Do Structural Holes and Network Connectivity Really Affect Entrepreneurial Performance?

Abstract

Research shows that structural holes and network connectivity are associated with entrepreneurial performance. Yet the explanatory variables will tend to be correlated, and multicollinearity may skew the results. The use of instrumental variables can nevertheless generate reliable estimates. The methodology can also identify possible reverse causal orders. Here a network of rural entrepreneurs building their own hydroelectric micro-power plants is studied. The use of instrumental variables shows that structural holes and network connectivity have strong and additive effects on performance, and with a particular focus on rural entrepreneurs in developing countries, the findings' implications are discussed.

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

“…Hence, brokering between groups offers the possibility to select or synthetize and to generate ideas that are valued by all groups, which are thus considered to be 'good ideas' (Burt 2004). More recent studies validate this proposition and show that structural holes are linked to creativity and innovativeness (Rodan 2010) and have a strong positive effect on performance (Aarstad 2012). In their study on the origin of structural holes, Zaheer and Soda (2009) nuance this relationship by showing that homogeneity rather than diversity in the network content enhances performance because it allows the creation of efficiency routines.…”

Down the Rabbit Hole: How Structural Holes in Entrepreneurs' Social Networks Impact Early Venture Growth

“…Structural holes have emerged as a source of unique resources for entrepreneurs, and have been related to venture performance, especially in the early stages of development (Aarstad, 2012;Batjargal et al, 2013;Rost, 2011;Sullivan & Ford, 2014;Cowan & Jonard, 2007).…”

“…Ahuja found that structural holes had both a positive and a negative impact on a firm's innovation. The presence of more structural holes in their social networks provided ventures with a diverse source of knowledge and information (Aarstad, 2012). In general, knowledge and resource-sharing benefits of collaborative networks rely on trust and shared norms of behaviour (Bizzi, 2013).…”

“…Thus, access to innovation is important, which necessitates connections to both geographically and technologically distant networks. The benefits of structural holes whereby there is less likelihood of redundant information available to ventures in young industries is weighed against the risk of exploitation (Aarstad, 2012;Ahuja, 2000;Goyal & Vega-Redondo, 2007).…”

“…Aarstad (2012) proposed that an extensive social network and the presence of structural holes in the network affected entrepreneurial performance positively. The implication is that the numerous ties found in an extensive and rich network provide an accumulation of tangible and intangible resources that are linked directly to entrepreneurial outcomes such as growth and profitability (Baum et al, 2000;Cowan & Jonard, 2007;Zhao, Frese & Giardini, 2010;Zaheer & Bell, 2005).…”