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18 Copyright © 2021, ISSN: 2407-5434; EISSN: 2407-7321
Indonesian Journal of Business and Entrepreneurship, Vol. 7 No. 1, January 2021
Permalink/DOI: http://dx.doi.org/10.17358/IJBE.7.1.18
Available online at http://journal.ipb.ac.id/index.php/ijbe
Accredited SINTA 2
by Ministry of RTHE Number 30/E/KPT/2018
1 Corresponding author:
Email: hadisumarsono@umpo.ac.id
SOCIAL NETWORK IN FAMILY BUSINESS:
THE PHENOMENON OF PONOROGO CHINESE ETHNIC ENTREPRENEUR
Hadi Sumarsono*)1, Khusnatul Zulfa Warotin*), and Slamet Santoso*)
*) Faculty of Economics, Universitas Muhammadiyah Ponorogo
Jl. Budi Utomo No.10 Ponorogo, Jawa Timur Indonesia
Abstract: The dominance of Chinese ethnic businesses in Ponorogo is thought to be related
to their strong business networks. This study aims to identify the Chinese family business
network model. The research method is conducted using a qualitative approach. Based on
interviews with several respondents and observations, we found that the business network
model has a different pattern on each stage of development and conditions. The network
models are increasingly expanding along with business growth. This research has implications
for small entrepreneurs to understand the existing model so that it can be used to obtain the
resources needed in developing their businesses.
Keywords: entrepreneur, social network, family business, chinese ethnic, minority
entrepreneur
Abstrak: Dominasi bisnis etnis tionghoadi Ponorogo diduga berkaitan dengan kuatnya
jejaring bisnis yang mereka miliki. Penelitian ini bertujuan mengidentikasi pola jejaring
bisnis keluarga etnis tionghoa. Metode penelitian dilakukan dengan menggunakan pendekatan
kualitatif. Berdasarkan hasil wawancara beberapa responden dan pengamatan di lapangan,
peneliti menemukan bahwa jejaring bisnis dagang etnis tionghoa ponorogo mempunyai pola
yang berbeda-beda dalam setiap tahap perkembangan dan kondisi. Pola jejaring bisnis
berkembang seiring dengan tahap perkembangan dan kondisi pertumbuhan perusahaan.
Penelitian ini memberikan implikasi kepada pengusaha kecil untuk memahami pola yang
ada sehingga mampu digunakan untuk memperoleh sumberdaya yang dibutuhkan dalam
pengembangan usaha mereka.
Kata kunci: entrepreneur, jejaring social, bisnis keluarga, etnis tionghoa, minority
entrepreneur
Indonesian Journal of Business and Entrepreneurship, Vol. 3 No. 2, May 2017
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Accredited by Ministry of RTHE Number 32a/E/KPT/2017
Indonesian Journal of Business and Entrepreneurship,
Vol. 7 No. 1, January 2021
INTRODUCTION
Most family businesses in Indonesia are predominantly
Chinese. Although the number is around 3.5% of
Indonesia's total population, it turns out that ethnic
Chinese can control 73% of the Indonesian economy
(Wulandari in Permadi and Kuswahyono, 2007).
Dominance appears in the trading business. Almost
every city in Indonesia has Chinatown which is the
heart of the city's trade. The many shopping centers,
shop houses and shops on the main road in almost
all regions in Indonesia are owned and managed by
Chinese descendants. After being reduced by BUMN
assets, Chinatowns throughout Indonesia control 80
percent of the money in circulation (Marzali, 1994 in
Harsono, 2002).
This phenomenon is also seen in small cities like
Ponorogo. Based on Harsono (2002), Chinese ethnic
entrepreneurs were able to dominate trade in Ponorogo
because they were formidable entrepreneurs in managing
shops that sell electronic equipment, automotive, gold
jewelry, iron stores, and photos copy-printing services,
and printing. Chinese ethnic entrepreneurs in Ponorogo
not only dominate trade in terms of numbers but also
market domination. Of the other types of trade such as
clothing stores, furniture, and pharmacies, market share
is owned by Chinese ethnic entrepreneurs.
Based on Sumarsono and Rapini (2015), Chinese
ethnic entrepreneurs are very dominating in trading
businesses requiring relatively large nancial capital.
The types of businesses run also do not really require
expertise or specic skills. The Ponorogo ethnic Chinese
entrepreneur is identical to the trading business, namely
shops and buying and selling. Research conducted by
Harsono (2001) and Sumarsono & Rapini (2015) has
provided an overview of Chinese ethnic entrepreneur
and emphasizes the aspects of excellence in human
capital. In contrast to existing research, this research
focuses more on aspects of social network in family
business of Chinese ethnic entrepreneuras a form of
social capital because social capital to be one of the
key elements in small business development (Kebede,
2018).
Social network on Chinese ethnic entrepreneur
in Ponorogo is important to be explored further
because, rst, ethnic minority entrepreneurs are facing
some challenges during their business creation and
development phase (Sithas, 2019). Social networks
has been identied as a major factor in the success of
minority entrepreneurs (Blanchett et al. 2019). However,
the success of the Chinese family business in Ponorogo
can be a portrait of how minority entrepreneurs can be
successful in managing family business. Sumarsono
and Rapini (2015) state that the trading business in
Ponorogo is controlled by certain people who still have
relationships as extended families. Most of the shops
on the main street in Ponorogo are owned by certain
families. In the eld of trade, the family business of
the indigenous people of Ponorogo (javaness ethnic)
has not been able competed with the ethnic Chinese
family's business (Harsono, 2002). Secondly, Permadi
and Kuswahyono (2007) show that the privilege of the
rst ethnic Chinese economic behavior lies in business
networks' strength. Social networking perspectives can
explain why someone is more successful in starting and
developing a business than anyone else (Chu 1996).
Mursid et al. (2017) found that the social network
variable signicantly affected the performance of
innovation.
Networks are often presented as vital to the start-
up, development and 'competitive advantage' of
ethnic business (Ram, 1994). Networks refer to the
relationship between the rm or the individual and the
myriad links with organizations and other individuals in
the wider environment (Bagwell, 2008). Networks are
also seen as a “resource” through which small business
owner managers gain access to important social and
cultural resources, information and capital (Sithas and
Dissanayake, 2019).
Social networking theory is currently receiving a lot
of attention in business and entrepreneurship studies.
Social networking theory emerged with the idea that to
study social structure is to analyze the patterns of bonds
that connect members. Social networking is important
in business development because it can provide access
to markets, ideas, information, business opportunities
and other resources (Robinson and Stubberud, 2010).
Social network helps family businesses to create and
maintain with their stakeholders and the growing
market size it offers (Agbim, 2019).
This relationship is based on the idea that each actor
(individual or collectivity) has different access to
valuable resources (wealth, power, information,). This
results in that structured systems tend to be stratied and
certain components will depend on other components
(Ritzer and Goodman, 2004). This social network is not
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Indonesian Journal of Business and Entrepreneurship,
Vol. 7 No. 1, January 2021
only useful individually but also collectively (groups)
because it is formed from interpersonal relationships,
between individuals with institutions, and networking
between institutions. Social networks can a2rise from
family ties, friendships, groups, and ethnic ties.
Based on several studies, Hanson (2009) said that
social networks focus on analyzing the individuals’
relationships with other individuals in accessing
resources through relationships, collective action, the
strength of relationships in networks and how to access
resources. Some studies have emphasized density,
cohesion, and openness (Murdiarta, 2009). In general,
Hanson (2009) concluded that social networking has
cognitive, relational, and structural dimension. The rst
dimension, the cognitive dimension, refers to sharing
language and meaning in networking. The relational
dimension refers to exchanges in relationships and
returns. An important aspect of the relational dimension
is trust. The third dimension, the structural dimension,
is a dimension to see the environment in general, both
within the network and outside the network. This
dimension focuses on relationships between actors
who form the relationship and how it can be formed.
In contrast to Hanson (2009), Chu (1996) divides the
nature of relationships between individuals in Chinese
ethnic business networks into four characteristics,
namely transactional relationships, communication
relations, instrumental relationships, and sentiment
relations. Transactional relationships are physical
and symbolic exchanges between individuals. A
communication relationship is a relationship between
the transfers of messages between individuals. An
instrumental relationship is an individual relationship
with one another in order to protect or secure goods,
services and valuable information. Whereas sentiment
relations refer to individual feelings with other
individuals in the network such as family characteristics
or ethnicity,
Whereas Keng (2001) divides the concept of networking
in business transactions into two-dimensional structures,
namely the level of relationship (strong-weak-no ties)
and the level of power distribution (vertical-horizontal
ties). From these two dimensions, Keng (2001)
developed a network dimension based on network
costs and network benets. A network can contribute
or not an economic activity depends on the appropriate
form of network that can be used so as to be able to
mobilize mutually benecial resources. A vertical
relationship form occurs when a company acquires a
lot of resources through a business network. While a
horizontal relationship form is a relationship structure
when the company distributes a lot of resources out
through the business network.
Based on the phenomena and previous research studies,
this research aims, rst, to nd out who are the actors in
the family business network at each stage of business
development. Secondly, this study aims to identify what
resources are distributed by each actor in the family
business network. Thirdly, this research aims to nd
out why relationships between actors can be formed
and nally how resource mobilization can be generated
through family business networks.
METHODS
The research subjects sampled in this study were
Chinese ethnic family business in Ponorogo The
number of respondents was determined using the
snowball technique, which was started by employees
or certain family condants who knew the Ponorogo
Chinese ethnic family business's intricacies.It did not
rule out the possibility of information being extracted
from the indigenous community (Javanese Ethnic) as
a resource. This snow-ball technique is carried out to
explore data from one respondent to other respondents
to key informants so that researchers do not nd new
information anymore.
The family business examined in this study are
associated with four extended families, namely the CN,
AL, BK and GM. CN and AL are “singkek” or “totok”
(native Chinese ethnicities) who started to build a
business in Ponorogo in the 1930s. The CN extended
family and the AL extended family are two extended
families who have ties through marriage. Currently,
CN and AL's children and grandchildren have many
companies in Ponorogo. Meanwhile BK and GM are
descendants of Chinese ethnicity who started to build
their business in the 1980s and currently the business s
managed by their children.
The process of collecting data is done by using in-
depth interviews. This method is carried out to dig
deeper into the family background, the actors behind
the family business, the bonds that are connected, as
well as matters relating to the dimensions of social
networking at the micro or individual level. The
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information extracted is not limited to the past but also
now as well as a description of the family company
in the future. The Interviews concentrated on each
stage of business growth, who the actors are support or
provide the resources, what the form of the relationship
and how resources are distributed between the actors.
So that the information received can be complete and
answer the research problem, the interview process is
done naturally, casual chat so that there is a kind of
discussion with research subjects as problem solvers
and researchers place themselves as anglers for
the emergence of problems so that more detailed
information from respondents appears. In the process
of retrieving data, it is not uncommon for researchers
to pretend to be buyers in stores owned by informants.
The interview process is conducted in an unstructured
manner but still in a structured outline so that it still
leads to dimensions in the business network. Literature
observations and studies are also carried out to explore
data that will be used to strengthen data obtained from
interviews. A list of informants and their descriptions
can be seen in Table 1.
Analysis of the data in this study is the analysis of
data through the process of induction-interpretation-
conceptualization. Detailed interview data are
interpreted and nally conceptualized within the
theoretical framework used. The analysis is carried
out by carrying out stages called grounded theory
(Herdiansyah, 2012). These stages include open coding,
axial coding, selective coding and nally conditional
matrix.
Table 1. List of informants
Informant Age Business Type Information Family
KJ 46 years Bakery Owner The successor to GM Family Business Member of GM family
HDR 35 years Owner of Digital
Printing and Design
Children KY (Owner of the Fashion shop)
Extended family CN
Member of CN family
BK 68 years Auto parts shop owner SC father, the owner of an auto parts shop Member of BK family
IB 70 years Business partner CN
Ethnic family
Javaness Ethnic Partner of CN family
GT 65 years The employee of
building shop
Javanese Ethnic Employee of CN family
HRM 60 years Owner of Building Shop The successor to business AL Large family Member of AL family
ARF 40 years Ownerof Digital
Printing
ExtendedFamily of AL Member of AL family
DN 39 years Owner of Digital
Printing, Entertainment,
ExtendedFamily of AL Member of AL Family
LRS 36 years Owner of Furniture
Store
Children from TTG Member of BK family
TT 40 years Owner of Palawija
Business
Extended Family of CN Member of CN family
LL 40 years Owner of Health and
Building Business
STN Child of Owner of Building Store Member of GM family
MR 38 years Mobile and electronics
shop owner
NH Child, beauty salon owner Member of BK family
MRN 48 years SL employee, owner of
the oil shop
Javanese Ethnic Employee of BK family
SN 41 years Household Appliance
Store, Baby Equipment,
Cafe
Chinese Ethnic married to Javanese ethnic Friend of GM family
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Vol. 7 No. 1, January 2021
Analysis of data begins with open coding. The researcher
tries to get as much data as possible regarding the
history of the business from four extended family (GM,
BK, AL and CN). Then axial coding is carried out to
compile and link data. Data analysis was performed by
reducing the data to the company's growth phase with
accompanying conditions, then the authors performed
selective coding. In this selective coding stage, the
researcher categorizes based on the actors who play a
role in each stage of the company's growth. Chu (1996)
and Minai et al. (2012) categorizes network actors into
three groups, Group I or informal network (family
members, relatives and friends), group II or formal
network (bank ofcials, suppliers and customers) and
group III or institutional network (government, trade
organization and social organization).
Furthermore, interpreting the categories based on
three aspects, namely resources (what resources can
be generated by each actors), the form or nature of
the relationship (why the relationship between actors
occur), and the structure of the relationship (how
resource mobilization can be generated). In this stage,
efforts are made to obtain several propositions. The last
stage is the conditional matrix, where the researcher
redevelops the proposition according to the conditions
and limitations of the phenomena raised. The results of
this analysis will provide a broad overview consisting
of specic schemes into a concept. The results of this
analysis will provide a broad general picture consisting
of specic schemes into a concept. This process is
carried out simultaneously so that it can get conclusions
that can answer the problems raised. Figure 1 is an
illustration of the research design carried out in this
study.
Social Network of Chinese Business
Entrepreneur in Ponorogo
Sample:
Four extended families (CN, AL, BK and GM)
Social Network of Chinese Busi-
ness Entrepreneur in Ponorogo
Data Intrepretation (selective coding):
- Actor
- Resources
- Form of relationship
- Structure of relationship
Data Reduction (axial coding):
stage of the company's growth
- Start up stage
- Growth stage
- Success stage
- Maturity stage
Data Verication and Conclusions
(conditional matrix)
Figure 1. Research framework
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RESULTS
Stage of Business Development of Ponorogo Chinese
Ethnic Entrepreneur
The scheme used in this study emphasizes the actors
in the network, related to the nature of the relationship,
access to resources and relationship structure based on
each stage of the development of the family business.
Targeting at this stage of the development of the family
business is important because it can identify different
strategic factors at each stage (McCline and Bhat,
2012). It is important to analyze the stages of business
development in order to provide a clearer pattern of
business networking patterns.
Some researchers have differences in identifying each
of these stages. As quoted in (McCline and Bhat, 2012),
Greiner (1972) identied ve stages of business growth
from the young to maturity while Adizes (1988) divided
business development into ten stages. While Chu
(1996) divides the stages of Chinese ethnic business
development into three stages, namely, the prestart-up,
start-up, and mature stages.
The results of interviews and observations in the eld
show that the growth of Chinese family business in
Ponorogo can be divided into four stages including
stage 1 (start up), stage II (growth), stage III (success)
and stage IV (maturity). In each stage can be divided
into several conditions. The following describes the
model of the Chinese ethnic family business network
at each stage of the company's growth, regarding the
conditions of the companions, the actors in the family
business network, the resources distributed, the form
and structure of the relationship.
Family Business Network at Start-up stage
The start-up phase is the initial stage of the business
being built. This stage starts with the idea planning
until the business runs for about one year. At this startup
stage, it covers two conditions namely new business
conditions and new branch conditions. A new business
condition is a type of business that has no connection
with a family business or has a different type of industry.
While the new branch is a type of business that is still
the same as a family business or is engaged in the same
industry. This new business that is still related to this
family business is a branch of the main family business
branch. The initial business network pattern can be
seen in Table 2.
Interviews show that at the beginning of business
ideas can come from the nuclear family and friendship
networks (informal network). Business ideas that
originate from the nuclear family lead to business
ideas that are still related to parents' business or family
business. While friendship or community networks,
many of which lead to the formation of new businesses
that are not related to family business or parents.
Table 2. Family business network of Chinese ethnic entrepreneur at start-up stage
Condition Description
Condition
Actor Resource Form/nature of
Relationship
Relationship
Structure
Condition of the
New Branch
The business still
related to the
family business
NuclearFamily The Entire
Resources
Sentiment Vertical
New Business
Conditions
Business not
related to the
family business.
NuclearFamily Finance, Transactional,
Sentiment
Vertical
Friend Ideas, supplier
access, market
access.
Communication,
Sentiment
Vertical
Extended Family, Finance, Market
Access,
Transactional,
Communication,
Sentiment
Horizontal
Vertical
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Indonesian Journal of Business and Entrepreneurship,
Vol. 7 No. 1, January 2021
a lot of support by promoting the newly built business.
Forms of communication relationships with extended
family and friends provide many benets to gain
market access.
Forms of sentiment relations with nuclear families,
extended families and friends provide benets to
market access and access to suppliers. The sentiment
relationship lacks benets in nancial access. The
newly built entrepreneur or business owner can utilize
the sentiment relationship of this family to get nancial
support by proving that his business can succeed.
While sentiment relations with friends usually bring up
new business ideas that are partnerships. As SN and
his friends did in starting their business cafe business.
Communication and sentiment relationships with
friends can bring up business ideas that are realized
together.
Family Business Network at Growth Stage
The growth stage is the stage of business development
that has been running for one to three years. Based on
sales and prot growth, this growth stage is divided
into three conditions: Low or slow, medium growth
conditions and high or fast growth. Low growth is a
condition the company has not been able to achieve
the expected sales. The business is running but not yet
as expected. Growth which is in the form of company
concessions makes a prot but sales growth is not too
high. While the high growth conditions are conditions
of growth and sales are very high or even more than
expected. In this condition, the company gets a lot
of prot and the business grows rapidly. Based on
the results of interviews and observations, it shows
that different conditions at this stage of growth have
different network patterns. Better company growth has
more complex network actors and patterns. There is
a relationship between network density and company
growth.
The condition of companies that experience poor
growth tends to have the same actors at the initial
stage. Entrepreneurs have not been able to use
friends to access suppliers to enter as actors in their
networks. The difference with the new business
conditions, the nuclear family and extended family
still provide nancial resource support but in the form
of sentiment relations. Higher support is provided in
the form of resources to gain market access through
communication and sentiment. As acknowledged by
In the condition of the new branch, relations with
the nuclear family more direct the form of sentiment
relations that are familial. This form of relationship
has a very strong level between father and son but not
too strong at the level of fellow children (brothers and
sisters). Some respondents claimed that the new branch
that was established was fully supported by the parents'
business. Children are given full authority to manage
the new branches built by parents. All resources are
channeled from the core family business to the newly
established branch. The relationship structure is
vertical, that is, the new branch has a lot of support
from other actors (nuclear families) in the network.
The pattern of networking is to clone a network that is
already owned by a nuclear family. The nuclear family
(especially parents) often acts as a "connecting bridge"
in building this new network pattern.
This condition occurs because Chinese ethnic
entrepreneurs lack access to a wide network of friends.
Based on interviews, LRS, who opened a new furniture
shop as a branch of the furniture store, said that their
parents did not hang out much with friends, both school
friends, and the community. LRS feels fortunate to
have parents who have established businesses and have
good growth.
Friendship relationships and the community more
leads to the emergence of new business conditions
that are not related to the family business. Forms of
communication with friendships are able to bring
up new business ideas in the startup stage. A form
of relationship with the nuclear family and extended
family has a transactional form. Resources transferred
to new business are not provided without accountability.
ARF is a Chinese entrepreneur who opened a digital
printing business, claimed to have to make business
proposals to get nancial capital support from nuclear
families and extended families. Even MR (another
respondent) had to convince his father that the money
he had borrowed in opening his cellphone shop could
be returned. Opening a new business that is not related
to the family business really requires the trust of parents
to get resource support, especially nancial support.
In addition to the form of transactional relationships
to access nancial resources, forms of relations with
nuclear families and extended families also have forms
of communication relationships. MR admitted that
many parents were directed towards managing their
business. MR also said that his extended family gave
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KJ, this bakery entrepreneur gets a lot of new buyers
from the information of his extended family and friends.
The development of sales requires the ability to utilize
incoming buyers as actors in the network.
In moderate growth conditions, Ponorogo Chinese
ethnic entrepreneurs are usually able to develop
networks at an early stage. Financial support from
the nuclear family which was originally shaped as a
sentiment relationship becomes more transactional.
Financial access can also be utilized from transactional
relationships with extended family, friends and even
suppliers. In this condition, the company is usually
trusted to get trade debts from suppliers. Family
support to get market access is higher. However, the
use of buyers and communities to gain market access is
still not optimal. Family business network of Chinese
ethnic entrepreneur at growth stage in Table 3.
Family Business Network at Success Stage
High sales growth followed by increasing prots
shows the family company is in a state of success.
In this condition of success, the pattern of business
networks is becoming increasingly widespread and
congested. Actors in the network have developed in
a broader group, namely: buyers, suppliers, banking,
environment, and government. The higher the
growth and development of the company, the more
transactional relationships become. Relationships with
the wider group are also stronger than with family and
friendship networks. Large families and friendships
that support increasingly weaker nancial access are
replaced by increasingly strong relations with banks.
Sales success is also followed by a form of instrumental
relationships that are more protective and retain their
resources. This instrumental relationship occurs with
buyers, the environment and the government. Some
respondents (TT, MRS, BJ, DN, and SL) claimed that
they were always approached by the environment to be
asked for donations when there were events involving
environmental residents such as august, fasting,
community service and so on. SL respondents even
raised the village thugs in their business environment
as employees so that the business was safe and
undisturbed.
This stage of success is the culmination of the triumph
of the family business. Individual owners or business
controllers have the ability and ease to become a
"magnet" in capturing new actors to expand the network.
At this stage, Chinese ethnic entrepreneurs expand a
lot, open new businesses and branches, and create new
networking patterns. Network expansion does not only
occur with the addition of actors but also the expansion
of new network patterns. Family business network of
chinese ethnic entrepreneur at success stage in Table
4.
Family Business Network at Maturity Stage
After going through the peak of business development,
the next stage is the stage of maturity. The maturity
stage is a stage that has passed the stage of growth.
This stage usually occurs at the age of the company for
more than 5 years. In this stage of maturity, there are
two conditions that accompany, namely the condition
of stability, and conditions of decline. Stability is
indicated by stable sales or steady growth. While the
condition of decline is indicated by sales that began
to decline. Many buyers are starting to switch to other
products.
Table 3. Family business network of Chinese ethnic entrepreneur at growth stage
Condition Description
Condition
Actor Resource Form/nature of
Relationship
Relationship
Structure
Low Growth
Conditions
There is growth,
but not as
expected.
Nuclear family
Extended family
Friendship
Finance, Market
access
Sentiment,
Communication
Vertical
Condition of
Moderate Growth
Sales run well,
but the sales is a
stable
Nuclear family
Extended family
Friendship
Finance Transactional Vertical
Market Access
Supplier Access
Communication Vertical
Supplier Finance,
Raw Material
Inventory,
Transactional Vertical
Community of
Buyers
Market Access Transactional
Communication
Vertical
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In this condition of stability, ethnic Chinese
entrepreneurs Ponorogo use nuclear family relations,
extended family or friends, to open new businesses.
Entrepreneurs create new network patterns together
by binding actors in their networks. In the process of
building this new network pattern, entrepreneurs act
as actors as well as a bridge between their previous
network patterns.
In the declining conditions, some actors in the
network began to be detached. Most relationships are
transactional. The sentiment relationship still exists
in relation to the nuclear family so that it can still be
used to access all resources. Communication with
extended families, friends or communities has the
benet of getting business ideas and market aspects,
but to get nancial support is obtained through a form
of transactional relationships. The form of instrumental
relations is only in relation to the government. Even
in conditions of decline, ethnic Chinese entrepreneurs
feel they still need to establish relationships with the
government relating to legal and tax matters. Family
business network of Chinese ethnic entrepreneur at
maturity stage in Table 5.
In conditions of stability, actors and access to resources
in the network are still the same as actors in the success
stage but have different forms and structures. The
expansion of actors in the network is not done much.
Even relationships with groups such as nuclear family,
extended family, friends, and community become
sentiment and communication. The relationship
structure becomes more vertical. Not to get support,
it is to give support. The ability to be a magnet in a
network is still owned but not widely used.
While the form of transaction and communication
relations with external groups such as suppliers,
buyers, communities and banks and the government
remains strong. The form of instrumental relations is
not too much because in the condition of companies
like this, ethnic Chinese entrepreneurs Ponorogo feel
that there is not much that needs to be maintained and
maintained.
Table 4. Family business network of chinese ethnic entrepreneur at success stage
Stage Condition
Information
Actor Resource Form of
Relationship
Relationship
Structure
Condition
High Growth
Market growth
and sales are very
high
Nuclear Family
Extended Family
All resources Transaction Horizontal
Nuclear Family
Extended Family
Friendship
Community
Market Access
Labor
Communication Horizontal
Buyer Market Access
Information
Communication
Transactional
Instrumental
Horizontal
Supplier Finance,
Raw Material
Inventories
Transactional Horizontal
Banking Finance Transactional Horizontal
Environment Labor Transaction Horizontal
Instrumental Vertical
Information Instrumental
Sentiment
Vertical
Government Information Instrumental Vertical
Horizontal
Indonesian Journal of Business and Entrepreneurship, Vol. 3 No. 2, May 2017
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Table 5. Family business network of Chinese ethnic entrepreneur at maturity stage
Stage Information on
Condition
Actor Resources Form/nature of
Relationship
Relationship
Structure
Condition of
Stability
Sales run well,
and the sales is a
stable
Nuclear family The entire
resources
Sentiment
Transactional
Vertical
Condition of
Stability
Sales run well,
and the sales is a
stable
Extended family Friend Market Access
Labor
Finance
Sentiment Vertical
Community Market Access Sentiment Vertical
Supplier Access Transactional Horizontal
Banking Finance Transactional Horizontal
Environment Labor Market Communication Vertical
Government Information Instrumental
Communication
Vertical
Horizontal
Declining
Conditions
Sales and growth
has decreased
Nuclear family The entire
resources
Sentiment
Transaction
Vertical
Extended family
Friend Community
Market Access
Labor
Finance
Business Idea
communication
Transaction
Horizontal
Supplier Finance Transaction communication
Banking Finance Transaction Horizontal
Government Information Instrumental Vertical
Horizontal
Business network patterns can be used to explain
the successes and failures of family businesses. The
accuracy of entrepreneurs in accessing resources can
be a social capital that can be used to support business
towards success. The family business network of
Ponorogo Chinese ethnic entrepreneur has a different
pattern in each stage of development and conditions.
This nding consistent with Blanchett et al. (2019) and
Lechner Dowling, and Welpe (2006) who told there are
different impacts regarding social networking for new
rms or old rms. Peltier and Naidu (2012) show that
social networks for small businesses change as rms
transition from startup to growth and beyond. According
to Witt (2004), the stage of the new rm can affect the
impact of social networking. Family business network
develop along with the stages of development and
growth conditions of the business.The higher stage of
growth and development, make networks more dense,
large and complex. The more actors involved in it, the
more varied the nature or form of the relationship.
At the start-up stage, actors in the network are still
limited to informal network (nuclear family, extended
family and network of friends). At the growth stage, the
actor in family business network become wider. These
results are consistent with the ndings of Chu (1996) on
entrepreneurs in Hong Kong. Family business network
is becoming wider from informal network (family,
friendship) into formal network (suppliers, buyers and
banking).
Chinese ethnic entrepreneur in Ponorogo does not
take advantage of institutional network (government,
trade and social organizations). Relationship with the
institutional network only occur when the company is
growing rapidly and entering a stage of maturity. This
nding is in accordance with the opinion of Minai
et al. (2012) which states that the majority of the
Chinese SMEs in Malaysia seldom communicate with
government. Chinese ethnic entrepreneur in Ponorogo
has relationship with the government mostly only to
protect and secure valuable resources (instrumental
relationship).
At the start-up and growth stages, Ponorogo Chinese
ethnic entrepreneurs get access to nance resource
from informal network such as family or friends. The
form of the relationship to obtain nancial resources
is always transactional even though the actors in the
network are nuclear families. Before their business
reaches a success stage they tend to avoid relationship
with banks to get funding. This result is in line with the
Indonesian Journal of Business and Entrepreneurship, Vol. 3 No. 2, May 2017
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Indonesian Journal of Business and Entrepreneurship,
Vol. 7 No. 1, January 2021
form of the relationship. At the start up stage, family
companies obtained a lot of resources from networks,
especially informal networks. Formal networks
(relationships with suppliers, buyers, banking and so
on) are being formed, at the growth stage. Whereas the
relationship with the government and the environment
(institutional network) is formed when the family
business is at the stage of success.
Most informal networks are formed due to sentiment
and communication relationships, but this relationships
do not apply when exchanging nancial resources.
Exchange of nancial resources is often transactional
even with family or friends (informal network). Formal
networks are due to transactions relationship, while
institutional networks are based on instrumentals.
The family business get a lot of resource support from
the network at startup to the growth stage. However,
when business reaches the success stage the family
business starts distributing its resources to the network.
In family business network, resources mobilization
ows from developed and successful family business
to start-up business.
Recommendations
This paper contributes to existing knowledge as
preliminary research how family networks are researched
in relation to ethnic minority entrepreneurship. We
hope this research will stimulate further research on the
family business and ethnic minorities entrepreneurship.
The results of this study have implications for minority
ethnic entrepreneurs to utilize the network patterns
they have to gain access to the needed resources. In
the initial stage (start-up) minority entrepreneur can
take advantage of sentiment and communication
relationships through informal and formal networks to
obtain valuable resources. Limitation of this research is
its relatively small sample size and most of the samples
used are limited to trading companies. To obtain a
deeper understanding of the family business network
of Chinese ethnic entrepreneurs, future research would
have to include a larger sample of family business from
variety industries. Future studies are advised to examine
the broader context, empirically testing, so that it can
provide stronger evidence
ndings of Hamed (1995) in Minai et al. (2012) which
states that the Chinese has been found to receive more
than 60% of nance source from family members.
Consisten with Blanchett et al. (2019), there are different
impacts regarding social networking for condition of
company. Successful family business can be magnets
for building and determining family network patterns.
The more growth is achieved the higher the nature or
form of the relationship the more transactional and
instrumental relationships. However, when a decline
condition occurs, the form of the relationship becomes
more sentiment and communication. The forms of the
relationship that occurs depend on the condition of
the company. Blanchett et al. (2019) argue that age of
the rm will be important to identify impacts of social
networks on a rm’s success.
This also happens with structure of relationship or how
resources are transferred. How resources can contribute
or not to an economic activity depend on condition
of the company. At the start-up and growth stages,
company acquires a lot of resources through informal
network. However, when it is at the high growth stage,
the company distributes a lot of resources out through
informal and formal network.
Managerial Implications
This study provides a portrait of how family business
network can provide access to market, nance, labor,
information, and other resources that help minority
entrepreneurs succeed in managing their family
business. This research has implications for small
entrepreneurs, especially minority entrepreneurs, to
understand how resource mobilization can be generated
from the network. Small entrepreneurs are encouraged
to optimize informal networks through sentiment
relationship to acquire resources at start-up business..
CONCLUSIONS AND RECOMMENDATIONS
Conclusions
The higher stage of growth and development, make
networks more dense, large and complex. The more
actors involved in it, the more varied the nature or
Indonesian Journal of Business and Entrepreneurship, Vol. 3 No. 2, May 2017
29
P-ISSN: 2407-5434 E-ISSN: 2407-7321
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Indonesian Journal of Business and Entrepreneurship,
Vol. 7 No. 1, January 2021
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