Th e Role of Social Capital in the Process of Becoming an Entrepreneur and in Entrepreneurial Success

Th e network approach plays an important role in the sociological study of enterprises and of the process of becoming an entrepreneur. In our analysis we examine the role of social relations in the setup process of enterprises by the aid of a questionnaire survey of 3,021 respondents representative of the adult population of Transylvanian small towns, and the impact of networks on business success based on the results of a questionnaire survey of 1,005 companies representative of Transylvanian small and medium-sized enterprises. Th e conclusion of our study is that social network as a resource is much more important during the setting up of an enterprise, whereas in the case of already established, operating enterprises its contribution to entrepreneurial success is less signifi cant.

Th e network approach plays an important role in the sociological study of enterprises and of the process of becoming an entrepreneur.According to the basic concepts of the paradigm associated primarily with Aldrich's name, entrepreneurs, too, are actors embedded in social micro-contexts, networks, whose endeavours to become entrepreneurs may be facilitated or hindered by these networks (Zimmer 1986. 14).Th e role of social capital in becoming an entrepreneur has been studied primarily with regard to small enterprises, since the innovative combination, the "bricolage" (the corresponding Hungarian term introduced by Tibor Kuczi being "kreácsolás", Kuczi 2011) of readily available resources and of others, which may be mobilized through contacts, is more emphatic in their case.Th e establishment of an enterprise is thus at the same time an inherent networking activity (Dubini -Aldrich 1991. 306).
Th e synergy eff ect of social networks on the establishment process of an enterprise, as well as their benefi cial infl uence on the success of already operating, consolidated businesses is a much studied phenomenon.As regards the establishment process of enterprises, these studies have identifi ed several kinds of helping mechanisms social capital can activate.To mention only the most important ones: contacts may serve as a source of information, that is, as additional resources to complete formal information sources, they may provide access to clients and suppliers, moreover, a proper social network, since it may provide an informal way to obtain loans, will possibly strengthen the fi nancial basis of a business, too (Powell -Smith-Doerr 1994. 372).A family network may also present specifi c advantages by providing unpaid (family) work; this may be particularly useful in the initial phase of establishing a business, when it might mitigate the initial fi nancial constraints; it may reduce the eff orts spent on controlling the employees, as well as ensure emotional support (provided by the spouse especially) in the processing of the frustrations emerging due to failures in the entrepreneurial process (Sanders -Nee 1996).
One of the most detailed analyses of the impact of social networks on entrepreneurship has been carried out by Greve, who proposed to fi nd out what are the most advantageous kinds of social networks in the diff erent stages of the process of entrepreneurship.In order to examine this question, Greve distinguished among three stages in the process of founding a company.According to his model, the process starts with the ripening of a business idea, it continues with the organizational activity of setting up the business and fi nally, it ends with the initial stage of the operation of the newly created company.In the fi rst phase thus, the individual becomes motivated on setting up the enterprise, and formulates some ideas in this regard, but does not take practical steps yet to achieve this goal (the motivation phase).In the second phase, the entrepreneur starts to plan the business in detail, to search funds, to set up arrangements, to look for a business establishment (the planning phase).Finally, the third phase of the process begins when the company starts the operating phase.
Since during these three phases the entrepreneur needs diff erent resources, his/her contact network has to serve diff erent purposes at every stage, and consequently this personal contact network undergoes a transformation during this process, its characteristics will be diff erent in each phase.Using the sophisticated tools of network analysis, Greve has formulated several hypotheses regarding these changes in the social network: In the course of the process of setting up an enterprise there is need for an ever growing web of contacts, and more and more work (confi rmed) Th e existence of a high-density social network is the most important in the planning phase.In the establishment phase a less dense contact network is preferable.(not confi rmed) Th e importance of indirect contacts increases in the establishment phase.(not confi rmed) In the establishment phase the importance of bridging social capital increases (confi rmed) In the establishment phase the importance of work relationships increases, at the expense of family ties and friendships (not confi rmed) In the establishment phase the importance of relations with persons active in diff erent professions, especially the ties formed with managers, increases (confi rmed) In the light of Greve's results thus, the social networks of entrepreneurs in diff erent phases of entrepreneurship diff er in extension, in the number of available bridging ties, as well as in the professional composition of the group belonging to the network (especially as regards the percentage of managers).Th ese characteristics show a tendency of growth in the course of the history of the enterprise (Greve 1995).
Research and analysis has not managed to clearly demonstrate the impact of social capital on already consolidated enterprises.Certain studies show a contrary pattern.Bates (1994), for instance, concluded that a more intense use of network resources is characteristic of companies lacking in other assets, and therefore more prone to bankruptcy.However, this correlation called the "compensation hypothesis" has not been verifi ed by Brüderl and Preisendörfer (1998), but the correlation termed "network success hypothesis," according to which extensive social networks based on strong bonds contribute to the success of newly established businesses, has been proven by them.
Th e role of personal relations in entrepreneurship was called even more radically into question by Curran and his colleagues, who concluded, on the basis of a qualitative research performed in the United Kingdom, that small-business owners/managers did not use the family contacts, kinship and friendship relations at their disposal for business purposes, not even in a tight situation.Th ey were characterized instead by their preference to remain independent of these networks.Th is can be traced back primarily to their self-defi nition emphasizing independence, to the mentality according to which the enterprise may be conceived of as a kind of personal "fortress" (fortress-enterprise mentality), and the business is the entrepreneur's own, individual responsibility and duty.
Apart from the infl uence of this culture-specifi c (small) entrepreneurial identity, active participation in family and kinship-friendship networks was limited also because of the time consuming nature of networking.Forming contacts with experts and consultants was also unadvisable because of its expensiveness, since this latter type of relationships were moneycosting service contacts (Curran et al 1993).
According to Donckels and Lambrecht (Donckels -Lambrecht 2005), too, family relationships have an obstructive infl uence on business success.Th ese authors posit that the success of existing businesses is facilitated primarily by geographically extensive, businessrelated contact networks, but the positive impact of these contacts is limited/extinguished by the entrepreneur's strong embeddedness in family, kinship relationships.Th e results of the analysis ultimately did not verify this latter hypothesis.Instead, the researchers proved that although strong family bonds have an inhibiting eff ect on the development of international relations (by reducing the frequency of the entrepreneurs' participation in trade fairs/exhibitions, which promote the formation of this type of ties), they do not hinder the positive eff ects of already existing national and international relationships.It has been, however, clearly shown that geographically more extensive national and especially international social networks involving business people do bear a positive eff ect on the success of enterprises (Donckels -Lambrecht 2005).

Th e role of social networks in the process of entrepreneurship and in the entrepreneurial success of small entrepreneurs in Transylvania
In our analysis we have also chosen to examine the impact of the entrepreneur's ego-centered network of contacts on setting up and successfully running a business.Having in view the process of entrepreneurship we are going to diff erentiate the phases proposed by Greve, introducing yet another phase in the process model: the phase of lack of motivation prior to the motivation phase.Although the entrepreneurship process starts obviously with the formulation of the idea, when it comes to the impact of diff erent relationships on this process, the role of the future entrepreneur's personal social network, its characteristics and diff erences compared to the networks of those who do not come up with a business idea, cannot be regarded as incidental in taking the fi rst steps toward the articulation of the business idea.
We have examined the eff ects of networks on the success of already operating businesses using three variables.One of them is the lifetime of enterprises; we considered the long life of a company one aspect of successful operation.Having in view the life span of enterprises, we may distinguish two phases: businesses in the initial and in the established phase, classifying into this latter type, aft er Pete and his coathors, the businesses that have been operating for longer than three and a half years (Pete et al. 2010).Since the mere existence of enterprises evidently does not reveal much about their business success, we introduced an additional variable to measure it: the annual cash fl ow of businesses.
In the present study we are going to analyse the role of social relations in the setup process of enterprises by the aid of a questionnaire survey of 3,021 respondents representative of the adult population of Transylvanian small towns, and study the impact of relationships on business success based on the results of a questionnaire survey of 1,005 companies representative of Transylvanian small and medium-sized enterprises. 1n the analysis we are going to take under close examination the structural characteristics of the ego-centered networks of individuals being in diff erent stages of the entrepreneurial process.Th is research strategy is based on the idea that if there are diff erences to be detected in the characteristics of the individuals' social network, the underlying cause is a selection mechanism, as a result of which those individuals whose social network bears the characteristics of a later entrepreneurial phase are more succesful in progressing to the next phase of entrepreneurship (Greve, 1995).

Th e studied types of relationships and their presumed eff ect on the diff erent phases of becoming an entrepreneur and on entrepreneurial success
In the present analysis, we are going to examine the prevalence rate of three types of relations: non-economic, personal relationships, functional personal relationships necessary for starting and running an enterprise, as well as institutional relationships formed with the institutional environment of the enterprise.
Independently of the setting up of an enterprise, the personal relationships existing prior to entrepreneurial intentions may facilitate the success of entrepreneurship in two respects.On the one hand, as we have shown above, they may be the means of mobilizing various resources necessary for starting the business.In this respect, the more extensive and denser the social network, the greater the potential benefi ts as several researches have confi rmed (Greve 1995, etc).On the other hand, the personal relationship network acquires special importance, since it is well suited to convey direct information, know-how on entrepreneurship on " entrepreneurial routine," if there are entrepreneurs, too, belonging to this network.In our research, we studied this function of personal social networks existing independently of the entrepreneurial intention, therefore, in the case of this network, we did not inquire about its structural characteristics (extent, density, etc.) but our questions pertained to whether the information concerning entrepreneurship is available through these relationships, that is, whether it is possible to reach other entrepreneurs through these ties.Th e eff ectiveness of this entrepreneurial knowledge transfer, however, may depend on the structural characteristics of the social network, its effi ciency is subject to the nature of the relationship between the holder of entrepreneurial knowledge and the potential entrepreneur.
Th e importance of contacts with persons of diff erent professions, relevant for the operation of the company, has been pointed out by several researchers, too (among others, the above discussed Greve).It is in any case inevitable for entrepreneurs to develop some of these types of relationships (for instance with an accountant).Besides these necessary connections, however, there is a wide variety of voluntary relationships developed on one's own initiative, which may help entrepreneurs to successfully found their business.Apart from conveying knowledge on "entrepreneurial routine," contacts with business leaders and entrepreneurs have other functions, too, since these persons are important members of the circle of suppliers and customers.Th ere may be still further types of voluntary relationships, including some that seem to have so far escaped the attention of socio-economic researcher.We refer here to the relationships (possibly) connecting companies with the non-economic sector.Enterprises are embedded more or less also in the public sector through the orders they honour, and have tighter or looser relations with the state institution system through the bodies monitoring the activities of companies.Th ese non-economic ties vary by country, and are likely to be stronger in countries with a socialist past.Th e role of controlling institutions is certainly infl uenced by the overall level of corruption (since these offi cials may easily obstruct the operation of an enterprise).For these reasons, we addressed in our research the issue of personal relations with those working in political-administrative institutions, as well as of the contacts formed with offi cials of institutions controlling the operation of enterprises.
Finally, we assessed the relations of enterprises with the institutional stakeholders of their economic environment.Here we intended to map those relationships of the enterprises that were not person-to-person relations, but contacts between the company and other institutions (organizations), irrespective of whether the connection was formal or informal.In this set of questions, on the one hand we inquired about relationships established with representative and consulting organizations (entrepreneur associations, cooperatives, business incubators, consulting fi rms), on the other hand, about relations with political and administrative institutions again.During processing, we considered these relationships also part of the ego-centered relationship network of the entrepreneur.
Based on the above, we formulated the following hypotheses on the impact of the entrepreneurs' social network on his/her success in founding an enterprise: Th e entrepreneurial routine conveyed by the personal relationship network existing independently of entrepreneurial intentions plays a decisive role in the process of entrepreneurship.Accordingly, in the case of entrepreneurs in later stages of setting up their business will have more and more entrepreneurs in their originally non-economic personal contact network B1.Necessary functional relationships will gain importance in the planning phase of the process of becoming an entrepreneur.Aft erwards there is no reason for the proliferation of relationships of this type, therefore, the prevalence of such relationships in the social network will not grow in this later stage.
B2. he relationships formed with business leaders and independent entrepreneurs are of the utmost importance in all phases of the life span of the enterprise, therefore, the prevalence of these relations is expected to increase continuously.Since beginning from the establishment phase these relationships gain a new, additional function, too, the prevalence of these contacts is expected to grow considerably in the last phase of the process.
B3. Personal relationships with the political and administrative sector and controlling institutions will become important in the establishment phase.
C1. Institutional relationships established with representative and consulting organizations gain real importance in the establishment phase.
C2. Institutional relationships with the political-administrative institutions also become important in the establishment phase.
D. In the case of already existing enterprises all the above discussed types of relationships promote entrepreneurial success.

Analysis
In the analysis of the process of setting up an enterprise thus we distinguish among four stages of the process.Since we are using here the results of a population-based survey, the vast majority of respondents, understandably, has never even considered the question of founding an enterprise (81.5%).Th ose being in the motivational phase make up 11.1% of the respondents, those in the active phase 3.3%, and 4.2% of all respondents were entrepreneurs or self-employed -they may be considered to have arrived to the establishment phase.Although the persons being in an advanced stage of entrepreneurship form only a relatively small proportion of respondents, the database has proved useful for the present purpose, thanks to the size of the sample.

A)
We inquired about the entrepreneurial model conceived not for economic purposes, that is, the one to be found in the social network independent from the fi rm, within the framework of the nuclear family relations and contacts with relatives, neighbours and friends.As regards prevalence in this framework, we expected -in accordance with our hypothesis A.
-that in the more advanced stages of entrepreneurship we would fi nd a growing proportion of entrepreneurs.As shown in Table 1, this assumption proved only partly true.As concerns family relationships, spouses and siblings with entrepreneurial experience gain increasing importance as the entrepreneurial process progresses.Th e importance of parents with entrepreneurial experience does not grow aft er the motivation phase, but still, it continues to be important.Th e number of persons belonging to the network that covers more distant relations than family ties is probably larger, therefore, understandably, there is a higher percentage of entrepreneurs in these relations.Th us, the entrepreneurial model to be found in these relationships plays a greater role in the formation of motivation, but these relations fall back in importance during the operation of the established enterprise.

B)
As regards the prevalence of relationships maintained with diff erent occupational groups, our fi rst hypothesis seems to prove true: the prevalence of relations with accountants, lawyers and notaries grows in the planning phase, but there is no signifi cant growth in the establishment phase.Th e once established relationships, that are in most cases business-related, are maintained during the further existence of the enterprise, but the prevalence of this type of costly relationship will not exceed the necessary extent.
Th e situation is diff erent as regards the prevalence of relations with business leaders and entrepreneurs, which continues to grow throughout the process of enterprise setup process.A specifi c dynamics of relationships with small entrepreneurs and self-employed persons may be observed, inasmuch as it changes twice dramatically throughout the business setup process.Th ese relations are important conditions for stepping into the motivation phase, aft er which, during the transition to the planning phase, the prevalence of these relationships increases only slightly.Upon entering the establishment phase, however, the number of these relations shoots up.
Our hypothesis concerning political and administrative relations has not been confi rmed.Although the prevalence of these relations shows a growing tendency up to the planning phase, in the establishment phase the prevalence of this relationship type decreases.Th is result indicates, therefore, that political and administrative relations have the greatest signifi cance in the planning phase (providing consultancy services), and lose their importance in the case of already operating enterprises.Th e relations maintained with offi cials of the controlling institutions show a similar dynamics.C) Our hypothesis on the network of institutional relationships has also been confi rmed only partially.Th e presumed dynamics of prevalence of relationships evolved in accordance with our expectations only as concerns the entrepreneurs' associations and other entrepreneurial organizations, showing a signifi cant increase aft er reaching the establishment phase.Th e ties maintained with co-operatives show a steady growth during the entrepreneurial process, the services of consultant and proposal writing fi rms are employed to the greatest extent during the planning phase.Th e relations established with political-administrative institutions follow the above detailed dynamics of ties with politicians and public offi cials, that is, aft er entering the establishment phase these ties start to lose signifi cance.Finally, we are going to perform the analysis of the examined types of social capital, using the linear regression model.Before applying the regression model, the variables that may be combined in one factor have been aggregated by principal component analysis according to relationship type.Th is data reduction procedure and its results are summarized in Table 4.

Table .
v Th e summary of the data reduction procedure.Th e impact of the resulting six factors has been tested step by step for each phase of becoming an entrepreneur.Table 5. summarizing the results also indicates the tendencies outlined above: the entrepreneurial model associated with the personal social network is more important in the motivation and planning phase, later its importance decreases.By contrast, the signifi cance of the entrepreneurial model associated with the family social network grows in this latter phase.Personal economic ties become increasingly important during the progress of the process, as well as the ties formed with economic institutions.Relations established with the offi cials of politicaladministrative controlling institutions, though they initially bear a signifi cant impact on the process of becoming an entrepreneur, later, in the establishment phase, they lose signifi cance.Institutional ties formed with this sphere do not have a signifi cant impact on any of the phases of becoming an entrepreneur.D) Th e analysis of the relation between social networks and entrepreneurial success, is performed, unlike the above, not based on a survey on population, but on the basis of the results of a survey on enterprises.Due to the larger sample size, this entrepreneurial database allows for a more reliable analysis, though it presents a signifi cant disadvantage, too, inasmuch as the respondents in most cases are the managers of the enterprises, and not the actual entrepreneurs themselves, as it has been mentioned in the methodological presentation of the research.Th us, the results may be regarded as to confi rm or refute our hypothesis only inasmuch as the analysed social networks may be considered to be the company's social network, and not the personal social network of the entrepreneur or manager.

Set of questions
We have studied the infl uence of relations on the successful operation of an enterprise, applying the research strategy used so far.We have grouped enterprises, according to the time elapsed since their foundation, into two categories: enterprises in the initial and in a later phase of their operation, drawing the boundary between these two categories at four years from the beginning of their operation.We have examined the correlation between the diff erent types of relations and the two categories of enterprises, by the aid of contingency tables.Th e results are presented in Table 6.
As shown in Table 6, there are very few signifi cant relationships between the time elapsed since the founding of the enterprise and the diff erent features of the social network.Th e existing personal relationships with entrepreneurs that constituted an important factor in the process of founding the enterprise, ceased to infl uence its successful operation aft er the founding stage.Similarly, there is no signifi cant diff erence between the initial phase and the later phases of operation as regards the prevalence of institutional relations either.Signifi cant diff erences between the two categories of enterprises have been found only in the case of some functional relationships with the offi cials of political-administrative institutions, as well as controlling bodies.We used the business turnover as another operationalization possibility of entrepreneurial success.We did not distinguish between categories according to the size of the turnover.instead, we compared the average turnover according to relation types.With this method we haven't found any signifi cant correlations between turnover and functional relationships, therefore we left out these correlations from Table 7., which summarizes the results.Ties to / Relations with the entrepreneurs belonging to the personal social network do not exert a signifi cant eff ect on entrepreneurial success, although the presence of a entrepreneur spouse or parent increases turnover almost signifi cantly.In contrast with personal and functional relations, however, we have found a signifi cant correlation between institutional ties and turnover.Th ese ties increased the turnover of the enterprise in all cases.To study the joint impact of the diff erent types of relationship on entrepreneurial success, we aggregated these relationships by principal component analysis.As a result, the personal contacts with entrepreneurs before becoming one of them settled into three factors (the friends-neighboursrelatives factor, the parents' factor and the spouse-sibling factor); functional relationships settled also into three factors (the factors of political-administrative-bureaucratic relations, of those established with small entrepreneurs-self-employed-accountants, as well as the factors of ties formed with notaries-lawyers-big entrepreneurs), whereas institutional relationships combined into a single factor Examining by means of the regression model the relationship between these factors and the number of years elapsed since the founding of the enterprise, as well as the company's cash fl ow -as it was expected in view of the results above -we could not fi nd any association.Az regards also the correlation between the two variables of individual factors and success, we could fi nd a weak correlation in the case of one single factor: between the factor of institutional relations and the company's cash fl ow.

Conclusions
Our results thus indicate that the nature of the social network is changing during the process of entrepreneurship, that is, the entrepreneur will utilize diff erent types of social relations as a resource in the diff erent successive stages of setting up the enterprise.Th us, the entrepreneurial models off ered by the personal network of contacts, the presence of other entrepreneurs in these close personal relationships, are important factors in becoming an entrepreneur, and they become increasingly important as the process progresses, losing some of their signifi cance only aft er the establishment of the enterprise.But even in this case, it may have a relatively important positive impact on the company's turnover if the entrepreneur's spouse or parent is also an entrepreneur.Similarly, functional relationships also play an increasingly important role in the process of entrepreneurship, in the established operational phase, however, these relations are no longer the conditions for further business success, their prevalence does not increase further.Th is applies primarily to economic, service-related ties.Political-administrative relations retain their importance during operation, thus contributing to entrepreneurial success.
Institutional relations gain importance progressively in the course of the life of the enterprise.In the initial stages of business setup (the motivation and planning phase) only the contacts formed with economic institutions are important, at this stage the political-administrative relations do not contribute to the consolidation of the business.In the later phase of the life span of the enterprise, however, these relations are the ones that contribute the most to entrepreneurial success.On the basis of these results, the overall conclusion is that the social network as a resource is much more important during the setting up of an enterprise, whereas in the case of already established, operating enterprises its contribution to entrepreneurial success is less signifi cant than expected.

Table  v
Were there entrepreneurs in your family, among your relatives and friends or their close relatives?("YES"responses, in percentages)

Table  .
v Do you have contact with the following types of institutions?("Personal relationship"-answers in percentages

Table  .
v Th e eff ect of the social network on the entrepreneurship process, divided into phases.

Table  .
v Th e impact of contact types on the successful operation of enterprises

Table  .
v Th e averages of company turnover according to the types of business relationships

Table  .
v Th e correlation between factors formed of types of relationships and entrepreneurial success (correlation coeffi cients)