Social Entrepreneurship in Argentina: The role of networks in the quest for financial resources

Ernesto Luna

Student thesis: Master thesis

Abstract

Social entrepreneurship appears as a promising phenomenon for solving the world’s problems. Yet, social entrepreneurs encounter acute barriers in accessing financial capital, thus limiting their ability to generate an impact. This is particularly acute in Argentina, which faces acute considerable market failures. In light of the problems encountered in the incipient social entrepreneurship field, this thesis sets to answer the following research question: how do social networks influence the access to financial resources for Argentine social entrepreneurs? The paper reviews the literatures on social entrepreneurship and then examines the research on networks in explaining the general entrepreneurship phenomenon. Then, building from the network success hypothesis, the thesis develops a theoretical-analytical framework for analyzing the research question. Two relations are explored, through two guiding subquestions. The first explores how entrepreneurs build their networks, and adopts Larson and Starr’s (1993) model of network development for the analysis. The second, adopting Granovetter’s (1973) notion of weak ties, addresses how tie strength influences the access to financial resources. Adhering to critical realism as a philosophy of science, this thesis embarked in a qualitative multi-method approach by conducting 11 semi-structured interviews with critically sampled Argentine social entrepreneurs, and 3 field experts were additionally consulted. Data triangulation was employed in order to enhance the findings. The study finds that social entrepreneurs in Argentina utilize a variety of networks for different purposes, and this evolves through time according to the organization’s stage. The interviews revealed that entrepreneurs adopt purposeful exploration of relevant ties, but are less systematic in the screening and selection of ties. Most importantly, the grave market failures in the supply of financial capital in Argentina imposes severe constraints for the entrepreneurs, which this thesis finds an indication of a compensation effect, whereby entrepreneurs turn to their networks due to the scarcity of options for finance. The findings reveal that entrepreneurs have a high reliance on their own contributions and donations for funding their ventures. Moreover, a high degree of embeddedness characterizes the relations of entrepreneurs with their resource providers. Similarly to the literature’s claim, this thesis finds that both weak and strong ties are equally important for seeking financial resources. Both weak and strong ties provide important support to entrepreneurs in the initial stages of the organization formation. Also, support networks seem determinant, as these provide essential funding in the early years and their key asset is providing useful information and connecting to key ties. The thesis concludes that the Argentine social entrepreneur’s social networks influence the access of financial resources, yet this causal relationship evolves. In the initial periods of the organization, networks appear as necessary conditions, whereas as the organization grows, these represent highly enabling contingent factors. Finally, other contingent factors that influence securing resources include the entrepreneur’s past experiences, their credibility and visibility gained.

EducationsMSc in Business, Language and Culture, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2013
Number of pages96