Networking Frictions and Entrepreneurial Learning in Developing Economies

Abstract

Relationships with peers help entrepreneurs learn and improve firm performance. Recent scholarship confirms that events—social gatherings such as mixers, conferences, or training programs—can help entrepreneurs build valuable social connections. Yet, for entrepreneurs in developing economies, networking frictions may make connecting with peers challenging and undermine the benefits of events. We argue that when networking frictions are high, the value of events will lie more in connecting neighbors rather than bringing together distant peers. In the presence of networking frictions, neighbors are both less likely to be someone the entrepreneur has already learned from and easier to sustain a relationship with. To test this argument, we use data from a series of networking events in Togo during which entrepreneurs were randomly assigned to meet with peers from across the city of Lomé. We find that entrepreneurs who were assigned to neighboring peers were much more likely to sustain a relationship, learn from their peer’s management knowledge, and in turn benefit more: Profits increase by 10% when entrepreneurs get to know peers who are located on average 1 km closer to them. Our results highlight the central role that networking frictions play in shaping who entrepreneurs in developing economies can successfully learn from. This paper was accepted by Lamar Pierce, organizations. Funding: Ewing Marion Kauffman Foundation [Dissertation Fellowship] and the Strategic Management Society [SRF Dissertation Fellowship]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.00281 .