Converting Ideas into Value
Edited by Claudio Petti
Chapter 5: The Locus of Innovation in Small and Medium-sized Firms: The Importance of Social Capital and Networking in Innovative Entrepreneurship
5. The locus of innovation in small and medium-sized firms: the importance of social capital and networking in innovative entrepreneurship Willem Hulsink, Tom Elfring and Wouter Stam INTRODUCTION The economist Giovanni Dosi (1988, p. 1132) made the point that innovation is primarily a process built on the activation of the specific internal capabilities, cumulative routines and implicit or tacit knowledge of established corporations: ‘one needs to have substantial in-house capacity in order to recognise, evaluate, negotiate, and finally adapt the technology potentially available from others.’ The driving forces behind innovation in these larger firms are internal employees and inputs from R&D, manufacturing or sales units and so on. Others have stressed the mobilization of external resources from the companies’ environment, such as direct or indirect links with leading knowledge institutions, dedicated suppliers, customers and so on. Oerlemans et al. (1998) have argued that, in order to explain innovative performance, both internal and external resources need to be included. Entrepreneurial firms suffering from strong internal resource constraints or competency gaps may benefit from external linkages with technology partners, investors and/or service providers, acting as real complementors. Similarly, Lee et al. (2001) argued that networking with external parties providing complementary resources contributes to a further accumulation of internal capabilities. In this chapter we follow their advice and attempt to answer the following question: Which ties and network positions matter when it comes to complementing internal competences in order to be innovative? In other words, we investigate the role networks play in...
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