Performance Spillover Effects in Entrepreneurial Networks: Assessing a Dyadic Theory of Social Capital

Abstract

We study how social capital induces performance spillover effects in an industry network of entrepreneurs building their own hydroelectric micro–power plants. Most of them are farmers and novices living in rural areas. There is a link between social capital and performance at firm level. By expanding the level of analysis to dyads, we find that entrepreneurs lacking social capital can compensate for this through cohesion with colleagues rich in social capital. Entrepreneurs can also benefit by mimicking the networking patterns of successful colleagues, gaining access to equivalent resources developed in the niche.