A network consists in a specific quantity of nodes related by connections, and these ties represent a specific relationship between those nodes (Granovetter, 1976). These relationships, formed by the multiple interactions of the participants inside a determined environment (Salancik, 1995), can be created between two different types of entities, individuals or collectivities (Breiger, 1974), creating networks not just among individuals but intra and inter organizational relationships as well (Tichy, Tushman & Fombrun, 1979). Networks structure analysis could permit to understand a part of individual or group’s behavior (Mitchell, 1974). Following Granovetter (1973), these connections classified in strong ties and weak ties according to its particular features, such as resource attract potential for instance. Strong ties are closer connections, which are capable to facilitate resources like trust, support and confidence. On the other hand, weak ties are unfrequently activated connections but they have an enormous potential to bring valuable and non-redundant resources like information, access to capital, advice or knowledge (Granovetter, 1973). Then, different types of ties are capable to bring distinct novel and valuable resources to any participant inside the network, and these resources are important to support and maintain business activities who are also critical to follow organization’s strategy, for instance improve innovative level of the firm (Ahuja, 2000). In addition to this, alongside strong and weak ties, there are empty spaces where are not connections between the nodes, called Structural Holes (Burt, 1992). According to Burt (1992) a major presence of these structural holes are capable to increase the availability of non-redundant resources across networks. Finally, the whole package of strategic, valuable and unique resources that an organization could get by its network management called Social Capital (Adler & Kwom, 2002; García-Valdecasas, 2011).

Social Capital represents the “goodwill” of individuals toward others too, and according to Adler & Kwon (2002) receiving this “goodwill” means develop a previous access to some specific resources such as information, influence and solidarity (Adler & Kwon, 2002; García-Valdecasas, 2011). All the resources inside Social Capital provide different sources for new skills, knowledge, control, power and trust (Adler & Kwon, 2002), that represent strengthening opportunities and different business alternatives for an organization’s strategy. In order to do an effective use of this social capital, organizations must be capable of ensure the resource flow inside its networks, through the establishment of collaborative relationships with others firms, and be capable of mobilize those resources to stand against their environment uncertainty, strengthen their initiatives or to deal with some business challenges (Adler & Kwon, 2002). Figure 1 shows how networks can bring non-redundant and valuable resources to the organization and in the stage 1 these resources are properly storage as the firm’s social capital. Resources captured by the firm are storage first, because firm would wait for a proper and accurate moment for their use. At stage 2 of the Figure 1, the firm is dealing with some particular situations or is involved in a specific context that forces it to mobilize these resources and use them on its business activities, following its whole strategy.

Figure 1
2stage model for building networks and mobilizing resources Source Cordova 2017 Reproduced with author’s authorization
Cordova (2017). Reproduced with author’s authorization.

Every economic activity is naturally embedded in social relationships (Granovetter, 1985) and through this exchange complex system of connections; they can acquire several opportunities in their markets to ensure their long-term survival (Uzzi, 1996). Moreover, networks can be a cyclic reliable source of these inducements and opportunities (Zaheer & Soda, 2009) because they are able to deploy resources like experiences, knowledge, prominence and power. If the firm is not capable of an adequately mobilization of these resources, it will not be possible to make a proper use of this social capital according to the organization’s requirements (Kwon & Adler, 2014). This means also that managing networks is not enough to ensure the use of new resources in organization’s business activities, it is necessary to have the capacity to allocate these resources in the right place and time over firms’ strategy, in order to achieve an advantageous position of an individual or group inside their own relationships network (Burt, 2005).

Institutional forces in the business environment constantly are reshaping firms’ boundaries in order to adapt them to the evolving conditions in the surrounding context (DiMaggio & Powell, 1983), assuring a proper fit between organizational characteristics and its operational field. In addition to this, institution-based view remarks looking institutions as relevant players in firms’ business environment, capable to set the organization’s strategy (Peng et al., 2009; Hernández, Moncada y Henao, 2018). The institutional context is involved in the overall business environment, redefining the way of how firms take decisions about resources (Oliver, 1997). Formal or informal institutions, organized or disorganized ones, have the power to change the environment and must be understand as a primary issue for the establishment of firm’s strategy (Ansari & Phillips, 2011).

According to Hillmann & Aven (2011) institutions represent a supporting business activity platform for firms in order to enable and facilitate the infrastructure, the commitments of contracts, and to secure and protect property rights. So, institutions play a significant role in emerging economies, but actually the institutional voids, regulations’ alterations, the effect of privatization and the existence of informal markets are overwhelming the institutional context (Vassolo et al., 2011) and creates a particular environment where firms strongly need monitoring and regulation to be able to obtain proper and long-term conditions for growth. For instance, institutional weakly business environments tend to force organizations to search for other alternative mechanisms to find new resources (Musacchio & Read, 2007); but in contexts where institutions act like central connectors inside organizations’ networks (Salvaj & Couyoumdjian, 2015) or have strong formal institutions (Musacchio & Read, 2007), organizations are able to find resources available in their business environments. Latin America represents the second most important emerging economy region worldwide and it still has a vulnerable institutional context (Vassolo et al, 2011). Finally, previous studies highlighted the importance of a clear and diligent institutional environment in Latin America, in order for entrepreneurs to take advantage of more opportunities (Saavedra-Leyva & Flores, 2019). However, emerging economies are mainly characterized by the presence of weak institutions (Young et al., 2014), and their ineffective action leads to the formation of informal markets, less or unequal opportunities for growth, and facilitates the existence of corruption (Vassolo et al., 2011; Vergara, 2018), both increasing the uncertainty of the environment.

Firms search for different kinds of collaboration relationships with partners (Barringer & Harrison, 2000), who have different or complementary skills, and that kind of synergy allows access to several new resources (Hitt et al., 2001), then those resources are useful against environment’s uncertainty according to the resource mobilization capabilities of the firm (Martin, Gözöbüyük & Becerra, 2013). According to the organizational needs, intangible resources such as reputation, knowledge, learning capability and transfer of knowledge capability (Hitt et al., 2001) could be relevant as well as tangible ones, which are necessary to achieve firms’ objectives. As Levitt & March (1988) explained, taking care of organizational networks means keep an open path of learning from other organizations. These learning networks formed by organizational relationships are the basic platform for innovation, acting as a community of knowledge, rather than the individual efforts of firms (Powell, Koput & Smith-Doerr, 1996). Innovation and generation of new ideas are due to the absence of some connections between individuals inside of a network (Burt, 2004). Those empty spaces, called structural holes (Burt, 1992), have the power of assure the non-redundant information flow across the network. In fact, firms that manage properly their networks are able to learn faster and can achieve higher levels of creativity (Burt, 2005) so, the larger the scale of network structure, the higher innovative level (Schilling & Phelps, 2007).

Emerging economies firms seek to cover the lack of formal and strong institutions by putting their trust on informal but well-performed reputation ones (Hillmann & Aven, 2011). This behavior facilitates the creation of reputation-based networks, which are mostly present in emerging countries. Reputation helps firms to reduce the uncertainty of a relationship with a new partner, making possible to know about its behavior record in the past and decide to trust it, asking for advice or delivering responsibilities with greater confidence (Hillmann & Aven, 2011). Then, the creation of trust-based supply chains allows the establishment of different contract relationships between buyers and suppliers carrying several benefits from this commercial network (Vurro, Russo & Perrini, 2009). Following figure 2, the long line below the supply chain represents the natural flow of goods or services, but the small lines between the actors means the relationships created basically on trust (e.g., between the raw material supplier and the manufacturer), and with the opportunity to share valuable resources beyond their commercial agreement. In fact, the possible relationships between business actors in the environment is infinite, because each participant comes with his own social capital package, looking for partners who have what they do not. Parkhe, Wasserman & Ralston (2006) explained that every structural difference on relationships is worthy of attention, as any of them are different, so every relationship will be unique in resources and capabilities.

Figure 2
An example of trustbased networks in supply chains Source Cordova 2017 Reproduced with author’s authorization
Cordova (2017). Reproduced with author’s authorization.

Figure 2. An example of trust-based networks in supply chains. Source: Cordova (2017). Reproduced with author’s authorization.

Networks are the main source of external resources for some companies who have limited access to internal resources, and their principal support to maintain a competitive strategy in their field (Dyer & Singh, 1998; Yao, Wen & Ren, 2009). Aditionally, it is possible that firms cannot obtain the precise resources they need from their internal sources because they are in their very first years of life and they did not develop strong practices nor inner learning processes yet. Contradictory to the traditional thinking about how firms build their strategy considering the context and the competition forces in the industry (Porter, 1980), a firm can model its strategy and achieve strategic differentiation based on the present resources available from its actual business network (Hung, 2002).

Furthermore, some firms who want to integrate their vision to their chain’s value have used the network theory to help them generate a new concept of Global Production Network, that implies more than a simple linear relationship, but a multi directional network of relationships between organizations in a particular industry (Levy, 2008). This structure of multiple connections allows firms to obtain valuable resources, develop trust between partners, and mobilize them according to the environmental situations.

In their risky trail of business crusade, entrepreneurs need to succeed in mobilizing their resources to be able to reach a sustainable growth next stage, creating finally stable new industries (Aldrich & Fiol, 1994). According to Aldrich & Fiol (1994) obtain legitimacy is the primary objective of an entrepreneurship who wants to survive and growth its first years in its industry, and the most effective way to do this is to gain trust inside its close business environment.

Entrepreneurs can obtain several benefits from bridging the structural holes in their networks, in order to reach different resources from the other side of these holes (Burt, 2005). In addition to this, network management can provide to entrepreneurs with the necessary endorsements to improve their reputation (Stuart, Hoang & Hybels, 1999), making possible to obtain valuable resources for their survival in turbulent business environments with high levels of uncertainty. For example, in the field of new firms that want to do business internationally, entrepreneurs must establish networks, actively acquire knowledge and accept uncertainty as normal during internationalization (Vissak, Francioni & Freeman, 2020). In this sense, networks are important, not only those present in the domestic market, but also those that can be developed internationally. In fact, at the level of public policies, countries can improve their connection to global innovation networks, beyond traditional mechanisms to absorb foreign technology, such as international trade and foreign direct investment (Guimón, Cancino, López y Miranda, 2019).

Business environments of emerging markets, such as Latin America, have an original lack of information and resources, because of their institutional weakness and high uncertainty, so networks can solve both (Maas, Seferiadis, Bunders & Zweekhorst, 2014). The decease rate for entrepreneurial activity can be dramatic if the environment does not have adequate conditions for those new firms to develop a proper establishment and sustainable operations over time. As Dew & Sarasvathy (2007) demonstrated, an entrepreneurial initiative is a complex network of stakeholders indeed, where each one of them are committed to a common purpose of innovation.

Inside a community with a high degree of social trust, which comes from social capital achievement, individuals are more likely to be entrepreneurs (Kwon, Heflin & Ruef, 2013, Torres et al., 2018). These entrepreneurs have to choose a particular strategy between cost leadership and differentiation to sustain their new businesses in the industry (Porter, 1980). However, in Latin America, necessity-driven entrepreneurship is the most common and it has to lead its way with limited resources and few information, so they are often most likely to choose principally a cost leadership strategy (Block, Kohn, Miller & Ullrich, 20152015). According to Block et al. (2015), entrepreneurship’s behavior and the decision of a competitive strategy depends on the environment and the entrepreneur’s reasons to begin the company. In emerging economies entrepreneurship is oriented to the necessity of helping people to leave poverty, but there are limited resources and inefficient institutions that could support entrepreneurial initiatives (Maas et al., 2014). When local institutions have the power and relevance in their business environment and also, when networks are properly developed by entrepreneurs, it is possible to enhance entrepreneurial growth opportunities (Petti & Zhang, 2011), and also to develop an entrepreneurship culture that would spread energy as well as initiatives to the entrepreneurial local community, which turns into a reliable mechanism toward increasing new businesses’ rates. (Fernández-Serrano & Liñán, 2014). Therefore, networks are an important instrument to facilitate resources, increase the diffusion of practices and, moderate appropriate environment conditions to establish opportunity-driven entrepreneurial activities.

According to Hitt et al. (2001), any intent to enter into a foreign market is indeed an entrepreneurial strategy and this effort requires valuable resources and capabilities. Some of the resources that may be obtained by constructing and using networks can actually help to make a better performance in international new ventures (Coviello, 2006). These recently born organizations use relationships generated by the natural network evolution from the beginning of the entrepreneurship to adequate their strategy in these foreign markets. As Coviello (2006) said, this type of entrepreneurship has to consider network relationships that were formed before the internationalization process, during the pre-internationalization phase. The entrepreneurs’ exposure to other organizations is a basic element of their strategy which allow them to obtain knowledge, relevant social ties, and the possibility of build self-confidence in their managerial activities (Sorenson & Audia, 2000). Moreover, entrepreneurial methods to find an opportunity for international exchange when they are exploring foreign markets rely on tie-based opportunities that emerge from relationships with others, and these kind of initiatives are called tie-based exchanges (Ellis, 2011). Nevertheless, this kind of exchange structure is produced by a sustained network system that allows the firm to obtain different and better opportunities to achieve a mutual benefit exchange or to establish trust and confidence with others in the same network through the enforcement and repetition of partner relationships in a less open network system.

Networks’ resources and entrepreneurial orientation directly influence firms’ performance. According to Elfring & Hulsink (2003), new opportunities and legitimacy are important resources related to firm’s performance. Entrepreneurs are able to take advantage of new opportunities reinforcing their strong ties, by the other hand; weak ties are quite useful to young entrepreneurs looking for drastic and quick innovations (Elfring & Hulsink, 2003). Networks can provide strategic resources to sustain and develop competitive advantages and entrepreneurial orientation offers search skills and execution abilities to exploit opportunities (Yao et al., 2009). Finally, following this perspective, networks resources and entrepreneurship skills are complementary mechanisms to model entrepreneurs’ strategy and are critical to combine in their initial operational phase.