The problems of using social networks in entrepreneurial resource acquisition

Abstract

This article identifies and classifies the problems perceived by entrepreneurs when they use social network ties (direct and indirect ties) to acquire resources during the early stages of new venture formation process. On the basis of field interviews with 128 high-tech entrepreneurs in Singapore, the author finds that entrepreneurs have a high level of awareness of the potential problems of social networks, though they rely extensively on network ties. Substantial variations occur across the three dimensions of potential problems (information, influence and solidarity) and three types of resources (financial resources, key team members and lead users). This study offers a more complete understanding of how and why entrepreneurs use social networks and the influence of their use on the entrepreneurial process.