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

Abstract

Social networks play a significant role in the success of new entrepreneurial ventures. They provide an accumulation of tangible and intangible resources that are linked to entrepreneurial outcomes such as growth and innovation. The structure of social networks, specifically, has been linked to these outcomes; structural holes in social networks have shown an association with entrepreneurial success. Entrepreneurs who have many structural holes in their networks are thought to benefit from a rich source of divergent information. This article examines the complex nature of the relationships among social networks, formal institutions, and the outcomes of new ventures. It also explores the effects of a social network’s structural holes on growth in the early years of a venture’s development. We propose that structural holes of a social network, through a mediating role of institutional polycentrism, play an important role in the growth and profitability of a new venture as well as potential threats of exploitation. We then provide recommendations based on the reviewed literature for entrepreneurs and managers of formal institutions.