

Research has found there are two main kinds of social capital:

· bridging social capital is accrued through an entrepreneurs' network broadening behaviours, which include reaching out to new contacts and establishing interpersonal knowledge of them. Network broadening behaviours include: being outward looking, connecting with a broad range of people, and building reciprocity with a diverse range of people

· bonding social capital is developed through forging strong ties through repeated interactions which help to create trust and a willingness to help.

Entrepreneurs are increasingly managing personal and business networks online. The likes of Facebook, Linked In and Twitter have significantly changed the way entrepreneurs interact with others and differences in the on and offline contexts could impact the types of opportunities entrepreneurs respond to, the resources available to them and the extent to which their social capital is used. Offline, social capital is thought to develop over long periods of time – in terms of years, if not decades, but it’s not clear whether such long-developed social capital is transferable to entrepreneurs’ online relationships.

What’s more, we know entrepreneurs are using online social networks to achieve venture outcomes. We know social capital is important for those venture outcomes. Yet we still know very little about how entrepreneurs’ social capital might manifest itself online and how it differs from the offline context.

Social Network Systems (SNSs) are continuously being enhanced with new features, and new platforms are being created to offer new networking options. Many entrepreneurs we interviewed struggle to keep up with these changes. Technology is often heralded as something to make life easier but with so many social media options out there, entrepreneurs face a challenge to keep up with change and keep their existing social media channels updated and fresh - compared to big business which may have whole departments dedicated to social media engagement.

Our evidence suggests that entrepreneurs are using SNSs differently than offline networks to acquire the social capital needed to build and grow their ventures, and believe more research needs to be done to look at these differences. We have developed 12 propositions that identify potential benefits to entrepreneurs using SNSs. We’ve identified that SNSs allow entrepreneurs to access network contents and make social judgement assessments which help broaden their networks that would be too time-consuming or socially awkward to do face-to-face. SNSs also allow entrepreneurs to convert weak ties to stronger ones by leveraging common ground that has been found online. More research is needed to better understand how entrepreneurs can realise these online social capital benefits to achieve venture outcomes.

Once researchers better understand entrepreneurs' bridging and bonding social capital online, we will be able to consider important new questions concerning the interplay of entrepreneurs' social capital online and offline. Are some embedded resources easier to access online versus offline? Do network preserving efforts that include both online and offline channels foster higher bonding social capital? What is the habitus of entrepreneurs' social capital? How adept are entrepreneurs at responding to field-specific habitus across online platforms? Answering these questions will bring into focus a more robust picture of entrepreneurs' social capital in the digital age.

This post is based on a paper written by Professor Shaw with Canadian colleagues Claudia Smith and Professor Brock Smith. The full article is free to read until December - you can find it here

About Eleanor Shaw

Eleanor Shaw is Professor of Entrepreneurship and Associate Principal, Entrepreneurship and Education, at the University of Strathclyde. She was previously head of Strathclyde Business School’s Hunter Centre for Entrepreneurship.