10 Networks: structural characteristics and benefits
Networks can be very different from each other based on some basic characteristics which can be important for innovation and entrepreneurship. Such network characteristics are based on the structural dimensions discussed in the previous section. By statistically analysing network structural dimensions a range of network indicators can be obtained. Specifically, these indicators are estimated using sophisticated calculations that use information on the number of network actors and the number and frequency of their connections.
These indicators can be used to identify which types of networks may provide better opportunities for knowledge and information sharing than others. This is important for entrepreneurship because new entrepreneurs can understand which networks offer more opportunities to gain access to novel knowledge and information than others. Table 1 below shows some well-established network indicators and how they could affect innovation potential and benefit the entrepreneurs participating in such networks.
The estimation of network indicators and characteristics in the table below is beyond the scope of this course. Instead, the aim is to increase your awareness of these concepts, their meaning and importance for entrepreneurship.
Network characteristic | Meaning/definition | Potential benefits to entrepreneur or innovator |
---|---|---|
Size | The number of actors (individuals or organisations) in a network. | Though it might seem better to be part of a larger network, its density and diversity are likely to be more important factors. |
Density | The number of linkages (or ‘ties’) between the various actors in a network as a proportion of the total number of possible linkages. | Dense networks with lots of overlapping (or ‘redundant’) ties are often good for exchanging information quickly, but are likely to be less effective as sources of new knowledge and resources. |
Diversity | The amount of variety in the types of network actor (e.g. for organisations: size, sector, technical specialism; for individuals: skills, knowledge, age, nationality). | Low-diversity networks may make for easier communication, but high-diversity networks are more likely to provide actors with opportunities to make ‘new combinations’ of knowledge and resources. |
Openness | The extent to which actors in one network are connected to actors in other networks. | More open networks (like high-diversity networks) are more likely to provide access to new knowledge and resources. |
Strong ties | Close links between actors who typically know one another well, such as close friends or organisations that have collaborated together regularly or over a long period. | Strong ties can be useful, particularly as ways of sharing complex knowledge, or where it is important to maintain trust or support. |
Weak ties | More distant links between actors who do not know one another very well, such as people you have met just a few times, or organisations that may occasionally trade with one another. | Weak ties have been identified as an important source of new knowledge and (to a lesser extent) resources. |
Structural holes | Gaps (i.e. an absence of links) between two more densely-connected parts of a network, with the result that each of these parts is lacking some important knowledge or resources. | Structural holes are often a source of entrepreneurial opportunities – the key is to find a way of ‘bridging the gap’, with the entrepreneur typically taking the role of broker between actors in the two (previously separated) parts of the network. |