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In the modern business environment, entrepreneurial networking and relationship capital have already attracted particular attention. Therefore, this work aims to examine the importance of these concepts.
In general, entrepreneurial networking refers to the formal or informal organisation of entrepreneurs to increase the effectiveness of their businesses activities (Das and Goswami, 2019). Today, it has become specifically essential for new companies, which try to establish relationships with other businesses in their spheres for growth and development (Mitra, 2020). An example of networking for entrepreneurs is various entrepreneur communities, such as Young Entrepreneur Council, allowing sharing ideas. For organisations, networking may refer to strong contacts through online platforms, such as LinkedIn, that bring parties together.
Entrepreneurial networking has multiple advantages first of all, it facilitates the companys access to collective resources (Li, Zubielqui and OConnor, 2015). Moreover, networking provides an early warning system to evaluate potential risks, threats and opportunities (Dodd and Keles, no date). It additionally may be regarded as a source of essential knowledge, support and advice for companies (Engel, Kaandorp and Elfring, 2017).
The concept of entrepreneurial networking is strongly connected with Burts structural holes theory and Marchs theory of decision making (Einar and Ratka, 2017). Both models emphasise the importance of cooperation and sharing to avoid failure as well as explain the potential disadvantage of networking the limited decision making of particular companies. Namely, those dominant parties that bring more individual resources control the market and have more power.
In turn, relationship capital refers to the value of relationships the company or an entrepreneur has with organisations and individuals, including suppliers, attorneys, employees, dealers, intermediaries, interest groups, clients and partners (Prieto and Holgado, 2019). Moreover, it supports the companys reputation, image, intellectual property and brand. With relationship capital, the organisation can maintain internal and external cooperation, strengthen internationalisation processes, generate competitive advantages, facilitate information access, expand the financial resource base and reduce the risk of failure (Zhang and Wang, 2018).
The importance of relationship capital is supported by Werner Felts model expanded by Barney in 1991 (Preetha and Sudhakar, 2015). According to it, the firms competitive advantage is determined by valuable resources and capabilities and solid relationships between customers, employees and community residents.
Reference List
Das, M. and Goswami, N. (2019) Effect of entrepreneurial networks on small firm performance in Kamrup, a district of Assam, Journal of Global Entrepreneurship Research, 9(7), pp. 1-14. Web.
Dodd, S. D. and Keles, J. (no date) Expanding the networks of disadvantaged entrepreneurs. OECD Centre for Entrepreneurship, SMEs and Local Development.
Einar, G. and Ratka, J. (2017) Characteristics of entrepreneurial networking practices through different phases of establishing a novel innovation firm, International Journal of Digital Technology & Economy, 2(2), pp. 67-78.
Engel, Y., Kaandorp, M. and Elfring, T. (2017) Toward a dynamic process model of entrepreneurial networking under uncertainty, Journal of Business Venturing, 32(1), pp. 35-51. Web.
Li, H., Zubielqui, G. C. and OConnor, A. (2015) Entrepreneurial networking capacity of cluster firms: a social network perspective on how shared resources enhance firm performance, Small Business Economics, 45, pp. 523-541. Web.
Mitra, J. (2020) Entrepreneurship, innovation and regional development. 2nd edn. Oxon: Routledge.
Preetha, R. and Sudhakar, C. (2015) Strategic advantage of relational capital in small and medium-size enterprises, American International Journal of Research in Humanities, Arts and Social Sciences, 15(713), pp. 16-19.
Prieto, M. C. P. and Holgado, M. A. T. (2019) The influence of relational capital and networking on the internationalisation of the university spin-off, Intangible Capital, 15(1), pp. 22-37. Web.
Zhang, L. and Wang, J. (2018) Research on the relationship between relational capital and relational rent, Cogent Economics & Finance, 6(1), pp. 1-18. Web.
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