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The key ingredients of schemes fostering entrepreneurs' networks
The document outlines the essential components and benefits of entrepreneurial networks, highlighting their role in motivating entrepreneurs, identifying business opportunities, and facilitating resource acquisition. It discusses characteristics of various types of networks, challenges faced by youth in networking, and presents key policy approaches for building effective networks, such as generic networks, intervention-based networks, specialized networks, and virtual networks. Cases from Italy, Poland, and Ireland illustrate successful initiatives aimed at enhancing entrepreneurial connectivity and support.
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The key ingredients of schemes fostering entrepreneurs' networks
- 1. THE KEY INGREDIENTSOF SCHEMES FOSTERING ENTREPRENEURS' NETWORKS David Halabisky Economist, Centre for Entrepreneurship, SMEs and Local Development, OECD david.halabisky@oecd.org
- 2. Table of contents 1.What is the role of entrepreneurial networks? 2. What do entrepreneurial networks look like? 3. What are the key issues in building entrepreneurial networks? 4. Why are networks important for youth? 5. What are the main policy approaches?
- 3. What is therole of entrepreneurial networks? 1. Acquiring motivation – Shape entrepreneurial motivations through the norms of the local environment. – Develop perceived desirability and feasibility through network interactions. 2. Opportunity perception – Acquire personalised information to generate business ideas through personal, educational and professional experience. 3. Idea validation – Test ideas through discussions with network contacts. 4. Resource identification – Identify and access resources prior to business launch (e.g. partners, financing). 5. Negotiating to get into business – Build relationships to secure resources, customers, employees, suppliers and distributors. 6. Business survival and growth – Increase pool of resources to grow a businesses (e.g. advice, ideas, new markets).
- 4. What do entrepreneurialnetworks look like? Entrepreneur Private Network Professional Network International Network Work Network Market Network Spouse Parents Other family Friends Suppliers Customers CompetitorsCollaborators Business mentors PartnersColleagues Contacts abroad Contacts from abroad Business advisors ResearchersInvestorsBanksAccountantsLawyers Identity-based network GenderSolidarity Cultural and linguistic commonalities Ethnic affiliation Source: Adapted from Schott and Cheraghi (2012).
- 5. What are thekey characteristics of entrepreneurial networks? 1. The strength of the ties between actors – Strong ties: at least twice per week and considered to be “close”. – Weak ties: less than twice per week, but more than once a year. 2. The degree of formality in the relationships – Informal (“soft”) networks: family, friends and acquaintances. – Formal (“hard”) networks: mediated through established institutions and organisations, (e.g. chambers of commerce, trade associations, social clubs, religious organisations). 3. The purpose and objectives of the network – e.g. support for growth.
- 6. Why do youthhave difficulties building entrepreneurial networks? 1. Youth lack experience in the labour market. 2. Youth have lower levels of entrepreneurship skills. 3. Youth typically have little to offer to networks.
- 7. What are thekey issues in building entrepreneurial networks? 1. Ensure that networks are well-linked with the wider business community. 2. Balance the provision of targeted networking initiatives against the creation of an overabundance of competing networks. 3. Transfer ownership of the network to members.
- 8. What are themain policy approaches? 1. Generic approach: • Bring together entrepreneurs with a common background to build linkages among them, and with the business community. • Use events to facilitate in-person contact, complementing with newsletters, online forums. • Strength: entrepreneurs easily identify with each other, which quickly builds trust among members. • Weakness: given a similar background, members likely have similar challenges in start-ups and cannot help each other.
- 9. Example: Be-Win (Italy) •Target group: Women entrepreneurs. • Description: – Network that provides training, coaching, and conferences. – Includes public and private organisations, including 16 Italian regions and firms belonging to the Enterprise Europe Network. – Annual budget: EUR 172 000. • Results achieved: – Created a network of entrepreneurship mentors, linked into EU network. • Lessons for other initiatives: – Built upon an existing structure. – Leverages European dimension (the Enterprise Europe Network Italia and the European Network of Mentors).
- 10. What are themain policy approaches? 2. Build networks around interventions • Use a support offering as the anchor that brings a network together (e.g. training). • These networks often reinforce targeted business development. • Strength: easy to set up since it is build around an existing grouping mechanism and there is often access to professional supports. • Weakness: these networks are not always sustainable when the binding factor is a short-term training course, for example.
- 11. Example: Mature Entrepreneur(Poland) • Target group: Potential entrepreneurs over the age of 50 • Description: – Training and networking in Gdansk (January 2009-December 2010) – In 2009-10, 60 candidates were selected and divided into 3 groups. – Staged training and financing, with networking. – ESF supported; total budget was EUR 500 000. • Results achieved: – 33 new companies established; all active in 2012, – In 2010, this project received the “European Enterprise Award” (EEA) for “The Best Human Investment” and in 2011, it was awarded first place at the 2011 European Enterprise Awards for “Promoting the Entrepreneurial Spirit”. • Lessons for other initiatives: – Structured support programme that is delivered in stages.
- 12. What are themain policy approaches? 3. Create specialised networks • Build networks to support a specific objective (e.g. business growth). • Meetings and events include workshops and other offerings to support network objectives. • Strength: very valuable for network members as there is a close tie with targeted business development support. • Weakness: can be resource intensive given the integration of business development support and a selective entry process.
- 13. Specialised networks: Goingfor Growth (Ireland) • Target group: Women entrepreneurs. • Description: – Group support, led by experienced women entrepreneurs (Leads). – Group mentoring provides support and “good” peer pressure. – National Forum brings together all of the Leads and participants. – Supported by Enterprise Ireland; ESF and the Department of Justice and Equality. • Results achieved: – Cohort from 2012 (60 participants) increased sales by an average of 13%, created 50 new jobs and 7 started exporting. • Lessons for other initiatives: – Championed by the private sector and supported by the public sector. – Leverages voluntary contribution of entrepreneurs.
- 14. What are themain policy approaches? 4. Develop virtual networks • Online networks eliminate physical distances between entrepreneurs. • As with traditional networks, online networks built on trust and reciprocal relationships. • Strength: flexible, low-cost structures that can potentially deliver many of the benefits of traditional networks. • Weakness: members may not be committed, effectiveness of online networks is unknown.
- 15. Virtual networks: Biiugi(Poland, Denmark and Germany) • Target group: Entrepreneurs and potential entrepreneurs over the age of 50. • Description: – Virtual networking and mentoring tool. – Started out of EU Best Agers Project. – Each member has an online profile that is available for others to see. – 2 levels of membership: basic membership and premium membership. • Results achieved: – Developed an online virtual network. • Lessons for other initiatives: – Developed in phases to ensure take-up.
- 16. Discussion questions 1. Doyou have networking initiatives for youth in your country? How do they work? 2. What are the key considerations when designing networking initiatives for youth?
Editor's Notes
- #4 Acquiring motivation: Shape entrepreneurial motivations through the norms of the local environment. Develop perceived desirability and feasibility through network interactions. Opportunity perception: Acquire personalised information to generate business ideas through personal, educational and professional experience. Idea validation: Test ideas through discussions with network contacts. Resource identification: Identify and access resources (i.e. partners, suppliers, customers, employees, financing, ideas) for business launch and development. Negotiating to get into business: Build relationships to secure resources, customers, employees, suppliers and distributors. Business survival and growth: Access resources to launch and grow a businesses (i.e. including potential partners, suppliers, customers, employees, advice, information and ideas)
- #5 Networks are groups of actors with a relationship or tie that connects them (Hoang and Antoncic, 2003; Nelson, 1988). They are bound by connections based on reciprocity, where network members draw on network resources, as well as contributing to them. Central to this notion is an element of social interaction. While social relationships are important in everyone’s life (Kim and Aldrich, 2005), these interactions are especially important for entrepreneurs because entrepreneurs are a product of their social environment (Jack et al., 2013). Entrepreneurial networks are a source of motivation, ideas, information, advice, business partners, employees and customers. Entrepreneurs’ networks can exist in several environments, including: Private networks, which are composed of spouses, parents, other family and friends; Workplace networks, which are composed of work colleagues, business partners and co-starters and business mentors; Market networks, which are composed of business collaborators, competitors, suppliers and customers; International networks, which are composed of business collaborators, competitors, suppliers and customers from another country and in another country; and, Professional networks, which are composed of business professionals (e.g. lawyers, accountants), financers (e.g. banks, investors) and other sources of information and support (e.g. researchers, business advisory services). Identity-based networks are based on ethnic affiliation, cultural and linguistic commonalities, age and gender, which mobilises certain social groups’ small resources to establish their local, national and transnational networks and businesses (Light and Bonacich, 1988, Portes, 1998; Glover et al., 2000; Flandreau, 2003; Morawska, 2004; Portes and Sensenbrenner, 1993; Waldinger et al., 1990). It is difficult to clearly distinguish between personal and business networks for an entrepreneur. Often there is substantial overlap between these two networks and separating them is rather artificial. Instead, it makes sense to consider the overall social network of the entrepreneur, and examine the nature of each tie within it.
- #6 Strong ties are those actors that entrepreneurs interact with at least twice per week and who are considered to be “close” to the entrepreneur (Granovetter, 1973). Most entrepreneurs tend to have quite small strong tie networks (Martinez and Aldrich 2011), but these actors are willing to do a great deal for each other. Their greater knowledge of one another’s situation enhances the “fit” and relevance of the information, support, services and resources interchanged. Held together by bonds of loyalty, trust and affection, strong ties are typically very important to entrepreneurs who are in the process of setting up a business and have special difficulties in accessing needed inputs for their venture through market mechanisms. One of the drawbacks of a strong tie network is that the actors can be rather homogenous since people have a strong social tendency to group closely together with those who are very much like them. Therefore, these networks can lack diversity in their reach, resources and (shared) perceptions. In contrast, entrepreneurs use weak tie contacts less frequently. Interaction with these contacts occurs less than twice per week, but more than once a year. Weak tie contacts may take the form of instrumental commercial relationships, such as those between supplier and client, as well as between competing firms at the same level in a given value chain. Entrepreneurs typically consider these contacts to be acquaintances (rather than friends), and this lower level of interaction results in lower expected benefits from this relationship. Although weak tie contacts may lack the insight and commitment to perceive and relay positive network outcomes to their entrepreneurial acquaintances, their greater number, and wider diversity, provides an enhanced “reach” into parts of the socio-economic environment not directly accessible by the entrepreneur (Jack, 2005). The formality of networks is also important because it influences how relationships are initiated and managed. Informal (“soft”) networks are comprised of family, friends and acquaintances developed by the individual entrepreneur’s life course. Formal (“hard”) networks are those mediated through established institutions and organisations, such as chambers of commerce, trade associations, local policy initiatives, and alumni associations. Formal networks can also include social groups, such as sport clubs, religious or political bodies. While both informal and formal networks are likely to be important to the entrepreneur (Birley, 1985), formal structures, although often more professional and focused, frequently appear off-putting and bureaucratic to entrepreneurs, particularly if they are geared towards providing business start-up support. For example, entrepreneurs and small business owner managers have a history of shunning and avoiding enterprise and business development agencies (e.g. Birley et al., 1991; Hanna and Walsh, 2002). Formal networks that are brokered through these organisations are found to be less rich than network connections that develop “naturally” (Hanna and Walsh, 2002).
- #7 The principle challenges for youth who are considering business start-up and self-employment area lack of assets, including financial, human and social capital, low credit ratings, and a lack of experience in entrepreneurship and in the labour market more generally (EC-OECD, 2012). One consequence of this lack of capital and experience is that young people have limited networks and often struggle to build legitimacy among financers, suppliers and customers. Central to the challenge that young people face when seeking to build a network is that they have very little to offer to the network. This reduces the likelihood of other entrepreneurs accepting young entrepreneurs into their networks and supporting them since there is little to gain.
- #8 Ensure that networks of entrepreneurs from under-represented and disadvantaged groups are well-linked with the wider business community to maximise the available pool of resources and to minimise the risk of a “group mentality” that reinforces the disadvantage. Balance the provision of targeted networking initiatives against the creation of an overabundance of competing networks. Finally, one of the most important success factors in entrepreneurial networks is that network members demonstrate ownership of the network, which can be achieved by using existing community structures. This is particularly important for public networking supports because they only way to achieve an impact is to ensure that entrepreneurs from under-represented and disadvantaged groups use the resources that are made available to them.
- #9 Public policy initiatives that support the development of networks for entrepreneurs from under-represented and disadvantaged groups often focus on bringing entrepreneurs from a common background together to build linkages among them and with the business community (e.g. Be-Win in Italy, see Policy example 1). The strength of this approach is that the entrepreneurs easily identify with each other given their common background, which quickly builds trust among network members. The downside is that since network members have a similar background, they may not have a lot to offer each other because they likely have similar challenges with respect to their start-ups.
- #10 Target group: Women entrepreneurs. Intervention type: This project provides a network and information portal for women and is a continuation of the project WAI - Women Ambassadors in Italy (http://www.womenambassadors.it). Description: The project was co-funded by the European Commission and co-ordinated by the Union of Chambers of Commerce from Toscana. It involved the construction of a female entrepreneurial network built upon the strong relationship between 32 mentors. These are women with experience in managerial and entrepreneurial fields. There were two ambassadors for each region involved and they were identified through a public selection process or through the preceding project Women Ambassadors in Italy. There are 49 mentees, which are new female entrepreneurs and they were selected through an open competition The focus of the project was the implementation of a training programme at the regional level, consisting of coaching sessions, meetings between mentors and mentees, technical conferences on the market opportunities for firms, on network contracts, web marketing, internationalisation and the means of family-work conciliation. Various public and private bodies, including sixteen Italian regions and firms belonging to the Enterprise Europe Network, participated to the project. The annual cost of the project was of about EUR 172 000, of which EUR 59 000 was covered by the regions and EUR 70 000 originated from EU funds. The remainder of funding came from private donors. Results achieved: The lasting value of the project rests upon (a) the creation of the Italian Network of Mentors, inserted into the wider European network and (b) the portal as a meeting place and a tool at the disposal of all those women in business who want to know each other better, develop potential synergies and co-operation with a view to the growth of their companies. The portal, which records much of the programme’s output, is also a community to discuss issues of common interest. Lessons for other initiatives: The network was built upon a longstanding effort (the WAI) and draws strength from its European dimension (the Enterprise Europe Network Italia and the European Network of Mentors). The portal has also demonstrated to be a useful resource that provided a tangible benefit for network members. For more information, please refer to: http://www.be-win.it.
- #11 Another common approach for public policy is to use networks as a vehicle for delivering training and other business development services. Examples of this approach include Mature Entrepreneur in Poland (see Policy example 2). While this approach also focusses on building a network of entrepreneurs with a similar background, it is much more focussed on delivering targeted business development support than networking initiatives. Policy makers need to exercise caution with this approach because it presupposes that the entrepreneurs need a certain type of support. If the entrepreneurs do not need and/or want this support, they are excluded from the network. Moreover, these networks are not always sustainable when the binding factor is a training course, for example.
- #12 Target group: Potential entrepreneurs over the age of 50. Description: Training and networking developed by the Gdansk Municipal Employment Office Aim was to provide guidance and financial support to individuals aged between 50 and 64 to help them remain attach or to re-enter the labour market through business creation. Participants applied with a 5 minute oral presentation on their business idea. In 2009-10, 60 candidates were selected for the programme and they were divided into 3 groups. Each participant took a 150-hour training programme and had access to experienced professional consultants. Upon completion of the course, participants could apply to receive financial assistance from the programme and 26 participants received this one-time subsidy and income supports for 6 months. The project was supported by the ESF from January 2009 to December 2010. The total budget was EUR 500 000. This project supported the expansion of networks for participants in two respects. First, the 3 groups of participants undertook a long training programme together and got to know each other very well. This provided each with a network of peers that could support and help them. Second, the interaction with professional coaches further increased their networks because each participant could access their knowledge and resources. Results achieved: Mature Entrepreneur fostered the establishment of 33 new companies in the city of Gdansk and in the Gdansk sub-province, which positively influenced the local economy. All of the newly established companies are still active, with some growing so much that further full-time positions were created. In 2010, this project received the “European Enterprise Award” (EEA) for “The Best Human Investment” and in 2011, it was awarded first place at the 2011 European Enterprise Awards for “Promoting the Entrepreneurial Spirit”. Lessons for other initiatives: The strength of the Mature Entrepreneur project is that it is based around a structured support programme that is delivered in stages. Those who move from one stage to the next have more support available to them, increasing their chances of success. One critical success factors that sets this project apart from others is the strict focus on entrepreneurship, whereas other projects (e.g. Older workers, a valuable resource for the labour market in Estonia), which have a very broad labour market focus which typically leads to less measurable outcomes.
- #14 Description: Going for Growth supports women entrepreneurs by inspiring them to be more ambitious. Support is provided through mentoring, collaborative peer relationships and networking events. Approach: Going for Growth supports women entrepreneurs in taking a strategic focus to the development of their businesses by focusing on growth goals and time-defined milestones. The initiative was designed and developed by an entrepreneur and it leverages volunteer contributions from successful entrepreneurs. It is supported by Enterprise Ireland and the Equality for Women Measure (2010-2013), which is funded by the European Social Fund and the Department of Justice and Equality. In 2012 a new sponsor, Bank of Ireland, became involved in the project. The principal support mechanism is group support, where small groups of entrepreneurs meet monthly for six months. These group meetings are facilitated by volunteer “Leads” who are successful women entrepreneurs. The Leads share their experience with their group, nurture a culture of trust and collaboration and facilitate the sharing of experiences and challenges. The group mentoring provides support and “good” peer pressure and inspires women entrepreneurs to achieve their goals. The project also includes a National Forum that brings together all of the Leads and participants for developmental workshops and to grow their networks. Going for Growth also champions positive media profiling of women entrepreneurs to promote them as capable of achieving growth. Impact: The most recent six month cycle (i.e. the fourth cycle) had 60 participants at a cost of EUR 1 500 per participant. Over this period, the participants increased their sales by an average of 13%, created 50 new jobs (combined) and 7 participants became exporters for the first time. While there is no evidence to link this growth solely to the initiative, participant surveys show that more than 90% considered their participation to be valuable. The Leads also benefit from the project and have formed a roundtable group for themselves to support and drive growth in their own businesses. Considerations for success: The key element of this initiative is the manner in which it is led and championed by the private sector and supported by the public sector. The continual focus on personal and business development supports both the entrepreneur and the business in achieving their goals. The calibre of the volunteer Leads underpins the success of the initiative and the fact that the groups are composed exclusively of women contributes to a full engagement by the participants. Leveraging the voluntary contribution of successful entrepreneurs contributes to the relatively low cost of running the initiative.
- #15 Online networks eliminate physical distances between entrepreneurs. Although face-to-face contact in online networks is not possible, online networks share some of the key characteristics of traditional networks. This includes, for example, connections built on trust and reciprocal relationships. The effectiveness of online networks is unknown but these low-cost structures can potentially deliver many of the benefits of traditional networks.
- #16 Target group: Prospective and practicing entrepreneurs that are over the age of 50. Country: Germany Intervention type: Virtual networking and mentoring tool. Objectives: To help older entrepreneurs grow their networks and develop professional relationships and new projects. Entry requirements: There are no specific entry requirements. Programme length: The pilot project was launched in June 2012. Description: This online platform links together experienced older entrepreneurs and less experienced or prospective older entrepreneurs. Each member has an online profile that is available for others to see and members with a basic membership can make contact with each other and start professional relationships. Members with a premium membership have more online services available to them such as access to newsletters, more online communication opportunities (e.g. live chatting), and have more options to build networks using the platform. Both memberships are free of charge during the pilot phase. Partners: Biiugi is part of the Best Agers project. More information available online http://www.biiugi.eu