A network view of entrepreneurship

Here is a definition of entrepreneurship that I came across in another one of Mark Granovetter's articles called The Impact of Social Structure on Economic Outcomes. He writes:

Schumpeter defined entrepreneurship as the creation of new opportunities by pulling together previously unconnected resources for a new economic purpose.

Granovetter goes on to say:

One reason resources may be unconnected is that they reside in separated networks of individuals or transactions. Thus, the actor who sits astride structural holes in networks (as described in Burt, 1992) is well placed to innovate. The Norwegian anthropologist Fredrik Barth (1967) paid special attention to situations where goods traded against one another only in restricted circuits of exchange. He defined “entrepreneurship” as the ability to derive profit from breaching such previously separated spheres of exchange.

Schumpeter's is an interesting definition and now ranks as the one I like best. Most of the other definitions of entrepreneurship I have seen approach it from the point of view of the outcome (new value created through product innovation etc.) rather than the process of network reconfiguration. The process point of view is more generalizable though because most new businesses are not all that innovative in product and fail many other definitions.

Links back to my post on more connected women being more successful..

The Strength of Weak Ties

I have been thinking a lot about how to understand poverty from the point of view of the properties of the social network. In this context, I thought I would share with you a very important paper by sociologist Mark Granovetter written in 1973 called ‘The Strength of Weak Ties’ which he has more recently revisited in a new paper called ‘The Strength of Weak Ties: A Network Theory Revisited’. Here is an excerpt:

.....individuals with few weak ties will be deprived of information from distant parts of the social system and will be confined to the provincial news and views of their close friends. This deprivation will not only insulate them from the latest ideas and fashions but may put them in a disadvantaged position in the labor market, where advancement can depend, as I have documented elsewhere (1974), on knowing about appropriate job openings at just the right time. Furthermore, such individuals may be difficult to organize or integrate into political movements of any kind, since membership in movements or goal-oriented organizations typically results from being recruited by friends. While members of one or two cliques may be efficiently recruited, the problem is that, without weak ties, any momentum generated in this way does not spread beyond the clique. As a result, most of the population will be untouched. The macroscopic side of this communications argument is that social systems lacking in weak ties will be fragmented and incoherent. New ideas will spread slowly, scientific endeavors will be handicapped, and subgroups separated by race, ethnicity, geography, or other characteristics will have difficulty reaching a modus Vivendi.

I share this because villages, which are typically poor by nature, are generally insular, tending to rely much more on strong ties with very few weak ties outside their village. Given this, one strategy Madura takes as an organization is to bring in products, services and events that foster ties across villages and to the urban economy. This may all sound like common sense but what is surprising, if you get into the models and workings of networks, is just how profound the consequences of a few weak ties can be. (I've spent the last five years thinking about this mostly in the context of the brain and it is interesting to note that the cerebral cortex, the outer layer of the brain where all the high level thinking gets done, is characterized largely by weak connections).