chapter  10
The role of networking in the growth process of entrepreneurial family firms
BySARAH DRAKOPOULOU DODD , ALISTAIR ANDERSON AND
Pages 27

In this chapter, we investigate the role of networks within the context of family firms. Our concern is how might networks support those family firms that look to engage in the process and practice of entrepreneurship. Our conceptual starting point is that networking provides structure, process and content for entrepreneurial firms (Hoang & Antoncic, 2003; Elfring & Hulsink, 2007; Slotte-Kock & Coviello, 2010). The social ties that form networks shape information, skills and knowledge availability, and perception of specific opportunities (Brüderl & Preisendörfer, 1998; Uzzi, 1997; Davidsson & Honig, 2003; Hite, 2005; Renzulli & Aldrich, 2005). Network relationships frame access to resources, customers and strategic partners, as well as configuring the entrepreneur’s own perceived legitimacy. Networks may be especially important within the familiness of family business in that they provide external focal points to compare with the internalities of the family itself. The importance of networking holds true for venture creation, as well as for subsequent entrepreneurial developments of the enterprise. Moreover, ventures which survive start-up, and pursue growth, show signs of substantial evolution in their networking practices and relationships. In essence, then, the importance of external business-friend ties to venture growth is now well established. There is also evidence for the increasing strengthening of what begin as arms-length business ties, but transmute into rich, multiplex and complex relationships. Family firms are characterized by the work/family dynamic and the relationship which this offers, which has been referred to as being unique (Drakopoulou Dodd et al., 2012). But the link to entrepreneurial theorizing has drifted as studies have tended to focus on structure, succession and business issues rather than process, practice and what drives their very existence and growth. This is a pity because by the very definition, a family firm is characterized by the special nature of the family relationship. Hence relationships outside the family should be interesting. Nonetheless, recent discussions have started to recognize that family firms can be entrepreneurial, especially in the ways in which they might grow and develop. However, much less is known about how the family might draw on networks and the impact these networks might have on if, and how, the family firm practices entrepreneurship and how venture growth might come about. The findings from the general entrepreneurship literature linking entrepreneurial venture growth and networking have thus far been so robust that it seems likely that this ought to be the case in family firms. Nevertheless, there are a number of contingencies which modify the nature of entrepreneurial networking, such as nationality (Dodd et al., 2002),

ethnicity (Anderson & Lee, 2008), gender (Robson et al., 2008), class (Anderson & Miller, 2003), business sector, venture position in value-chain and – as noted already – stage of venture development (Anderson et al., 2010). Moreover, relational issues are likely to have a strong effect on the family firm’s distinctive interconnections (Anderson et al., 2012). It thus seems feasible to propose that whilst networking will be as important for family firms as it is for other entrepreneurial ventures, some aspects of networking processes, structures and content may well be specific to the family firm context and influence how they engage with entrepreneurial process and practice. We therefore pose the question, how do family firms who are engaged in the practice of entrepreneurship enhance, extend and evolve external network ties for venture growth? To address this question, we draw together theoretical developments from the family firm realm, and entrepreneurial networking theory, to analyze data from 12 family firms who were perceived to be acting entrepreneurially through the exploitation of new opportunities (Stevenson & Jarillo, 1990; Shane & Venkataraman, 2000). In doing so we investigate the ways in which these structures and processes interact to impact upon entrepreneurial growth. Three countries were selected for the fieldwork – Scotland, England and Greece – and both rural and urban contexts from each country were chosen. Family firms were purposefully chosen (Gartner & Birley, 2002; Pratt, 2009) who were identified as being (1) interesting at a theoretical level and (2) willing to share openly their experiences with the research team. Semi-structured interviews were carried out with 12 family firm entrepreneurs. Special attention was paid to issues relating to networking and growth. The constant comparative method (Jack et al., forthcoming) was utilized to analyze interview transcripts, with team members moving between data and theory in an iterative pattern until few new insights occurred. Our findings identified interesting and important divergence in the patterns of networking enacted by family firm entrepreneurs during venture growth. For example, growth strategies for many of the family firms tended to be driven by resources available within the family-firm nexus. Market and technology evaluations took place through quite formal, “professional” mechanisms in many cases. The usage of weak-ties, which has come to be seen of diminished importance for non-family entrepreneurs, appeared more significant for family-firm growth. This has implications for the way we perceive networking within the context of the family firm and especially for the practice of entrepreneurship. This chapter presents an overview of the academic literature pertinent to the research question, focusing especially on the growing body of work on entrepreneurial networking and growth, as well as attempting to unpick the complicated story of growth in the family firm. Next, the possible interactions between these two scholarly streams are discussed, to consider the specific nature of family firm networking during venture growth. The study’s methodology is then recounted, followed by our findings. Finally, results are discussed in the light of extant conceptual and empirical contributions, and conclusions drawn.