Critical View of the article by Peltier & Naidu (2012)

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Complete Executive summary stating issues from article and from the real-business
(2 marks)
Critical View of the article by Peltier & Naidu (2012)
(4 mark)
Effective use of theoretical material from Marketing and Management and at least five academic journal articles besides Peltier & Naidu (2012)
(6 mark)
Identify at least one business that uses social networks for marketing. Providing some useful information such as when social network was introduced in the firm life cycle
(2 mark)
Researched on how the business is being managed and marketed (5 marks)

Recommendation and challenges of future technologies and its use in the organization/business
(2 mark)
Ability to write clearly, good structure and format
(2 mark)
Use of credible in-text reference, completion of a full reference list following APA style
(2 mark)

MA505 Sem 1 2015 Report Assessment Criteria: 25%


Journal of Small Business and
Enterprise Development
Vol. 19 No. 1, 2012
pp. 56-73
q Emerald Group Publishing Limited
DOI 10.1108/14626001211196406

There is a growing consensus that forming, nurturing, and managing internal and
external relational networks are critical to the success of innovative and small business
ventures (Jones and Holt, 2008; Ngugi et al., 2010; Street and Cameron, 2007). Broadly
defined, relational networks represent the aggregation of all interactions through
membership in formal organizations and relational encounters entrepreneurs create
and nurture with suppliers, distributors, consultants and customers, or any of a wide
range of other social contacts, including friends, family, and acquaintances (Dodd and
Patra, 2002). Through cooperative interactions with varied types of social network
members, small businesses place themselves in a better position to develop effective
strategies and tactics needed for thriving in an ever-changing global landscape (Lee
and Jones, 2008; Molina-Morales and Marti´nez-Ferna´ndez, 2010). Combined, social

networks are valuable components of entrepreneurial learning and can enhance the
success of small businesses through the creation of organizational assets in the form of
human, market, financial, and technological capital (Fuller-Love and Thomas, 2004;
Jack et al., 2008)
Although social networking is receiving increased attention in the small business
and entrepreneurship literature, major shortcomings exist with regard to the
transitional nature of entrepreneurial learning networks over time (Hampton et al.,
2009; Littunen and Niittykangas, 2010; Zhang et al., 2008). Virtually silent is research
that examines the evolutionary nature of social networks in terms of their importance
and contact frequency across the organization lifecycle, and specifically from start-up
and/or acquisition through growth (Elfring and Hulsink, 2007; Klyver, 2008; Xu et al.,
2008). A greater understanding of these networking needs will extend the literature by
highlighting how effective small business are at transitioning from launch to growth,
and how social networks may benefit this transition (Hampton et al., 2009; Hite, 2005;
Lechner and Dowling, 2003).
Also of significance, research is increasingly questioning whether entrepreneurs
have “social identities” (Watson, 2009) and whether these social orientations impact the
frequency and effectiveness of different types of social network relationships (Shaw,
2006). Although a steady stream of research has emerged on the personality
characteristics of entrepreneurs, relatively unexplored is the extent to which an
entrepreneur’s social orientation moderates the degree of information sharing that
exists within and across SMEs (Bowey and Easton, 2007) and the extent to which small
businesses seek input from associates within and external to their organization
(MacDonald et al., 2007; Molina-Morales and Marti´nez-Ferna´ndez, 2010). Given the
gaps in the social networking and entrepreneurship literature, four research questions
have emerged:
(1) How do social networks and entrepreneurial learning mechanisms evolve as
small business enterprises transition from start-up/acquisition to growth?
(2) Do small business owners differ in their configurations of social identities?
(3) How do the social identities of small business owners impact social networks?
(4) Do social networks improve profitability and organizational performance in
small firms?
Research framework: social network theory
The social network approach to asset creation is founded on the principle that the
relationships entrepreneurs have with others is a key resource for creating and
building business ventures (Aldrich et al., 1987; Carsrud and Johnson, 1989). Structural
social capital helps entrepreneurs access information, knowledge, resources and
financing by participating in networks rich in structural holes (Casson and Della
Giusta, 2007). Although not meant to be exhaustive, social networks have been
described in terms of three types of relational interactions (see Johannisson, 1995). The
first are exchange networks, made up of an organization’s set of commercial
relationships, most notably associated with vendors and customers. Communication
networks encompass the set of organizations and individuals from which the
entrepreneur could receive support in terms of business contacts and knowledge
needed for making sound business and financial decisions and could include

Social networks




consulting firms, financial advisors, trade associations, and other sources of expertise
(Klyver, 2008; Palakshappa and Gordon, 2007). Lastly, personal networks may exist in
the form of ongoing communications with family members, relatives, friends and
acquaintances. Exchange and communication relationships can be viewed as
formal/external networks, while family and personal relationships can be
conceptualized as informal/internal networks (Mackinnon et al., 2004; Sequeira et al.,
2007). Although in the current research we conceptualize social assets in terms of
exchange, communication and personal networks, social networks often have fuzzy
and overlapping boundaries with varying degrees of multi-plexity, leading to
continuous rather than a finite number of relationships, all of which could run in
multiple directions and encompass different qualities and values (Mitchell, 1969).
Traditionally, social network theory has been applied to entrepreneurial
organizations in two ways – to illustrate that an entrepreneur’s social network of
contacts allows access to resources that are not possessed internally, and to
demonstrate that relational networks enhance economic exchange (Anderson and Jack,
2002). When a network relationship is entrenched within a social relationship and
directly impacts an entrepreneur’s decision making process, the linkage is deemed to
be “relationally embedded” (Uzzi, 1996). As Staber and Aldrich (1995) state,
“sociologists now take as axiomatic the proposition that economic action, including
entrepreneurial behaviour, is embedded in interpersonal social networks” (p. 442).
Granovetter (1985) argues that all relationships are socially embedded and that the
degree of embeddedness has a direct and positive impact on economic actions and
Research hypotheses
Social network theory and business transitions
Research on the transitional and temporal nature of relational networks is scarce ( Jack
et al., 2008). Transitional networking can be framed in part on the notion of “network
culling” (Larson and Starr, 1993), which has been conceptualized as an iterative process
involving the exploration, evaluation and selection of network partners. This culling
process underscores the dynamic nature of social networks, and particularly with
regard to the evolution of one’s network over time as new relationships are added, as
some are dropped, and some modified (Bowey and Easton, 2007). This temporal
evolution of networks and network ties has important ramifications for understanding
innovative decision making involving opportunity assessment, resource utilization,
and the governance of launching, growing, and maintaining small firms (Miller et al.,
2007). In some instances, network relationships create organizational assets often
referred to as social capital (Burt, 1992). Social capital is amassed when entities in the
network establish relationships, relationships that build trust and expectations of
fairness and reciprocity (Grabher, 1993; Granovetter, 1985). The empirical and
theoretical treatment of business networking has paid little attention to understanding
how complex sociological ties or attachments develop among small businesses or
within small communities where an increasing number of businesses fail (Cope et al.,
The creation, modification, and elimination of social networks over time are
important areas of inquiry (Bowey and Easton, 2007). Hite and Hesterly (2001) contend
that emerging firms might rely more heavily on close, relationally embedded ties

(personal networks) early on in their organizational lifecycle. This reliance on closely
embedded relational networks might be traced in part to higher levels of trust
associated with these informational exchange partners (Mackinnon et al., 2004). Family
and friends might thus have their most important impact during the planning stages of
a potential venture (Greve and Salaff, 2003). Later, as the business transitions into a
growth mode and beyond, the entrepreneur might be more inclined to extend the range
and depth of its relational linkages in the form of exchange (vendor and customer
research) and communication (consultants, financial advisors, trade associations, etc.)
networks (see Hite and Hesterly, 2001). As a consequence, the characteristics of
network ties may change and these changes may affect opportunity discovery,
resource access and mobilization (e.g. Hite, 2003; Uzzi and Gillespie, 2002). For
example, Larson and Starr (1993) examined the evolution of network ties in emerging
firms and suggested that even newly established work related ties may evolve to
become more relationally-embedded over time as social exchanges are layered over the
business relationship, thus increasing the influence of the tie on the firm (Granovetter,
1985; Uzzi, 1996; Uzzi and Gillespie, 2002). Likewise, Lechner and Dowling (2003) found
that the mix of networks evolve as firms develop, with the relative importance of more
personal social networks decreasing over time in favor of more external relationships.
Logically, the preceding discussion suggests that a small business owner’s social
identity is not necessarily static and might evolve as the organization proceeds through
the organizational life-cycle. This is consistent with Hall’s (2002) identity-change
process model that implies that an entrepreneur’s social identity might be altered over
time as organizational goals change along with the effort needed to succeed in dynamic
and competitive markets. As such, as the decision situation changes so too can an
individual’s social identity in response to the changing context in which these decisions
are made (Tajfel and Turner, 1986). There is some expectation that although relative
importance might deviate over time, entrepreneurs with a greater family- and/or
personally-based orientation will utilize personal and family-oriented networks more
across all stages of the organizational life-cycle and those with a more external
orientation will always form relationships with exchange and communication social
networks (Greve and Salaff, 2003).
Based on this review, we posit the following:
H1. Advice from personal networks (family and friends) will be the most used
social network during the start-up stage of the organizational lifecycle.
H2. Advice from personal networks (family and friends) will have the highest
perceived value during the start-up stage of the organizational cycle.
H3. The frequency advantage of advice received from personal networks (family
and friends) over other types of social networks will decrease from the
start-up to the on-going stage of the organizational life-cycle.
H4. The value advantage of advice received from personal networks (family and
friends) over other types of social networks will decrease from the start-up to
the on-going stage of the organizational life-cycle.
H5. The frequency of advice and value of advice received from exchange
networks (customers and suppliers) will increase from the start-up to the
on-going stage of the organizational life-cycle.

Social networks




H6. The frequency of advice and value of advice received from communication
networks (consultants, financial advisors, competitors) will increase from the
start-up to the on-going stage of the organizational life-cycle.
H7. The frequency and value of advice received from personal networks
(family/friends) will decrease from the start-up to the on-going stage of the
organizational life-cycle.
Social network theory and social identities
Consistent with emerging research by Down (2006), and Peltier et al. (2009, 2012),
entrepreneurs’ “self-identity” is expected to play a role in the internal and external
orientation that they take in making business decisions. Hite (2003) contends that the
nature, scope and importance of relationally embedded linkages for solving business
problems may differ based on the interpersonal characteristics of an entrepreneur and
the social setting in which the interactions take place. In this way, the type of “social
identity” employed by an entrepreneur may play a major role in impacting opportunity
discovery and resource mobilization (Hite, 2005; Larson and Starr, 1993). Moreover, the
interdependence of individuals and groups in the social network and that these social
members share common goals are expected to be key aspects of external social
identities (Ellemers and Bos, 1998).
Watson (2009) contends that an entrepreneur’s social identity will impact the degree
and value of information seeking and sharing (MacDonald et al., 2007). Pertinent to
social networks, information access comes from multiple sources, including past
experience, customers and competitors, and other players in the social environment.
Information accessibility and fit thus determine which social groups (if any) become
salient and thus influence the frequency and value of that information and the extent to
which one’s social identity is impacted (Ullrich et al., 2007). As such, a key ingredient
for capturing social identities is the ability to categorize small business owners with
regard to their preferences for varied network relationships, and specifically, exchange
networks, communication networks, and personal networks (Sequeira et al., 2007).
Importantly, the information access process undertaken is thus a function of whether
small business owners define themselves in terms of a more personal or social identity,
and when an external social identity is prevalent, which type of social network serves
to guide behaviour (Haslam et al., 2003).
H8. A family/personal-oriented social identity will result in greater use and
perceived value of personal networks at all stages of the life-cycle; and an
external-focused social identity will result in greater use and perceived value
of exchange and communication networks at all stages of the life-cycle.
Social identities, entrepreneurial learning and economic performance
Despite the increasing consensus that entrepreneurs and small businesses must form
networks to survive, relatively few empirical studies have investigated the link
between an entrepreneur’s social identity and firm performance (Watson, 2009).
Granovetter (1992) argues that socially embedded relations are also closely linked to
productivity and economic performance vis-a`-vis the ability to make better decisions
through information sharing and tactic knowledge exchange, and particularly in
decision environments containing high levels of task complexity and uncertainty. We

argue that regardless of the social identity type in which entrepreneurs fall, “social”
entrepreneurs will outperform “non-social” entrepreneurs. Linking back to the notion
of “social capital”, Casson and Della Giusta (2007) contend that the “capitalized value”
of social networks contribute to future economic performance, a view supported by
Molina-Morales and Marti´nez-Ferna´ndez (2010) and Zhang and Fung (2006).
(1) H9. Firms operated by small business owners characterized as having a
stronger internal or external social identity will outperform firms operated by
individuals with a weaker social identity.
Respondents were selected from the local directory of businesses and chosen to
participate by a systematic random sample of firms employing less than 500
employees (most were much smaller than 500). Some completed the survey while the
interviewer awaited but the majority of the respondents asked the surveyor to come
and pick it up one or two days later. The interviewers were female faculty from local
educational institutions, which had a great impact on the willingness to participate in
the study. A total of 312 questionnaires were returned. Given this face-to-face data
collection approach and that the sponsoring universities were identified, nearly all of
the surveys had complete data. Of the 312 returns, 15 were removed because of missing
data pertaining to the performance measures, for a final response rate of 85.6 percent.
The profile of respondents is provided in Table I.
To generate insight into social network usage, we asked the small business owners to
indicate their level of Contact Frequency (five-point scale: never, once in a while,
sometimes, frequently, very frequently) and Value of Information Received from these
contacts (five-point scale: no value, slightly valuable, some value, valuable, very
valuable) for the three types of Social Networks (personal network – family/friends;
exchange network – current/potential customers, suppliers; and communication
network – business/financial consultants, non-competing businesses, competing
businesses) at two points in time along the organizational life-cycle (start-up/planning
stage and current/ongoing strategic planning stage).
To assess social identity, respondents indicated their level of agreement (five-point
scale: strongly disagree to strongly agree) with 28 statements, which were then used to
cluster respondents to serve as independent variables for H8 and H9 (see Table II).
Using a five-point comparative scale (inferior to competition, below average, average,
above average, superior to competition), four Comparative Firm Performance
Measures were also collected (sales growth, market share growth, profit growth, and
overall success of business).
Cluster analysis
We were also interested in determining whether the social identity of the respondents
impacted the frequency and value of the advice they receive from personal, exchange,
and communication networks (H8). To test H8 we first conducted a K-means cluster
analysis utilizing the 28 question instrument measuring respondents’ perceptions of
different types of social networks and how they apply to their business/themselves.

Social networks




Table I.
Profile of respondents


Profile (%)

How business started
Acquired from family
Acquired externally


When business was started
Within ten years
11-15 years
15 þ years


Family involvement in business


, 34
55 þ


High school or less
Some college/tech
Graduated college
Post graduate


Company sales (Euros)
, 73,000
. 730,000


Two, three, and four cluster models were conducted, with the three-cluster
segmentation model providing the cleanest separation in the segments. Table II
shows our three-segment solution and the mean scores for each of the social identity
statements (all significant at p , 0:01). The three clusters that emerged were named
Family/Personal Social Identity, External Social Identity and Weak Social Identity.
What is first evident from Table II is that entrepreneurs with an External Social
Identity (n ¼ 146) make up the majority of the respondents, followed by
Family/Personal Social Identity (n ¼ 85); and Weak Social Identity was the smallest
group of entrepreneurs (n ¼ 66). In this regard, 78 percent of the respondents seem to
seek some type of relational networking partners, either family/personal networks or
external networks.
Findings and discussion
Prior to conducting tests of our hypotheses, and to determine whether the various
firmographics could confound our tests, for H1, H2, H3, H4, H5, H6 and H7 we
compared the frequency/value of advice received from social networks based on

Social identity statements
I seek business advice from many different
My family/friends play a large role in my
business decisions
My family/friends are important support
My family agrees with my business
My family really cares about the success of
my business
My parents have been a major influence in
my business life
I am often in conflict with my family
regarding my business
I don’t trust the advice that I receive from
non-family members
I am very secretive so competitors won’t
know my strategies
My friends have often given me bad advice
I have a strong network of business
I have a strong network of suppliers who
help me make decisions
I have a strong network of experts who help
me make decisions
I spend a lot of time developing a strong
relationship network
Advice from non-family members is better
than from family
I share my business advice with others
Business organizations are important for
sharing ideas
I have a high tolerance for risk
Others would describe me as a team player
I have open communications with external
business members
I am often in conflict with members of my
relationship network
I don’t like to work in teams
I am a competitive person
Others like to work with me
Many people seek my advice
I don’t look to other businesses to see how I
can improve mine
My family is an important part of the
success of my business
I trust the advice that my family gives me


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