Network Capital as a Success Factor for Entrepreneurs: Beyond the Buzzword

Abstract

Startup success has long been a point of interest within entrepreneurship discussions and ecosystems. Startup and entrepreneurial success have often been based upon and measured by hard factors such as performance and sales volume. Although these hard factors are important, there is increased discussion surrounding the topic of networking. Particularly, the topic of social capital and weak ties. There is often acknowledgement that social contacts and networks help shape the success of an entrepreneur equally. Network capital research supports the vitality of social relationships in the growth and sustainability of startups. This paper thus explores the role of network capital and weak ties in building ecosystems as a success factor, analyzing how these factors shape entrepreneurial endeavors. This research paper includes theories from the Expectancy-Value-Cost Theory. The research follows a quantitative method. Data was collected via a survey with 200 participants within the entrepreneurship community. The data was analyzed using Structural Equation Modeling (SEM) and SmartPLS. This research identifies significant influencing motivational factors behind network-oriented behavior patterns. The findings also demonstrate mental tradeoffs between expectations and costs (time and effort) associated with networking activities. In this regard, self-expected competence can be identified as an important influencing factor on network-related activities.  Furthermore, the results show that network activities significantly affect startup success in different ways (i.e., access to external investors and funding, internal startup performance, and identification of new business opportunities). Our findings contribute to entrepreneurship research by explaining important interrelations between motivational influencing factors on networking activities and building supportive ecosystems for progressive startup development. Practical implications include making a concerted effort to invest in social capital, network and maintain relationships. This may not only positively affect startup success, but in turn can lead to a positive return on investment in terms of crucial resources such as knowledge, expertise and opportunities.