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Getting wired for innovation: An analysis of the advice networks of software entrepreneurs

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Abstract

Purpose The purpose of this article is to examine the nature and influence of entrepreneurs' advice networks on the innovative performance of their companies from both economic and social perspectives. Specifically, it aims to address three research questions: Does information typically flow both ways in advice dyads? How important is trust in these relationships? What is the ideal structure of an advice network? Design/methodology/approach As part of a larger study, executives at 20 entrepreneurial software companies in the Greater Pittsburgh, Pennsylvania, region of the USA were interviewed in person to determine the nature and structure of their advice networks. Findings The executives reported sharing business and technical advice with their contacts, both within and outside of their own organizations. Entrepreneurs who maintained diverse, uncommonly connected advice networks led organizations that were perceived as more innovative than those with more densely connected networks. Research limitations/implications Future studies should examine these research questions in economic and cultural settings outside the USA, and examine the influence of advice‐network size and different network environments on advice‐network value and productivity. Practical implications Entrepreneurs should be careful to not take trust in these networks lightly. Originality/value Entrepreneurs may be able to leverage their advice networks for maximum innovation by adding new advice contacts not connected to their current advice contacts. Entrepreneurs should be careful to not take trust in these networks lightly.

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... Data characterizing the participants, their experience in the network, and enablers and disablers to the development and maintenance of their business network was collected. Ottesen et al., (2004) and McGrath et al., (2006) found that entrepreneurs often have inaccurate knowledge of their social and business networks. Therefore, the entrepreneurs started the questionnaire by completing a network audit (see , Table 1). ...
... In many instances the entrepreneurs had worked to create a formal business network in their region and/or for their industry. These findings confirm the value of conducting a network audit (Ottesen et al., 2004;McGrath et al., 2006;Soetanto, 2019;Liu et al., 2017). The entrepreneurs who were not members of a formal network indicated that, over time, they have become mentors to new entrepreneurs and that their interactions are based on sharing experiences both good and bad. ...
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... Data characterizing the participants, their experience in the network, and enablers and disablers to the development of their business network was collected. Ottesen et al. (2004) and McGrath et al. (2006) found that entrepreneurs often have inaccurate knowledge of their social and business networks. Therefore, in the present study, the entrepreneurs started the questionnaire by completing a network audit. ...
... Significantly, some of the entrepreneurs considered how formality could be brought to their networks to create better value from what is often an ad hoc communication system. This finding confirms the value of conducting a network audit, and maps onto Ottesen et al. (2004) and McGrath et al. (2006). Third, the respondents were asked how their relationship with formal business networks has evolved. ...
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... As studies of other contexts demonstrate, social network analysis is well suited for analyzing resource dependence relationships (e.g., Burt, 1983Burt, , 2004Piskorski and Anand, 2005;Scott, 2017). Entrepreneurial ecosystems are comprised of networks of entrepreneurs, mentors, investors, support organizations, and other stakeholders (McGrath, Pate, Gray, and Vance, 2006;Motoyama and Knowlton, 2017). As an example of how a network perspective might reveal insights into how nascent EEs manage resource dependence, the external perspective on organizational teams finds that both the density of a team's internal social network and the heterogeneity of external perspectives, knowledge, and expertise are related to team productivity (Reagans and Zuckerman, 2001). ...
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... Seventh, existence of relations between contacts may be beneficial in the way that closure between my contacts enables them to organize and coordinate support for me (Coleman 1990). Eighth, and contrary to closure, absence of relations between contacts may be beneficial in the way that holes between my contacts enable me to act with lesser constraint from them and to utilize more varied information channels; specifically, I may be an entrepreneur in the Latin or French literal meaning of going between-entre-and taking-prendre-ideas from others, where their disconnect prevents them from combining their ideas (Burt 2004;McGrath et al. 2006). ...
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Knowhow trading is the informal exchange of practical technical knowledge between pairs of engineers and other technicians in different firms. This paper explains the advantages and disadvantages of this particular mode of knowledge sharing from an economic perspective. Under a knowhow trading regime long-term, self-selected partners barter knowledge ex post, i.e., they exchange information already known to one of them. The paper explains why barter is better suited to the exchange of ideas than to the exchange of conventional goods and points out advantages of ex post knowledge sharing between firms whose priorities differ. It is generally cheaper to acquire knowhow through exchanges than to “reinvent the wheel” but sharing knowhow can cut into the firm's competitive advantage. Pairwise exchanges limit, although they do not eliminate, the firm's loss of competitive advantage when it shares technical knowledge.Because knowhow trading is informal and “off the books” such trading is difficult for the firm to evaluate and to manage. Similarly, since it eludes the traditional measures of economic activity, knowhow trading is difficult to document and integrate into studies of the general economy.
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Effects on opportunity recognition of three social sources of opportunity-related information (mentors, informal industry networks, participation in professional forums) were investigated. Results indicated that all three sources had direct, positive effects on opportunity recognition by entrepreneurs. In addition, the effects of two sources (mentors and professional forums) were mediated by schema strength, while effects of the third source (informal industry networks) were mediated by self-efficacy. Results are consistent with theories of opportunity recognition that emphasize the role of information and cognitive processes, and suggest that two social sources of information not systematically investigated in previous research–mentors and participation in professional forums–can assist entrepreneurs in identifying opportunities for new ventures.
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Employees frequently give technical information or advice to colleagues in other firms, including direct competitors. This paper addresses whether such information-transfer is in the economic interests of the firms involved.It is hypothesized that employees trade information in accordance with the economic interests of their firms. Conditions are discussed in which information trading creates an economic advantage for the participating firms.Data on specific information transfer decisions were obtained from a survey of 294 technically oriented middle-level managers from the U.S. specialty steel and mini-mill industry. The observed pattern of information transfer strongly supports the hypotheses (1) that employees trade information and (2) that such trading is desirable from a firm's point of view. Furthermore, the data suggest a positive link between the participation of a firm's employees in informal informationtransfer networks and the economic performance of the firm. Indeed, it can be in a firm's interest to make its boundaries penetrable for informal information trading rather than to discourage such transfers.
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Facilitating entrepreneurial networks is a key to promoting entrepreneurial vitality in a region. The focus of this research was to investigate methods to enhance member involvement in entrepreneur network organizations (ENOs), building from concepts in relationship marketing. Six organizations participated in the study, producing 205 usable surveys. The overall concept of organizational marketing strategies being mediated by the attitudinal variables of commitment and trust, which in turn may be related to behavior, was supported. Enhancement of member interdependence and core service performance emerged as important independent latent constructs, or marketing strategies, that might be employed. Service performance was directly related to participation as well as mediated by instrumental commitment and trust. Measures of affective commitment were not important. Normative commitment was positively related to instrumental commitment, retention and participation. A surprising negative relationship is noted between trust and participation. Of particular interest may be the role of normative commitment, which appears to be a powerful driver of participation, particularly notable since economic benefits might logically be expected to be stronger drivers of member involvement in this context.
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"Informal" know-how trading is the extensive exchange of proprietary know-how by informal networks of process engineers in rival (and non-rival) firms. I have observed such know-how trading networks to be very active in the US steel minimill industry and elsewhere, and they appear to represent a novel form of cooperative R&D. When one examines informal know-how trading in the framework of a "Prisoner's Dilemma", real-world conditions can be specified where this behavior both does and does not make economic sense from the point of view of participating firms. Data available to date on the presence and absence of such trading seem to be roughly in accordance with the predictions of this simple model. Although presently documented only as a firm-level phenomenon involving the trading of proprietary technical knowhow, informal know-how trading seems relevant to (and may currently exist in) many other types of situation. Indeed, it may be applicable to any situation in which individuals or organizations are involved in a competition where possession of proprietary know-how represents a form of competitive advantage.
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