Cardim, Mafalda Reis Janela
(2005)
Help or hindrance? The role of social networks in the start-up and development of low technology and low credit small businesses in Portugal.
PhD thesis, London School of Economics and Political Science.
Abstract
This thesis evaluates how the social capital embodied in social networks influences the performance of small businesses. Specifically, it assesses whether the use of social networks is beneficial or detrimental to the development of the business. It is based on the analysis of a sample of 42 Portuguese small business partnerships in the furniture and graphic arts industries. To assess the social determinants of failure and success, I sampled a population of businesses according to their perfonnance, and systematically compared their histories. The method of data collection, the narrative interview, focused on the development of businesses from their start-up in 1993 until 2000, when the data were collected. I find that the use of social ties is essential for the start-up and survival of businesses. Once this first stage of business development is overcome, however, there are two negative impacts of social networks. At the second stage of development, the dependence on social networks stifles growth. Ventures that desire to grow have to become independent from their social network, and have to rationalize production. A further negative effect arises from malfeasance within the partnership, which often condemns the business to failure. The thesis concludes that while social networks are essential in the early stages of a business, they later often become detrimental to its development, and can even be the leading cause behind a business's demise.
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