A Network Model of Organization Formation

Abstract

This paper presents a network model of organization formation and builds upon theories of social and socioeconomic exchange. The model explains the transformation of exchange relationships from a set of relatively simple, often single-dimensional dyadic exchanges into a dense set—a network—of stable, multidimensional and multilayered interorganizatlonal exchange relationships. The model details three stages of entrepreneurial networking activity which are used to secure the critical economic and non-economic resources needed to start a business: (1) Focusing on the essential dyads; (2) Converting dyadic ties to socioeconomic exchanges; and (3) Layering the exchanges with multiple exchange processes. In all three stages, there is an iterative process which involves the exploration, screening and selective use of network dyads to match the business definition of the emerging firm. Organization formation results from the crystallization of stable, committed, revenue-generating, inter-organizational exchange relationships which extend beyond the earlier idiosyncratic and personalized relationships of the entrepreneur. A network model of organization formation appreciates the social embeddedness of economic relationships and the multidimensional nature and content of business relationships.

Network diversity and maritime flows

“…While this is largely due to the absence of a proper mathematical definition of multigraphs (or multiplex graphs), the possibility and implications of having two or more types of links were approached by sociologists since the 1960s (Mitchell, 1969;Burt, 1992;Eve, 2002), notably looking at the effects of having both personal and professional relations within a given organization on individuals' career evolution. Such multiedge relations are thus called two-dimensional in social network analysis in opposition to singlestranded edges or links (Larson and Starr, 1993 ;Degenne and Forsé, 1999); they sometimes allow directionality (multidigraph) and the existence of loops, self-loops, or self-edges (pseudograph). In practice, multigraphs are often analyzed as simple graphs where links have multiple attributes allowing the application of conventional network analytical methods (Wasserman and Faust, 1994;Newman, 2010).…”

Connecting the Dots for Social Value: A Review on Social Networks and Social Entrepreneurship

“…It was suggested to consider social entrepreneurship as emerging from bridge-building between several logics, borne by previously unconnected networks. Finally, Larson and Starr's (1993) network model of organization formation has been suggested of particular interest to social entrepreneurship research as it entails the participation of multiple stakeholders in entrepreneurship emergence. In particular, it may be concluded that as social networks focused on addressing social needs grow and formalize, they may crystallize to form a socially oriented venture.…”

“…Analysing networks and entrepreneurship in a processual way, Larson and Starr (1993) present a network model of organization formation in a widely cited but barely empirically tested article (Hoang and Antoncic 2003;Slotte-Kock and Coviello 2010). The authors argue that the simple and idiosyncratic personalized relationships of the entrepreneur transform into a network of stable, multidimensional inter-organizational exchange relationships through three stages.…”

“…Even though the relationships are managed by individuals, the exchanges shift to an increasingly organizational level. According to Larson and Starr (1993), the successful outcome of these three stages is the crystallization of a critical mass of stable, committed, revenue-generating, inter-organizational exchange relationships into a new organization that will be characterized by stability and predictability. This stability stems from the perception of participants that their long-term commitment to build strong socioeconomic ties with the entrepreneur involves high switching costs.…”

Trust as Networking Knowledge: Precedents from Australia

“…Larson and Starr (1993) argue that interpersonal contact and sharing of understanding of the conduct and behaviour of participants in a relationship provides a certain minimum level of understanding, giving rise to trust and reciprocity. Larson and Starr (1993) suggest that collaboration will be based on previous positive experiences with partners; thus, collaboration between competitors without prior collaborative experience could thus be very risky. Reciprocity encourages continuous collaboration when it builds social capital.…”