New Firms’ Social Networking And Perofrmance

It is widely recognized by both theorists and practitioners that social networksplay a critical role in entrepreneurship as well as new firms’ growth. Thus,entrepreneurs are all actively involved in building and maintaining their socialnetworks at both individual and organizational levels. However, since different newfirms do vary in their social networking,“how to build” and “what to build” are twointeresting and intriguing questions to be answered in the process. In order to exploredifferences in new firms’ social networking and consequences of such differences,this research focuses on this special entrepreneurial activity at the organizational level,and portraits essential characteristics of this process by borrowing and contextualizingthe special perspectives of efficiency and effectiveness. With143valid questionnairesanswered by Chinese entrepreneurs, the research empirically examines how newfirms’ social networking influences their performance and further explorescontingencies and boundary conditions of this mechanism by considering themoderation of important environmental factors.Four primary conclusions are drawn from this empirical study:First, new firms’ social networking and its major characteristics exert significantinfluence on their performance and growth. Through efficient and effective socialnetworking, new firms, which are greatly limited by the liability of newness andsmallness, manage to assemble precious external resources that are essential to theirsurvival and growth. High networking efficiency implies that new firms are able toestablish their primary social networks at relatively lower cost and faster pace, whichmeans they can get ready with required resources when good opportunities come.High networking effectiveness implies that new firms’ organizational networksinclude relatively more ties, especially close ties with frequent interactions and tieswith higher status and richer resources.Second, though closely related, social networking efficiency and effectivenessare different in influencing new firms’ performance. While the ideal state of socialnetworking is to achieve high efficiency and high effectiveness at the same time, new firms usually find it difficult to reach the ideal state and have to make a choicebetween the two. Vertical comparisons show that, social networking effectiveness iseven more influential in infant firms than in Go-Go firms, which means that the greatinfluence of social networking effectiveness on new firms’ performance is weakenedwith the progress of firms’ growth stage. Horizontal comparisons show that, amonginfant firms, social networking effectiveness is more influential than networkingefficiency, while among Go-Go firms, the former is less influential than the latter.Such differences enlighten new firms at different stages to make different choices intheir social networking.Third, trust climate that new firms are situated in positively moderates therelationship between new firms’ social networking and their performance. Asfoundation of inter-organizational trust, favorable trust climate helps stimulate newfirms’ better performance with social networking and especially promote the positiveinfluence of networking effectiveness. Furthermore, Favorable trust climateaccelerates interactions between new firms and their networking partners, reducesopportunistic behaviors and cooperative risks, promotes trust accumulation amongcooperative organizations, motivates them to achieve win-win situation incooperation, and makes the transformation of common relation into close relationmore easily. At the same time, in better trust climate, partners with higher status andmore accesses to resources will reduce their doubts about new firms, which enablesthem to cooperate more closely and offer critical support more willingly.Fourth, marketization, which best reflects local market environment, moderatesthe relationship between new firms’ social networking and their performance, amongwhich the development of local product market as well as local factor marketsignificantly moderates the influential mechanism of networking input andeffectiveness. The rapid progress of marketization is an essential characteristic ofChina’s transforming market environment. New firms’ social networking influencestheir performance through two different paths: the market path, which follows andworks with formal market rules, and the non-market path, which penetrates into andgoes against formal market mechanism. When local marketization negativelymoderates social networking’s influence on new firms’ performance, it mainly weakens influence from non-market path. On the contrary, the influence ofnetworking effectiveness from the market path is further strengthened by thedevelopment of local factor market. Thus, new firms in China’s transforming marketenvironment must reduce their dependence on social networks’ influence from thenon-market path and make best use of the positive influence from the market path byadjusting networking styles and networking structures.The major contributions of this research to the study of entrepreneurial networksare concluded in the following three aspects:First, while previous studies have largely ignored the process of new firms’social networking, or simply described it with scattered varibles and dimensions, thisstudy depicts and describes essential characteristics of new firms’ social networkingin a systematic and general way by borrowing and contextualizing the specialperspectives of efficiency and effectiveness. Networking efficiency focuses on hownew firms construct their social networks and places special emphasis on the rightmethods exhibited in input and speed, and networking effectiveness concentrates onwhat social networks new firms should build and attaches great importance on theright network, which is mainly exhibited in structure and content of the network.Second, this research explores the relationship between new firms’ socialnetworking and their performance from the contextualized perspectives of efficiencyand effectiveness, and thus greatly enriches previous discussions about the linkbetween entrepreneurial networks and new firms’ growth. After contextualizing thetwo borrowed perspectives and portraying new firms’ social networking in a moresystematic way, this paper discusses and compares how networking efficiency andeffectiveness influence new firms’ performance differently. By doing so, it not onlymakes up for the neglect of organizational networks and networking process inprevious studies, but also offers a more in-depth understanding of the relationshipbetween entrepreneurial networks and new firms’ performance. Comparisons betweenthe two aspects as well as further discussions about the moderation of trust climateand maketization serve to clarify boundary conditions of the focused influentialmechanisms, which also pushes forward studies on entrepreneurial networks.Third, this research discusses contingencies and boundary conditions of the relationship between new firms’ social networking and their performance byconsidering the moderation of China’s transforming market environment, whichgreatly promotes entrepreneurship studies in the special context. Since the reform andopening-up policy, China has been experiencing remarkable transformation fromplanning economy to market economy, and one of the most prominent characteristicsin China’ market environment is the rapid and eneven progress of marketization indifferent regions. From the perspectives of efficiency and effectiveness, the researchillustrates the moderation of regional marketization on the link between new firms’social networking and performance. Results show that, regional marketization,especially development of regional product market and regional factor marketsignificantly moderate the focused relationship. Such a bold and innovative attemptenriches entrepreneurship studies set in Chinese context and points out directions forfurther work.This dissertation is divided into six chapters, and the basic structure is as follows:Chapter1briefly introduces research background, research questions, methods, aswell as theoretical framework of the current research. Chapter2reviews previousstudies related to social networks, entrepreneurial networks as well as efficiency andeffectiveness. Chapter3first contextualizes and defines new firms’ social networkingefficiency and effectiveness, and then presents a series of hypotheses on therelationship between new firms’ social networking and performance as well ascontigencies and boundary conditions of their link. Chapter4describes researchmethods employed in the current research, including research design, data collectionand analytical techniques. Chapter5first reports and explains the results of empricialanalyses, which tests hypotheses proposed in chapter3. Finally, the last chaptersummarizes major findings, draws conclusions of the research, pointes out possibleinnovation, and also points out directions of further studies by objectively analyzinglimitations of this research.