Small worlds, infinite possibilities? How social networks affect entrepreneurial team formation and search

Abstract

The social network perspective has become an important analytical lens for understanding strategic actions among entrepreneurs. Social theorists offer two competing visions of networks' configurations: one of infinite opportunities for individuals to develop heterogeneous circles of affiliations and the other of constrained opportunities privileging only certain individuals. We draw on this tension to describe three models of network formation – random, small world, and truncated scale free – and apply them to entrepreneurial team formation and resource mobilization strategies undertaken by entrepreneurs. We compare and contrast two models of team formation – a rational process model and an interpersonal relations model – and identify the network contexts under which each is most applicable. Mundane entrepreneurial teams arise within localized clusters and appear unlikely to take advantage of what network theorists have called small world networks, which depend upon bridging ties between clusters. Nonetheless, there are entrepreneurial strategies through which new ventures might achieve the advantages of small world networks. To the extent that new ventures emerge in truncated scale free networks, their founders must work within a highly centralized structure, with its institutionalized standards making team formation and entrepreneurial search more instrumental than within small worlds. Copyright © 2007 Strategic Management Society.