Entrepreneurial Networks

The definition of a "network" being a system of interconnected components, an "entrepreneurial network" is an association of entrepreneurs organized, formally or informally, with the object of increasing the effectiveness of the members' business activities. Such networks extend from very informal mutual support arrangements on up to national and international membership organizations based on formal rules, substantial membership fees, and often employing professional staffs. The phrase includes business owners meeting for breakfast once a week to trade experiences, problems, opportunities, woes, and news all the way to international industry associations that link such major activities as petroleum, steel, communications, and many other major branches of finance and of industry. Typical examples are chambers of commerce, associations of racially or ethnically similar business owners, Rotary Clubs, alumni associations focused on business development, community based business clubs, industry associations, investment clubs with thematic aims, some venture capital organizations, and SCORE (Service Corps of Retired Executives) sponsored by the Small Business Administration. In one sense OPEC (Organization of Oil Exporting Countries) may be considered an entrepreneurial network as well. What these organizational types have in common is that their members are either in business, wish to be in business, have been in business, and/or are interested in fostering a healthy business/industrial environment.

A study published by the National Commission on Entrepreneurship (NCOE), an organization populated by entrepreneurs and funded by the Kauffman Center for Entrepreneurial Leadership, posed the following question in designing the parameters of its study: "What makes a community entrepreneurial?" Why, for example, do some locales seem to generate a vibrant and exciting business environment while other places, with very similar demographic profiles, struggle to generate new businesses and to keep those that get started? What the NCOE discovered confirmed conventional wisdom on the subject: the presence of universities, access to venture capital, and good physical infrastructures are all keys to a vibrant economy. But the NCOE found one other and important ingredient that differentiated "entrepreneurial" from other areas. NCOE's study, entitled Building Entrepreneurial Networks summarized its findings this way: "Successful regions are not just relying on hard assets like schools, buildings, and capital. Soft, people-based assets matter, and they matter a lot. In particular, we found that entrepreneurs thrive in regions where they can effectively network with other entrepreneurs…. Regardless of their stated purpose, networks provide entrepreneurs with critical opportunities for peer learning. These learning opportunities matter as communities with more extensive peer networks in place tend to enjoy higher levels of both entrepreneurial activity and economic growth."

Business, trade, and craft associations, broadly speaking, have been around as long as business has existed. They were not only common but government-monitored institutions during the Roman empire and, in the form of guilds, represented one of the more important organizational forms of mediaeval business activity, serving later as launching pads for the development of major sectors in the industrial age. The phrase "entrepreneurial network," however, is of recent origin and represents yet another form of association reflecting the popularity of "networking," a subject discussed in detail elsewhere in this work under that name. The emphasis in what now follows, particularly the examples cited, will be on the newly emerging form.

BENEFITS OF NETWORKING FOR THE ENTREPRENEUR

Commercial exchange is, by definition, a social activity. It involves exchange between at least two people. "No man is an island, entire of itself," as John Donne said. Nor is a business self-sufficient. A business is a social creature, "a part of the main." A company's reach, power, and effectiveness grows in proportion to is connectedness. Start-up firms often begin with a limited network. For the entrepreneur starting a business, entrepreneurial networks offer genuine benefits. Foremost among these are opportunities to build relationships. Such relations need not necessarily be with people narrowly linked to business. Any and all relationships help—but those with peers are more valuable. By cultivating membership in a peer network, a new entrepreneur can learn a great deal from others daily facing the same problems. Networking of this sort can also provide a new business owner with the chance to get a first hand look at potential service providers and/or help to combat the sense of isolation that often comes with starting a company.

As a business develops, the challenges it faces also tend to grow. The founder of a growing business is likely to be looking for different benefits from networking than he or she did during the start-up phase. The social and peer-to-peer advisory aspects of an entrepreneurial network often become secondary to more strategic networking objectives. The new objectives may be to build business alliances, to find new investors and/or partners, to get first hand reviews of potential service providers, or to search for somebody with a particular area of expertise who can be hired.

INFORMAL NETWORKS

Entrepreneurial networks start with the entrepreneur's established web of relationships—with family and with friends. Religious, avocational, and social linkages belong to this category from the outset. People in such groups can provide an unexpected source of information or contacts that may be helpful in some aspect of a business's development. The informal aspects of such networks often mean they are taken for granted; their value as a network is not appreciated; in most cases, consequently, they're not exploited to the full. Although nobody much likes a person who has a one-track mind and who attempts to "do business" in inappropriate venues, it is useful to make informal networks work for a business purpose by simply being informative about one's business needs and open to the suggestions and the expertise of others.

FORMAL NETWORKS

Formal entrepreneurial networks are associations of businesses—or functions within them, like presidents' or purchasing managers' groups. Associations organized around industry groupings or types of businesses are one form of formal networking. A new business owner can gain legitimacy by joining such groups even before his or her venture has gained enough traction to become a factor on the competitive landscape. There are, of course, limits to how freely one can interact with those with whom one must compete. Nonetheless, associations of this type are a useful source of information about regulatory matter that impact a business, technical developments within the field, effective methods of communication or administration, and frequently associations also pool competitive information and share the results; thus associations hire staffs that collect but keep confidential sales data but publish overall market size information. Formal networks are often an effective means of reaching out to the public and of influencing government policy.

Chambers of commerce are a widespread and universally accepted form of "formal" entrepreneurial networking. Chambers, of course, belong to the traditional forms of business associations, but they offer modern services much valued by the same entrepreneurs who join other networks. These services include, for instance, attractively priced health insurance that a chamber negotiates with a provider under which the chamber itself is the "umbrella" organization providing a large number of "employees" to cover. Most chambers also offer training opportunities through seminars and lecture series, and virtually all offer multiple venues for contact, referral services, and technical advice for the fledgling member.

The Alternative Board® is a business established in 1990 with the objective of facilitating monthly peer advisory boards comprised of entrepreneurs and high level managers who run non-competing businesses. The Alternative Board® (TAB) is funded by membership fees based on the annual sales of each participating business. The voluntary boards TAB organizes consist of presidents, CEOs, owners, and managing partners of privately owned businesses. The boards—with up to 10 but no more than 12 members—meet monthly under the guidance of a TAB certified facilitator or coach. This cooperative venture is an example of a very formal entrepreneurial network in which business owners join together to assist one another in the development of their businesses—with an understanding that each will benefit from the cooperative endeavor.

SpeedNetworking™ is a service business developed to assist entrepreneurs in the job of making connections with the "larger whole." According to the company's Web site what they offer is the following: "SpeedNewtorking.com is Web site are SpeedNetworking™ events that provide a very effective and fun way of generating new business, ideas, job leads and ultimately providing participants greater professional opportunities in person."

The desire to interact and form connections is often greater than are the opportunities or time available to do so. Consequently, there is a business opportunity inherent in meeting this desire and some entrepreneurial types have taken advantage of the need and formed businesses to try and fill that need. SpeedNetworking™ is only one such business. Another is LinkedIn.com, and the spread of the Internet has been an opportunity for such networking facilitation businesses.

Jodi Cohen, writing in the Chicago Tribune, described a SpeedNetworking™ event this way: "It works like this: Following a schedule, participants sit across from each other and have five minutes to swap information about their businesses. When five minutes are up, the organizer shouts 'rotate, rotate, rotate,' and one of the guests switches seats. An hour later, each person will have made 10 contacts—and maybe plans to meet later for coffee." SpeedNetworking™ events include the services of a networking "expert" who provides advice to participants. Such advice includes: 1) Ask the right questions, "What do you need?" instead of "What do you do?" 2) Develop a short, concise, and interesting description of your business, service, or product. 3) Most importantly, follow up after the event-stay in touch.

Business associations based on racial, ethnic and other similar common characteristics of its members are also types of entrepreneurial networks. Associations of this type include the U.S. Hispanic Chamber of Commerce, the National Association of Women Business Owners, the National Association of Minority Contractors, the National Black Chamber of Commerce, and the National Indian Business Association to name but a few. Like industry or business sector associations, these organizations offer members a variety of benefits as well as the opportunity to network with other business owners in a cordial and non-competitive environment.

Trade, business, and commercial organizations represent nearly 17 percent of all not-for-profit organizations in the U.S., at least as measured by Thomson Gale's Encyclopedia of Associations (EA). In its most recent edition, EA listed 22,270 major associations of which 3,789 were in the industrial/commercial category. Large entrepreneurial networks are a subset of this total, but the phenomenon, particularly in its more informal manifestation, is very much larger. These networks benefit small business above all, linking them into the greater fabric of American commerce.

see also Angle Investors; Business Incubators; Chambers of Commerce; Mentoring; Networking; Service Corps of Retired Executives

BIBLIOGRAPHY

About SpeedNetworking.com." SpeedNetworking™ Available from http://www.speednetworking.com/AboutUs/17_AboutUs.asp. Retrieved on 13 June 2006.

The Alternative Board®. "History." Available from http://www.tabboards.com/Page-844.htm. Retrieved on 12 June 2006.

"Building Entrepreneurial Networks." National Commission on Entrepreneurship. Available from www.ncoe.org/. December 2001.

Cohen, Jodi S. "Business Networking Goes Broadband: Professionals make new connections in 5-minute intervals." Chicago Tribune. 30 May 2006.

Encyclopedia of Associations. Forty Third Edition. Thomson Gale, 2005.

Hitt, Michael, Duane Ireland, Michael Camp, and Donald Sexton, eds. Strategic Entrepreneurship. Blackwell Publishing, May 2002.

"On-line Business Networking Becomes a Profitable Alternative." PR NewsWire. 3 May 2006.

Rosenfeld, Stuart A. "Networks and Clusters: The Yin and Yang of Rural Development." Paper presented to Conference on Exploring Policy Options for a New Rural America, Federal Reserve Bank of Kansas City. May 2001.

Tanter, Suzanne. "Entrepreneurial Networks Feature at IT Business Conference." The University Record (University of Michigan). 15 November 1999.

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"Women Leading the Way in Business Start-Ups." Business Week Online. 9 March 2006.

                                             Magee, ECDI