My PP deck for a session I run on social networks and entrepreneurship for the Wisconsin Entrepreneurship Bootcamp (WEB).

1. Social Networks
&
Social Capital
WEB Presentation
Mason A. Carpenter
Mason A. Carpenter

2. Networking Like Obama?
Gogo Erekosima, Innovate Africa Project Mason A. Carpenter

3. Outline
• Some definitions
• Context
• Research
• Assess
• Going forward
Mason A. Carpenter

4. Outline
• Some definitions
• Context
• Research
• Assess
• Going forward
Mason A. Carpenter

5. Definitions
• A social network is a social structure made
of nodes (which are generally individuals
or organizations) that that are connected
together by ties.
• Social capital is the resources—such as
ideas, information, money, and trust—that
you are able to access through your social
network.
Mason A. Carpenter

6. Definitions
• A broker is someone who connects (bridges) different
subgroups in a network; subgroups can be functions,
departments, divisions, locations, and any other dividing
characteristic (age, gender, and tenure for instance)
• A connector is someone whom others consult frequently
for information, resources, expertise, or decision-making
help in the network.
• A super connector is someone who makes a
disproportionate number of connections, or provides a
bridge between otherwise unconnected, large networks.
Mason A. Carpenter

7. Definitions
• Comrade – Trusted member of your
professional network that is closest to you
and who can speak honestly about your
goals. This circle of individuals is usually
around 7.
• Colleague – Member of your inner ring of
up to 150 people.
• Contact – Your entire network (essentially
the phone book!)
www.upmo.com Mason A. Carpenter

8. Brokers
Connectors or super connectors
Direction of resource flow
Mason A. Carpenter

9. The org chart…
Ego & Whole Networks
Networks…how work actually gets done
Mason A. Carpenter

10. Outline
• Some definitions
• Context
• Research
• Assess
• Going forward
Mason A. Carpenter

11. Our Predispositions
• Networks aren’t manageable
• = Networking
• A time sink
• Risky
• External (like Facebook)
• “Informal”
Mason A. Carpenter

12. Rare?
“If everyone had
super powers, there
would be no super
heroes.” Syndrome from
Disney’s The Incredibles
Mason A. Carpenter

13. Rare?
• Nationally, more American’s are bowling
than ever before, but individual play has
largely supplanted team play (Putnam, 2000)
• From 1985-2004, the percentage of
individuals in businesses who identified a
co-worker as a close confidant in their
discussion networks declined from 48% to
30% (Kacperczyk, Sanchez-Burks, & Baker, U Michigan working paper 2009)
Mason A. Carpenter

14. Who you know, or what you know?
• Wh o
y o u
k n o w,
d e t e r m
Mason A. Carpenter

15. Pipes vs. Ties
Mason A. Carpenter

16. Context - Summary
• Our biases and predispositions
• Social networks are becoming
diffuse
• Who you know  What you know
• Pipes and ties
Mason A. Carpenter

17. Outline
• Some definitions
• Context
• Research
• Assess
• Going forward
Mason A. Carpenter

18. Research
• Psychology & Sociology
• Management & Strategy
• Finance
• Cross Cultural
Mason A. Carpenter

19. Psychology & Sociology
• Milgram’s “Small Worlds” (PT 1967)
• Granovetter’s “Getting a Job” (1974)
• In a large electronics company, managerial
compensation, positive performance
evaluations, promotions, and good ideas are
disproportionally in the hands of people whose
social networks span structural holes (Burt, AJS 2004)
• Among managers, bankers, and analysts, social
capital resources are dramatically concentrated
in the immediate network around a person (Burt,
AMJ 2007)
Mason A. Carpenter

20. Management & Strategy
• Nature of network ties affects how well board
directors perceive their ability to contribute to
and monitor firm strategy (Carpenter & Westphal, AMJ 2001)
• CEO paid more and more strongly linked to firm
performance when other social network
characteristics were present (Carpenter, Sanders &
Gregersen, AMJ 2001)
• Non-exec managers paid more when
background plugged a strategic network need
(Carpenter & Wade, AMJ 2002)
Mason A. Carpenter

21. Management & Strategy
• Search-transfer paradox. Weak ties promote
knowledge of opportunities (information search),
but strong ties are needed to access and
transfer the actual knowledge and related
technology (the transfer issue) (Hansen, ASQ 1999)
• Super connectors in science – a
disproportionate number of inventions are
spawned by a select few scientists; this
phenomenon is growing stronger, and such
scientists are increasingly mobile across
organizations and industries (and despite non-
compete clauses) (Flemming & Marx, SMR 2006)
Mason A. Carpenter

22. Finance
• Geographically proximate stock analysts
are more accurate than other analysts (Malloy,
JoF 2005)
• Mutual fund portfolio managers place
bigger bets and yield greater returns from
firms they have social network ties to (Cohen,
Frazzini, & Malloy, JPE 2008)
• Analysts outperform on their stock
recommendations when they have social
network ties to a focal firm (Cohen, Frazzini, & Malloy, HBS
working paper 2008)
Mason A. Carpenter

23. National culture
• National culture and social networking
– Not extensive research on differences
– Nationality does not appear to excessively
constrain entrepreneurs
– Hofstede’s cultural dimensions of power
distance, individualism/collectivism, and
masculinity are relevant
– http://www.geert-hofstede.com/
G. Hofstede and R. R. McCrae Personality and Culture
Revisited: Linking Traits and Dimensions of Culture Cross-
Cultural Research, February 1, 2004; 38(1): 52 - 88.
Mason A. Carpenter

24. National culture
• Individualistic and non-hierarchical
societies are more inventive than other
societies (global patent data) (Shane, JBV, 1992).
• Knowing someone who has started a
business recently, across the world, has a
significant impact on entrepreneurship
participation. This relationship is strongest
in low power distance, masculine national
cultures (comparing 35 countries, 5 years)
(Klyver, Hindle, & Schøtt, SSRN, 2007).
Mason A. Carpenter

25. Overarching Conclusion
• Social networks and social capital are key
inputs into value creation and
entrepreneurship
• Weak ties most valuable to access and
disseminate knowledge (information
search)
• Strong ties most valuable to transfer
knowledge and access resources
(information/resource transfer)
• National culture can play a role
Mason A. Carpenter

26. Outline
• Some definitions
• Context
• Research
• Assess
• Going forward
Mason A. Carpenter

27. Data and methods…..
Generic Characteristics
DENSITY SIZE
TOTAL EMBA Spring 08
Variable Obs Median Mean Std. Dev. Min Max
# of links 30 16 16 6 7 24
Very Close % 30 30% 34% 15% 14% 70%
Network Density % 30 45% 45% 16% 20% 86%
Senior % 30 46% 46% 21% 4% 93%
Peer% 30 24% 28% 14% 7% 63%
Junior % 30 20% 23% 17% 0% 60%
Different Area% 30 40% 46% 26% 0% 94%
Different Unit % 30 30% 33% 21% 0% 88%
Different Firm% 30 46% 40% 21% 0% 76%
Same Gender % 30 69% 63% 22% 14% 100%
Same Race % 30 93% 85% 28% 0% 100%
Same Nationality % 30 100% 90% 26% 0% 100%
Other Characteristics?
Weak v.s. Strong
_______ ________ Connectors
Centrality
_______ Mason A. Carpenter

28. Outline
• Some definitions
• Context
• Research
• Assess
• Going forward
Mason A. Carpenter

29. Going Forward
• Reasonable to seek a balance between working and networking
• Assess your social network IQ
– Does the word network make you queasy?
– Take a 20-item survey (see Appendix)
– UpMo Job Readyness Evaluator (www.upmo.com)
• Assess your own network
– Gladwell’s list of names (see Appendix)
– Grid (link to survey in Appendix)
– Personal, operational, strategic
• Assess your group’s network and networking
– Requires different skill sets to excel
– Bridging and brokerage skills
– Different mindset
– Different reward structure
• Give, give, give
"Worry not that no one knows you,
seek to be worth knowing.“ Confucius Mason A. Carpenter

30. Further Reading
• Wayne Baker (2000). Achieving Success Through Social
Capital. Jossey-Bass.
• Ron Burt (1992). Structural Holes. HBS.
• Ron Burt (2009 – in press). Neighbor Networks. Oxford.
• Mason Carpenter (2009). An Executive’s Primer on the
Strategy of Social Networks. BEP.
• Daniel Goleman (2006). Social Intelligence. Bantam.
• Martin Kilduff & Wenpen Tsai (2004). Social Networks and
Organizations. Sage.
Thank you! Mason A. Carpenter

31. Appendix
The following page has a 20-item survey on your attitude toward networks.
Simply score yourself on a scale of 1 (disagree), 3 (ambivalent), or 5 (strongly agree),
and sum your scores.
A grid-based Ego network survey is available under “My Bookshelf” heading”
http://research3.bus.wisc.edu/course/view.php?id=139
Mason A. Carpenter

32. Appendix
Mason A. Carpenter

33. From Malcolm Gladwell’s Tipping Point (pp. 39-40). Go through this random list of names
and give yourself 1 point for everyone you know with a given last name. For instance, if
you know three Johnsons, you get three points. What is your total? Out of 400 people,
Gladwell found 5% scored below 20, 3% over 90, 1% over 100, and a range of 16-108
(2-95 in a sample of college students).
Mason A. Carpenter