Mobilization of Social Capital

Access to social capital creates the necessary condition for mobilizing social capital. The amount of accessible social capital mobilized then influences the instrumental outcomes (Lin, 1999). Entrepreneurship researchers have found that the structural characteristics of social networks greatly affect entrepreneurial performance. In terms of the number and strength of social ties, for instance, entrepreneurs who possess social capital characterized by many social contacts, strong personal ties, and direct ties with referrals to investors are more likely to receive funds from venture capitalists (Shane and Cable, 2002). Strong ties reinforced by mutual feelings of attachment, reciprocity, and trust (Uzzi, 1999) are critical to counter uncertainty concerns of potential partners who are often reluctant to risk their reputation, capital, or other resources on uncertain ventures (Lee et al., 2001). Strong social ties could significantly affect venture investment decisions, and thus affect the likelihood and cost of acquiring financial capital (Batjargal and Liu, 2004). In terms of the extent of social ties, for instance, before launching new ventures, entrepreneurs can often identify or obtain valuable information from diverse and extensive contacts in their informal social networks within their industry, such as current or past customers, suppliers, and financial institution employees (Ozgen and Baron, 2007). New ventures associated with high-status contacts were shown to undertake IPOs faster and earn greater valuations at IPO than ventures lacking such connections (Stuart et al., 1999). However, those authors implicitly assumed that all entrepreneurs have the same ability to utilize all available network resources. Instead, our field observations indicate that political skill is a widely varying individual difference that may determine the ability to mobilize accessible social capital for achieving desirable venture performance.

Specifically, we observed that politically skilled entrepreneurs mobilize their social capital better than politically unskilled entrepreneurs. Politically skilled entrepreneurs are more likely to use their networking ability to connect with diverse contacts for utilizing information and other resources. They are particularly more attentive to others’

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needs and are more aware of opportunities when they arise. They are also better at presenting themselves as honest, sincere, open-minded, caring, and helpful. Thus they can foster a norm of reciprocity and openness in their networks, which, in turn, guides the behaviour of other network members. Furthermore, they are often highly skilful at negotiating, deal-making, and conflict management (Ferris et al., 2007), and thus are more likely to influence others, especially key contacts who are instrumental to their venture performance.

Our interviewees developed and maintained many contacts in their core and extended networks. Table III shows that they maintained an average of 37 close contacts in their core networks and 199 more distant contacts in their extended networks. With so many contacts but with constrained time and energy to invest in social relationships, entrepreneurs are unlikely to contact them all frequently. Furthermore, even if they are aware of all their contacts, individual entrepreneurs may still differ in their ability to influence them all. When entrepreneurs have many contacts in their social networks, how can they identify the key contacts for gathering the right expertise and resources?

Figures 5 and 6 present quotations from the entrepreneurs we interviewed. Inter- viewees had varied political skills and they used their social networks differently, particularly in mobilizing key social ties. Politically unskilled entrepreneurs tend to consider their social networks to be less efficient for supplying needed resources (e.g., C2 in Figure 5) or less crucial for their business needs (e.g., E2 in Figure 6). They are less aware of key social ties that they could trust (e.g., E2 in Figure 5 and S1 in Figure 6). In contrast, politically skilled entrepreneurs are more aware of the expertise, backgrounds, and interests of various contacts. They are better at identifying key, maximally beneficial contacts, and more skilful at influencing key contacts to obtain crucial resources such as business information and financial capital. They utilize different dimensions of political skill in building and using their networks, identifying more relevant key contacts through their social astuteness, and building strong bonding and trust through their apparent sincerity. Their interpersonal influence allows them to influence close contacts who are well-placed as bridges connecting entrepreneurs with potential key clients or investors the entrepreneurs could not have reached alone. Each case confirms the patterns identified from the previous case, but each case adds some uniqueness to the pattern.

Next we conducted two within-case analyses ( J1 and P1, Figure 5). Recall that J1 owns

a consulting firm for clients that have annual sales ranging from $500,000 to $15 million. J1 described herself as ‘highly capable of picking the right (key) contact’ in both core and extended networks that are ‘most appropriate for the job given the situation’. She said: ‘I like to go to different events and talk to people of different trades and small business owners like dry clean owners. I pay attention to what they do, what they need, and what their interests are . . . I’m highly capable of picking the right contact who is most appropriate for the job given the situation.’ Her quote demonstrates a high level of social astuteness that helps her achieve her goals through identifying and using important social relations.

Similar to J1, P1 is also politically skilled, with a self-reported political skill score higher than those of most other entrepreneurs we interviewed. P1 owns a successful high-end restaurant chain. With more than 2000 people in his network, he considered his networking ability to be one of his personal strengths. He said: ‘The people who work with me laugh at me, because if I talk to somebody once, I will create an outlook entry for that

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Figure 5. Role of political skill in network use (mobilization of social capital): using key social ties (the original figure uses green–grey–red colours to represent different levels of political skill associated with entrepreneurs. For readers interested in the colour figures, please see http://onlinelibrary.wiley.com/doi/10.1111/ joms.12107/abstract for the original figures)

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Note: The original words of the interviewed entrepreneurs suggest that compared to entrepreneurs with low political skill (e.g., E2, C2, and S1), entrepreneurs with high political skill (e.g., J1, P1, and P2) tend to be more aware of people’s needs, interests, expertise, and value and be more skilful at identifying the key contacts

important for their business needs and mobilizing the right person at the right time for reaching their targeted objective.

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Figure 6. Role of political skill in network use (mobilization of social capital): using strong ties as network bridges (the original figure uses green–grey–red colours to represent different levels of political skill associated with entrepreneurs. For readers interested in the colour figures, please see http://onlinelibrary.wiley.com/doi/ 10.1111/joms.12107/abstract for the original figures)

Note: The original words of the interviewed entrepreneurs suggest that compared to entrepreneurs with low political skill (e.g., E2 and S1), entrepreneurs with high political skill (e.g., R2, P1, C1, and d3) tend to be better at using strong ties as network bridges to achieve the desired business objectives.

201 27 person and I will capture whatever information I can about that person . . . I particularly

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pay attention to building up my database, and my contacts . . . I think it’s just through sincere interactions with people, as it happens naturally. . . And I’m not afraid to ask for help and I’m also very willing to offer help . . . It’s [the relationship is] just there, and I know it’s there, and if

I need it I’m not afraid to use it, but I don’t necessarily go through the effort of activating it, cultivating it, keeping it alive or active, keeping it fresh, exactly . . . I do remember (the name or face of the contact even when I haven’t talked to that person for months or years). I can remember the context within which I met people, things. Again, I talked about the sincerity of the relationship with people. Like for example, it’s very important to me that I do my best to pronounce peoples’ names the right way and to spell them the right way. If I’m going to a party or an event ahead of time I very much like to get the attendee list ahead of time so that I can review it ahead of time, so that because I know that when I meet someone for the first time I have

a hard time remembering names, but I know if I see the name ahead of time then when I meet that person I have a much better chance of actually remembering it. So that’s something

I would do to try to help my memory and help myself to connect with people, you know, in that regard.’ The interview with P1 vividly demonstrated his three dimensions of political skill. Showing strong networking ability, he works to remember names and the contexts of meetings so that he can connect well with the right people and influence them when needed. Showing high social astuteness, he remembers names and associates people with the context; he is highly aware of who knows what and when to use them even though he has thousands of active and inactive contacts. Demonstrating apparent sincerity in interactions and a willingness to help others, he has many contacts who are willing to help him. Therefore, his high political skill allows him to identify the key contacts important for his business needs and to mobilize the right person at the right time for reaching his objective. P1’s case confirms the observations made from J1’s case: political skill affects how entrepreneurs mobilize the contacts in their social networks to meet their needs. We thus propose the following:

Proposition 3: Given the same level of accessible social capital, politically skilled entrepreneurs will be better at using key social ties to achieve desirable venture performance than will politically unskilled entrepreneurs.

Importantly, we find that politically skilled entrepreneurs are better at mobilizing strong ties in their core network to reach key clients or investors outside their personal social networks. In other words, politically skilled entrepreneurs are better at using strong ties in their core network as network bridges to reach key people who are otherwise not easily reachable. Strong bridging ties create network bridges linking entrepreneurs to otherwise unconnected individuals outside the entrepreneur’s immediate personal networks. The network bridge is a network link providing the only path between two persons (Harary et al., 1965). ‘A network bridge between two persons A and B provides the only route along which information or influence can flow from any contact of A to any contact of

B, and consequently, from anyone indirectly connected to A to anyone indirectly connected to B’ (Granovetter, 1973, p. 1364). A bridge is significant: (a) as a direct tie between A and B, who are presumably members of different groups; and more broadly (b) as a network link that joins otherwise unconnected individuals by bridging between A

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and B (Granovetter, 1973). Both information and influence resources can flow through network bridges. Furthermore, bridging ties can be strong or weak, differing in the time spent in interaction, emotional intensity, intimacy, or reciprocity (Granovetter, 1973; Marsden and Campbell, 1984).

Network scholars argue that strong ties can serve as network bridges linking otherwise unconnected individuals. For example, Kalish and Robins (2006) examined the ego network structures of 125 university students and found very few ‘weak’ structural holes in ego networks; almost 28 per cent of the triads (on average) were ‘forbidden triads’ or ‘strong’ structural holes. The substantial amount of ‘strong’ structural holes suggests that strong ties may serve as network bridges. Kalish (2008) found two psychological network orientations – entrepreneurial orientation and relationship-building orientation – associated with individuals who span structural holes and form strong ties linking densely connected cliques. The findings possibly explain why strong ties can serve as bridges. Tie strength, weak or strong, is not a precondition for a tie to function as a bridge: a disconnection between individuals having non-redundant resources or holding different network positions is, however, critical (Burt, 1992). Bian (1997) further detailed ‘strong ties as network bridges’. In the corporate world, disconnections may be deliberate because they give strategic players information and control in competing for economic rewards. In the social world, disconnections are largely non-deliberate, social-cultural processes, constrained by ego’s and alter’s social class and residential location (Bott, 1957).

Several studies have shown that strong ties are better bridges than weak ties when influence and other social resources (e.g., trust and loyalty) must be transferred through network bridges. Indirectly connected third parties positively affect trust within strong ties but negatively affect trust within weak ties (Burt and Knez, 1995). In the Chinese labour market, where recruitment is informal and job information is not readily available, interpersonal connections are essential; thus strong rather than weak ties with intermediaries provide the network bridges job-seekers need (Bian, 1997). Entrepreneurs striving to acquire financial capital benefit if they have embedded, strong ties with bank managers who are then motivated to persuade relevant decision-makers that the entrepreneur is creditworthy (Uzzi, 1999). Overall, the empirical evidence on strong ties as bridges indicates that trust and reciprocity between individuals can be ‘rolled over’ to a new third party, ‘thereby establishing trust and reciprocal obligations between two parties that lacked a prior history of exchange’ (Uzzi, 1999, p. 490).

Consistent with those prior arguments and findings of strong ties as network bridges, evidence from our field interviews reveals that for politically skilled entrepreneurs, crucial business deals with major clients or major investments are channelled more through strong ties than through weak ties. In other words, weak ties are used mostly for transferring publicly available information that otherwise is scattered in the market and sometimes they are used for obtaining referrals. Instead, entrepreneurs must rely on strong ties to obtain influence and referrals, which are often more costly and difficult to obtain. For example, the case of P1 illustrates how politically skilled entrepreneurs use strong ties as network bridges to obtain financial capital needed for venture development. At the initial fundraising stage of P1’s restaurant business, one of his close uncles introduced him to ten friends, former executives from the company where his uncle once worked as an executive. The ten friends became angel investors, each investing $5000 to

203 29 $10,000 in P1’s new restaurant. P1 separately raised more money through close friends.

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One woman, a close friend, introduced P1 to her close friend who then invested $50,000. Another close friend since college introduced P1 to his boss, the CEO of a biotech company, who also invested $50,000. P1 said, ‘so it was, usually somebody close intro- ducing me to somebody who wasn’t close and that was the person who made the investment.’ In P1’s example, financial capital from key investors was channelled more through contacts with strong ties who served as bridges connecting the entrepreneur and the key investors who were otherwise unconnected.

P1 was not the only entrepreneur who described using strong ties to reach key investors with whom he was not directly connected. Our coding showed that other entrepreneurs with relatively high levels of political skill gave similar reports (e.g., D3, C1, R2 in Figure 6). In contrast, the entrepreneurs with relatively low political skill (e.g., E2, S1, M2, C2 in Figure 6) failed to use strong ties to reach unconnected key investors or clients. The observations suggest that politically skilled entrepreneurs show a consistent pattern of network mobilization in which they use strong ties as network bridges. We reason that political skill influences the mobilization of social capital through strong ties possibly through several mechanisms. First, as mentioned, politically skilled entrepreneurs tend to develop and maintain a stable core network by developing strong bonding with key contacts for long durations. Second, politically skilled entrepreneurs tend to be more competent in the four dimensions of political skill, particularly in social astuteness and networking ability. They are better at using social ties for achieving desirable outcomes. For important business tasks and decisions, strong ties are better than weak ties for exerting influence. Thus, politically skilled entrepreneurs are more likely to use strong ties to reach and influence key people who may be outside their personal networks but are important for achieving business objectives. Thus we propose that politically skilled entrepreneurs are better at using strong ties as network bridges to obtain influence and referrals for reaching clients or investors. Figure 7 depicts the process.

P1’s example suggests the instrumental role of political skill in entrepreneurs’ use of strong ties as network bridges, and also suggests the important role of political skill in strategic or mindful construction of favourable social networks. That is, politically skilled entrepreneurs are better at managing their networks and positioning themselves favour- ably for achieving their desirable venture performance. We thus propose:

Proposition 4: Given the same level of accessible social capital, politically skilled entrepreneurs will better use strong ties as network bridges to achieve desirable venture performance than will politically unskilled entrepreneurs.

Mobilization of Social Capital