Chapter 5: Networks: A Theory of Connectivity and Interdependence
The concept of a network is common to both the social and natural sciences. The use of the network concept in entrepreneurship research therefore places entrepreneurship studies in a wider context. There are many different types of network, however. This chapter sets out the main dimensions of network structure, and explains the factors that determine the structure of any given type of network. It considers social networks, commercial networks involving trade and investment, and local business networks, such as those found in industrial districts. It is argued that the structure of a network can usually be understood as the efficient solution to a coordination problem. As a result, explanations can be developed of why different network structures emerge in different situations. To develop explanations along these lines, however, the conventions on which network research is currently based will need to be changed. 5.1 NETWORKS AS AN INTERDISCIPLINARY SUBJECT Networks play a crucial role in the theory of entrepreneurship. As explained in Chapter 1, networks are used by entrepreneurs to synthesize information from different sources in order to discover profit opportunities. Once an opportunity has been discovered, networks can help entrepreneurs make contact with prospective financial backers. With financial backing, entrepreneurs can set up trading networks on their own initiative. New shops and factories act as hubs which intermediate new linkages and redirect trade into novel channels. Trade itself utilizes transport and communication networks to deliver products to customers; these networks may themselves have been created through infrastructure investments made by...
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