Social capital and entrepreneurial process

  • Elvin AfandiEmail author
  • Majid Kermani
  • Fuad Mammadov


The paper examines the relationship between social capital and entrepreneurial engagement of individuals in 35 nations from Europe and Asia. To the best of our knowledge, this is the first empirical research that attempts to investigate the influence of three-dimensional social capital concept – trust, networks and norms – on three stages of entrepreneurial process – preference, trial and success – using such large and comprehensive cross-sectional micro data. In general, we find that all three dimensions of social capital matter in the entrepreneurship context, albeit differently. They become beneficial in different ways and at different stages of entrepreneurial involvement. For example, among trust variables, institutional trust in general, and trust in business-oriented and business-supporting actors in particular, exert significant positive effect on entrepreneurial process. Individuals with formal membership in professional associations are more likely to perceive entrepreneurial opportunities, while some close or strong-tie networks might prevent them from progressing in the entrepreneurship ladder. Finally, individual level civic norms appear to be negatively associated with early-stage entrepreneurship, while the success in becoming an entrepreneur is not found to be bound by people’s civic norms.


Entrepreneurial process Social capital Trust Networks Civic norms Transition economies 

JEL classifications

L26 D8 J24 



We acknowledge the support of the Economics Education and Research Consortium (EERC) in Ukraine for funding this research.


  1. Acs, Z., & Varga, A. (2005). Entrepreneurship, agglomeration and technological change. Small Business Economics, 24(3), 323–334.CrossRefGoogle Scholar
  2. Acs, Z., Arenius, P., Hay, M., Minniti, M., (2005). Global entrepreneurship monitor: 2004 executive report. Babson Park, MA: Babson College and London: London Business School.Google Scholar
  3. Afandi, E., & Kermani, M. (2015). Bridging the gender gap in entrepreneurship: an empirical analysis. Journal of Developmental Entrepreneurship, 20(2).Google Scholar
  4. Aldrich, H. (2000). Entrepreneurial strategies in new organizational populations. In R. Swedberg (Ed.), Entrepreneurship: the social science view. Oxford: Oxford University Press.Google Scholar
  5. Ardagna, S., Lusardi, A., (2008). Explaining international differences in entrepreneurship: the role of individual characteristics and regulatory constraints, NBER Working Paper No. 14012.Google Scholar
  6. Arenius, P., & Clercq, D. (2005). A network-based approach on opportunity recognition. Small Business Economics, 24(3), 249–265.CrossRefGoogle Scholar
  7. Audretsch, D.B., Keilbach, M.C., Lehman, E.E., (2006). Entrepreneurship and economic growth. Oxford: Oxford University Press.Google Scholar
  8. Batjargal, B. (2003). Social capital and entrepreneurial performance in Russia: a longitudinal study. Organization Studies, 24(1), 535–556.CrossRefGoogle Scholar
  9. Batjargal, B. (2010). The effects of network's structural holes: polycentric institutions, product portfolio, and new venture growth in China and Russia. Strategic Entrepreneurship Journal, 4(2), 146–163.CrossRefGoogle Scholar
  10. Baum, C., (2006). An introduction to modern econometrics using Stata. College Station, TX: Stata Press.Google Scholar
  11. Bennet, R., & Robson, P. (1999). The use of external business advice by SME’s in Britain. Entrepreneurship and Regional Development, 11(2), 155–180.CrossRefGoogle Scholar
  12. Blanchflower, D. G., Oswald, A., & Stutzer, A. (2001). Latent entrepreneurship across nations. European Economic Review, 45(4–6), 680–691.CrossRefGoogle Scholar
  13. Bono, J. E., & McNamara, G. (2011). From the editors: publishing in AMJ – part 2: research design. Academy of Management Journal, 54(4), 657–660.CrossRefGoogle Scholar
  14. Bonte, W., & Piegeler, M. (2013). Gender gap in latent and nascent entrepreneurship: driven by competitiveness. Small Business Economics, 41(1), 961–987.CrossRefGoogle Scholar
  15. Bourdieu, P. (1986). The forms of capital. In handbook of the judgment of taste. Cambridge, MA: Harvard University Press.Google Scholar
  16. Bruederl, J., & Preisendorfer, P. (1998). Network support and the business of newly founded businesses. Small Business Economics, 10(3), 213–225.CrossRefGoogle Scholar
  17. Burt, R.S., (1992). Structural holes: the social structure of competition. Cambridge, MA: Harvard University Press.Google Scholar
  18. Burt, R. S. (1997). The contingent value of social capital. Administrative Science Quarterly, 42(2), 339–365.CrossRefGoogle Scholar
  19. Butler, E., & Hansen, S. (1991). Network evolution, entrepreneurial success, and regional development. Entrepreneurship and Regional Development, 3(1), 1–16.CrossRefGoogle Scholar
  20. Coleman, J. (1988). Social capital in creation of human capital. American Journal of Sociology, 94, S95–S120.CrossRefGoogle Scholar
  21. Coleman, J., (1990). Equality and achievement in education. Boulder, CO: Westview Press.Google Scholar
  22. Davidson, P., & Honig, B. (2003). The role of social capital and human capital among nascent entrepreneurs. Journal of Business Venturing, 18(3), 301–331.CrossRefGoogle Scholar
  23. Davidson, P., & Wiklund, J. (1997). Conceptual and empirical challenges in study of firm growth. In P. Davidson (Ed.), Entrepreneurship and the growth of firms. Cheltenham: Edward Elgar Publishing.Google Scholar
  24. De Clercq, D., Arenius, P., (2003). Effects of human capital and social capital on entrepreneurial activity, Working Paper Steunpunt OOI.Google Scholar
  25. De Clercq, D., Danis, W., & Dakhli, M. (2010). The moderating effect of institutional context on the relationship between associational activity and new business activity in emerging economies. International Business Review, 19(1), 85–101.CrossRefGoogle Scholar
  26. Demirgüç-Kunt, A, Klapper, L., Panos G., (2007). The origins of self-employment. Washington DC: Working paper, Development Research Group, World Bank.Google Scholar
  27. Doh, S., & Zolnik, J. (2011). Social capital and entrepreneurship: an exploratory analysis. African Journal of Business Management, 58(12), 4961–4975.Google Scholar
  28. Elfring, T., & Hulsink, W. (2007). Networking by entrepreneurs: patterns of tie formation in emerging organization. Organization Studies, 28(12), 1849–1872.CrossRefGoogle Scholar
  29. Elster, J. (1989). Social norms and economic theory. Journal of Economic Perspectives, 3(4), 99–117.CrossRefGoogle Scholar
  30. Estrin, S., Mickiewicz, T., & Stephan, U. (2013). Entrepreneurship, social capital, and institutions: social and commercial entrepreneurship across nations. Entrepreneurship: Theory and Practice, 37(3), 479–504.Google Scholar
  31. European Bank for Reconstruction and Development (EBRD). (2011). Life in transition: after crisis, London, UK.Google Scholar
  32. Fafchamps, M., Minten, B., (1999). Social capital and the firm: evidence from agricultural trade. Social capital initiative working paper 17. Washington DC: World Bank.Google Scholar
  33. Fukuyama, F., (1995). Trust: the social virtues and the creation of prosperity. NY: Free Press.Google Scholar
  34. Gartner, W.B., Carter, N.M., (2003). Still trying after all these years: Nascent entrepreneur “semi-survivor” bias in the panel study of entrepreneurial dynamics. Paper presented at the Academy of Management Meetings, Seattle, Washington, August 2003.Google Scholar
  35. Gedajlovic, E., Honig, B., Moore, B. C., Payne, G. T., & Wright, M. (2013). Social capital and entrepreneurship: a schema and research agenda. Entrepreneurship: Theory and Practice, 37(3), 455–478.Google Scholar
  36. Giannetti, M., & Simonov, A. (2004). On the determinants of entrepreneurial activity: social norms, economic environment and individual characteristics. Swedish Economic Policy Review, 11, 269–313.Google Scholar
  37. Glaeser, L., Laibson, I., Scheinkman, A., & Soutter, L. (2000). Measuring trust. Quarterly Journal of Economics, 115(3), 811–846.CrossRefGoogle Scholar
  38. Goel, S., & Karri, R. (2006). Entrepreneurs, effectual logic and over-trust. Entrepreneurship: Theory and Practice, 30, 477–493.Google Scholar
  39. Granovetter, M. (1985). Economic action and social structure: a theory of embeddedness. American Journal of Sociology, 91(3), 481–510.CrossRefGoogle Scholar
  40. Greve, A. (1995). Networks and entrepreneurship. Scandinavian Journal of Management, 11(1), 1–24.CrossRefGoogle Scholar
  41. Greve, A., & Salaff, W. (2003). Social networks and entrepreneurship. Entrepreneurship: Theory and Practice, 28(1), 1–22.Google Scholar
  42. Grilo, I., & Irigoyen, M. (2006). Entrepreneurship in the EU: to wish and not to be. Small Business Economics, 26(4), 305–318.CrossRefGoogle Scholar
  43. Grilo, I., Thurik, R., (2006). Entrepreneurial engagement levels in European Union. Scientific Analysis of Entrepreneurship and SMEs (SCALES) Paper N200515.Google Scholar
  44. Grilo, I., & Thurik, R. (2008). Determinants of entrepreneurial engagement levels in Europe and the US. Industrial and Corporate Change, 17(6), 113–1145.CrossRefGoogle Scholar
  45. Grootaert, C., Bastelaer, T. (Eds.), (2002). Understanding and measuring social capital: a multidisciplinary tool for practitioners. Washington D.C: The World Bank Press.Google Scholar
  46. Habibov, N., & Afandi, E. (2011). Self-rated health and social capital in transitional countries: multilevel analysis of comparative surveys in Armenia, Azerbaijan and Georgia. Social Science and Medicine, 72(7), 1193–1204.CrossRefGoogle Scholar
  47. Hite, J., & Hesterley, W. (2001). The evolution of firm networks: from emergence to early growth of the firm. Strategic Management Journal, 22(3), 275–286.CrossRefGoogle Scholar
  48. Hoang, H., & Antoncic, B. (2003). Network-based research in entrepreneurship: a critical review. Journal of Business Venturing, 18(2), 165–187.CrossRefGoogle Scholar
  49. Höhman, H., & Malieva, E. (2005). The concept of trust: some notes on definitions, forms and sources. In H. Höhman & F. Welter (Eds.), Trust and entrepreneurship. Cheltenham: Edward Elgar Publishing.CrossRefGoogle Scholar
  50. Höhmann, H., Welter, F. (Eds.), (2005). Trust and entrepreneurship: A West-East perspective. Cheltenham, UK: Edward Elgar.Google Scholar
  51. Jack, S. L. (2005). The role, use and activation of strong and weak network ties: a qualitative analysis. Journal of Management Studies, 42(6), 1233–1259.CrossRefGoogle Scholar
  52. Johannisson, B., Ramirez-Pasillas, M., (2001). Networking for Entrepreneurship: Building a Topography Model of Human, Social, and Cultural Capital. In W. Bygrave et al., (Eds.), Frontiers for Entrepreneurship Research 2001. Wellesley, MA: Center for Entrepreneurial Studies, Babson College.Google Scholar
  53. Kandori, M. (1992). Social norms and community enforcement. The Review of Economic Studies, 59(1), 63–80.CrossRefGoogle Scholar
  54. Khayesi, J., & George, G. (2011). When does the socio-cultural context matter? Communal orientation and entrepreneurs’ resource accumulation efforts in Africa. Journal of Occupational and Organizational Psychology, 84(3), 471–492.CrossRefGoogle Scholar
  55. Knack, S., & Keefer, P. (1997). Does social capital have an economic pay-off? A cross-country investigation. Quarterly Journal of Economics, 112, 1251–1288.CrossRefGoogle Scholar
  56. Krueger, N. F., Reilly, M. D., & Carsrud, A. L. (2000). Competing models of entrepreneurial intentions. Journal of Business Venturing, 15(5), 411–432.CrossRefGoogle Scholar
  57. Kwon, S., & Arenius, P. (2010). Nations of entrepreneurs: a social capital perspective. Journal of Business Venturing, 25(3), 315–330.CrossRefGoogle Scholar
  58. Liao, J., & Welsch, H. (2005). Roles of social capital in venture creation: key dimensions and research implications. Journal of Small Business Management, 43(4), 345–362.CrossRefGoogle Scholar
  59. Light, I., & Dana, L. P. (2013). Boundaries of social capital in entrepreneurship. Entrepreneurship: Theory and Practice, 37(3), 603–624.Google Scholar
  60. Luhmann, N., (2000). Vertrauen: ein Mechanismus der Reduktion sozialer Komplexität. Stuttgart: Lucius & Lucius.Google Scholar
  61. Lyon, F. (2000). Trust, networks, and norms: the creation of social capital in agricultural economies of Ghana. World Development, 28(4), 663–681.CrossRefGoogle Scholar
  62. Martez, B., & Rodriguez, L. (2004). Church membership, social capital, and entrepreneurship, in Brazilian communities in the U.S. International Research in the Business Discipline, 4(1), 171–201.Google Scholar
  63. Meek, W. R., Pacheco, D. F., & York, J. G. (2009). The impact of social norms on entrepreneurial action: evidence from the environmental entrepreneurship context. Journal of Business Venturing, 25(5), 493–509.CrossRefGoogle Scholar
  64. Nahapiet, J., & Ghoshal, S. (1998). Social capital, intellectual capital, and the organizational advantage. Academy of Management Review, 23(2), 242–266.Google Scholar
  65. Nikolova, E., Simroth, D., (2013). Does cultural diversity help or hinder entrepreneurship? Evidence from Eastern Europe and Central Asia. Working Paper 158, European Bank for Reconstruction and Development (EBRD).Google Scholar
  66. Nikolova, E., Ricka, F., Simroth, D., (2012). Entrepreneurship in transition region: an analysis based on the life in transition survey. Working Paper 141, European Bank for Reconstruction and Development (EBRD).Google Scholar
  67. Ostrom, E., (2005). Understanding institutional diversity. Princeton, NJ: Princeton University Press.Google Scholar
  68. Paxton, P. (1999). Is social capital declining in the United States? A multiple indicator assessment. American Journal of Sociology, 105, 88–127.CrossRefGoogle Scholar
  69. Paxton, P. (2002). Social capital and democracy: Ad interdependent relationship. American Sociological Review, 67(2), 254–277.Google Scholar
  70. Puffer, M. S., McCarthy, J. D., & Boisot, M. (2009). Entrepreneurship in Russia and China: the impact of formal institutional voids. Entrepreneurship: Theory and Practice, 34(3), 441–467.Google Scholar
  71. Putnam, R., (2000). Bowling alone – the collapse and revival of American community. NY: Simon & Schuster Press.Google Scholar
  72. Raiser, M. (1999). Trust in transition. EBRD Working Paper, No. 39, London.Google Scholar
  73. Reynolds, D. (1997). Who starts new firms? – preliminary explorations of firms-in-gestation. Small Business Economics, 9(5), 449–462.CrossRefGoogle Scholar
  74. Reynolds, D., Bosma, N., Autio, E., Hunt, S., de Bono, N., Servais, I., Lopez-Garcia, P., & Chin, N. (2005). Global entrepreneurship monitor: data collection design and implementation 1998-2003. Small Business Economics, 24(3), 205–231.CrossRefGoogle Scholar
  75. Riordion, W., (2004). Plunkitt of Tammany Hall. Whitefish, MT: Kessinger Publishing (originally published in 1905).Google Scholar
  76. Rousseau, D., Sitkin, S., Burt, R., & Camerer, C. (1998). Not so different after all: a cross-discipline view of trust. Academy of Management Review, 23(3), 393–404.CrossRefGoogle Scholar
  77. Saegert, S., Thompson, P., Warren, R., (2001). Social capital and poor communities. New York: Russell Sage.Google Scholar
  78. Sako, M., (1992). Prices, quality, and trust: interfirm relations in Britain and Japan. Cambridge, UK: Cambridge University Press.Google Scholar
  79. Scarbrough, H., Swan, J., Amaeshi, K., & Briggs, T. (2013). Exploring the role of trust in the deal-making process for early-stage technology ventures. Entrepreneurship: Theory and Practice, 37(5), 1203–1228.Google Scholar
  80. Schenkel, T., Hechavarria, M., & Matthews, H. (2009). The role of human and social capital and Technology in Nascent Ventures. In P. D. Reynolds & R. T. Curtin (Eds.), New firm creation in the United States (pp. 157–183). Berlin, Heidelberg, New York: Springer.CrossRefGoogle Scholar
  81. Shane, S., & Cable, D. (2002). Network ties, reputation, and the financing of new ventures. Management Science, 48(1), 364–381.CrossRefGoogle Scholar
  82. Shane, S., & Venkataraman, S. (2000). The promise of entrepreneurship as a field of research. Academy of Management Review, 25(12), 217–222.Google Scholar
  83. Smelser, N., Swedberg, R. (Eds.), (1994). The handbook of economic sociology. Oxford: Princeton University Press.Google Scholar
  84. Stam, W., Arzlanian, S., & Elfring, T. (2014). Social capital of entrepreneurs and small firm performance: a meta-analysis of contextual and methodological moderators. Journal of Business Venturing, 29(1), 152–173.CrossRefGoogle Scholar
  85. Steier, L., & Greenwood, R. (2000). Entrepreneurship and the evolution of angel financial networks. Organization Studies, 21(1), 163–192.CrossRefGoogle Scholar
  86. Stephan, U., & Uhlaner, L. (2010). Performance-based vs socially supportive culture: a cross-national study of descriptive norms and entrepreneurship. Journal of International Business Studies, 41(8), 1347–1364.CrossRefGoogle Scholar
  87. Thomas, S., & Mueller, L. (2000). A case for comparative entrepreneurship: assessing the relevance of culture. Journal of International Bossiness Studies, 31(2), 287–299.CrossRefGoogle Scholar
  88. Thornton, P. H., & Flynn, K. H. (2003). Entrepreneurship, networks, and geographies. In Z. J. Acs & D. B. Audretsch (Eds.), Handbook of entrepreneurship research: an interdisciplinary survey and introduction (pp. 21–34). London: Kluwer.Google Scholar
  89. Tonoyan, V., Strohmeyer, R., Habib, M., & Perlitz, M. (2010). Corruption and entrepreneurship: how formal and informal institutions shape small firm behavior in transition and mature market economies. Entrepreneurship: Theory and Practice, 34(5), 803–831.Google Scholar
  90. Van der Zwan, P., Verheul, I., Thurik, R., & Grilo, I. (2010). The entrepreneurial ladder and its determinants. Applied Economics, 42(17), 2183–2191.CrossRefGoogle Scholar
  91. Van der Zwan, P., Verheul, I., & Thurik, R. (2012). The entrepreneurial ladder, and regional development. Small Business Economics, 39(3), 627–643.CrossRefGoogle Scholar
  92. Van Oorschot, W. (2006). Making the difference in social Europe: deservingness perceptions among citizens of European welfare states. Journal of European Social Policy, 16(1), 23–42.CrossRefGoogle Scholar
  93. Vivarelli, M. (2004). Are all the potential entrepreneurs so good? Small Business Economics, 23(1), 41–49.CrossRefGoogle Scholar
  94. Welter, F. (2012). All you need is trust? A critical review of the trust and entrepreneurship literature. International Small Business Journal, 30(3), 193–212.CrossRefGoogle Scholar
  95. Welter, F., & Smallbone, D. (2006). Exploring the role of trust in entrepreneurial activity. Entrepreneurship: Theory and Practice, 30(4), 465–475.Google Scholar
  96. Westlund, H., & Adam, F. (2010). Social capital and economic performance: a meta-analysis of 65 studies. European Planning Studies, 18(6), 893–919.CrossRefGoogle Scholar
  97. Westlund, H., & Bolton, R. (2003). Local social capital and entrepreneurship. Small Business Economics, 21(2), 77–113.Google Scholar
  98. Westlund, H., Larsson, J., & Olsson, A. (2014). Start-ups and local entrepreneurial social capital in the municipalities of Sweden. Regional Studies, 48(6), 974–994.CrossRefGoogle Scholar
  99. Wilken, P., (1979). Entrepreneurship: a comparative and historical study. Norwood, NJ: Ablex publishing.Google Scholar
  100. Williamson, O. (1993). Calculativeness, trust, and economic organization. Journal of Law and Economics, 36(1), 453–486.CrossRefGoogle Scholar
  101. Woolcock, M., & Narayan, D. (2000). Social capital: implications for development theory, research, and policy. World Bank Research Observer, 15(2), 225–249.CrossRefGoogle Scholar
  102. Wooldridge, J., (2002). Econometric analysis of cross section and panel data. Cambridge, MA: MIT Press.Google Scholar
  103. Zahra, S. A., Sapienza, H., & Davidsson, P. (2006). Entrepreneurship and dynamic capabilities: a review, model and research agenda. Journal of Management Studies, 43(4), 917–955.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.Islamic Corporation for the Development of the Private SectorJeddahSaudi Arabia
  2. 2.Central Bank of AzerbaijanBakuAzerbaijan

Personalised recommendations