Time and Place: Thursday, 01.07., 10:20–10:40, Room 2
Session: Economic Transactions
This paper explores the relationship between social networks and entrepreneurship by constructing a dynamic social network from archival records. The network corresponds to the elite of a society in transition to modernity, characterized by difficult geographical conditions, market failures, and weak state capacity, as in late 19th- and early 20th-century Antioquia (Colombia). With these data, I estimate how the decision to found industrial firms (i.e. my measure of entrepreneurship) related to the position of individuals in the social network. I find that individuals more important as bridges in the network (i.e. with higher betweenness centrality) were more involved in entrepreneurship. However, I do not find individuals with a denser network to be more involved in this type of activity. The rationale of the results is that entrepreneurship was a highly- complex activity that required a wide variety of complementary resources. These resources were spread in society and markets worked poorly enough to canalize them to entrepreneurs. Thus, networks operated as substitutes for markets in the acquisition of resources. In particular, individuals with network positions that favored the combination of a broad set of resources had a comparative advantage in entrepreneurship. I run several tests to support this rationale.
JEL Classification: O1, L1, L2, N8.