Network Structure and Innovative Performance of African Entrepreneurs: The Case of Uganda

Abstract

In this study, we examine the impact of social capital on entrepreneurial innovativeness in an African context. Social capital refers to resources that are embedded in a durable network of relationships. This article focuses specifically on the structure of networks. There are two main views on the relation between network structure and entrepreneurial performance. One view argues that closed networks are beneficial for cooperation and resource sharing, which is needed to implement an innovation, while another view argues that closed networks constrain entrepreneurs, since it is open networks that provide entrepreneurs with fresh information and ideas. Based on these arguments, we hypothesise that the relationship between the degree of constraint of a network and innovative performance has an inverted U-shape. We also examine the hypothesis that overlap between personal and business networks will hamper innovative performance of entrepreneurs because information will be less diverse and heterogeneous, and because re-distributive kinship obligations may act as a drain on entrepreneurial resources. We test our hypotheses using a recent survey of about 700 Ugandan rural and urban entrepreneurs. Our hypotheses are supported in the urban sample, but not in the rural sample.