Social Capital and Business Entrepreneurship: A Study of Coastal Karnataka

Abstract

Social capital is perhaps the biggest growth area in entrepreneurship research. Scholarly studies have been gone into different aspects of entrepreneurship within the framework of social capital: entrepreneur (Anderson & Jack, 2002); organisation (Nahapeit and Ghoshal, 1998); firm regional (Westlund, 2006); family business (Greve & Salaf, 2003; Anderson & Miller, 2003); national (Kown & Arenius, 2010); and even social liabilities (Weber & Weber, 2009). Quite often, held that entrepreneurs' social networks are also strongly affected by their social capital, which is often defined either as (1) the ability of individuals to extract benefits from their social structures, networks, and memberships, or (2) these benefits themselves - the advantages individuals gain from their relationships with others (Nahapiet and Ghoshal,1998). In nutshell, the concept of social capital is an embodiment of entrepreneurial strategy to use of hard resources lying beneath social relations to increase entrepreneurial productivity. In fact, resource acquisition and dispensation within the network is an existential challenge for every entrepreneur. Normally, right from the moment an entrepreneur perceives a business opportunity that can be converted into bankable project, he consults his 'personal network' i.e. 'inner circle' consisting of family members (parents and siblings, relatives: blood and marriage) and 'close friends' (drawn mainly from friends-at-work or informal work connections, religious or caste and community platforms, common interest affiliations, affinity of neighbourhood and others). Beyond information needs, from this 'informal source', one may draw functional inputs as well. Once the enterprise is launched (or in the launching process) he develops 'business contacts' with professional advisors (bank managers, solicitors, tax consultants and others) and 'commercial relationships' with customers, suppliers, employees and others which in aggregate give rise to 'business network' i.e. 'outer circle' (Ramachandran & Ramnarayan, 1993). The purpose of this paper is to understand the social capital dynamics of a select group of entrepreneurs drawn from diverse sectors in Udupi district of Coastal Karnataka. The paper begins with a review of extensive literature on social capital that offers a platform to grasp the social capital in entrepreneurship context. Thereafter, it rolls on to empirical part of study in which in-depth social interactions data is analysed. Findings establish the fact that social capital dynamics creates an economic critical mass that helps small entrepreneurs to flourish against odds. Mainly the 'liabilities of locality' along with 'liabilities of newness' and 'liabilities of smallness' force small entrepreneurs to seek entrepreneurial resources both 'hard and soft' from 'network endowed' and 'network weaved' in entrepreneurial process.