The Locus of Innovation in Small and Medium-Sized Firms: The Importance of Social Capital and Networking in Innovative Entrepreneurship

51 Pages Posted: 23 Jul 2008

See all articles by Willem Hulsink

Willem Hulsink

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Tom Elfring

VU University Amsterdam

Wouter Stam

The Hong Kong University of Science and Technology

Date Written: 21 2008 7,

Abstract

Social networks matter in the innovation processes of young and small firms, since ‘innovation does not exist in a vacuum (Van De Ven, 1986: 601).’ The contacts a firm has could both generate advantages for further innovation and growth, and disadvantages leading to inertia and stagnation. In the first case the existing social network or the new business contact provides opportunities furthering eventual success, in the second case, the existing network or the new business contacts turns out to have a constraining or even detrimental effect on performance. The search and use of social capital is driven by goal-specificity: it only includes those ties that help the actor in the attainment of particular goals. Most of the research so far has been deliberately or unwillingly one-sided, by for instance only looking at entrepreneurial firms in dynamic industries (or more specifically, start-ups in the high-tech industries). Or selective attention has been paid to either the internal sources or the external contacts to trigger innovation. And when a conclusive study has been conducted into investigating both the effect of internal and external ties on innovation, the sample often includes large and established companies and managers (instead of entrepreneurs and smaller firms, as what we are interested in). The main line of reasoning in this paper is as follows. In the first section we discuss the key network concepts, such as, social capital, relational embeddedness (strong and weak ties), structural embeddedness (i.e. structural holes). Section two deals with innovation and the central role of knowledge in the discovery and realisation of innovations. Social networks and its potential for knowledge brokering appear to be important and therefore the last section focuses on the relationship between particular network characteristics and innovation.

Keywords: entrepreneurship, innovation, social capital, networking, small- and medium-sized firms, James Dyson

JEL Classification: M13, O32, M, L15

Suggested Citation

Hulsink, Willem and Elfring, Tom and Stam, Wouter, The Locus of Innovation in Small and Medium-Sized Firms: The Importance of Social Capital and Networking in Innovative Entrepreneurship (21 2008 7,). ERIM Report Series Reference No. ERS-2008-041-ORG, Available at SSRN: https://ssrn.com/abstract=1170184

Willem Hulsink (Contact Author)

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Tom Elfring

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

Wouter Stam

The Hong Kong University of Science and Technology ( email )

Clear Water Bay
Hong Kong, -
Hong Kong

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