The Role of Social Relations in Fostering Entrepreneurship and Creative Use of SME Resources

Abstract

This paper investigates the role of social relations in helping individual entrepreneurs to develop their businesses in uncertain environmental conditions. Using the social (relational) capital theory and the mixed methods approach we examine the role played by horizontal and vertical relations established by the owners of Russian small and medium size enterprises in helping them to choose the best business development opportunities. Prior research has established that connections play a critical role in entrepreneurial activities if national institutional environments are underdeveloped, and the rules of doing business are uncertain. “Who do you know” vs “what do you know” becomes a critical contributor to running a successful business across various industries and countries. This study highlights the importance of horizontal networking for expanding the scope of entrepreneurial activities. It also discusses the stimulating role of environmental uncertainty in SME development.