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Why the Personal Network of the Owner-Manager is Important for a Business

Updated on December 16, 2017


Virtual and global businesses have been considered as “risky businesses” owing to the fact that they have to compete in a business environment that is rapidly changing (Littler, Sweeting 1990). Personal networks involving the association of the owner/manager with the external stakeholders have been perceived to be important strategies in thriving in an uncertain, volatile, technology driven business environment (Human, and Provan 1997). The focus of this paper is to evaluate the statement by Ostgaard and Birley (1994:281) on the essentiality of the personal networks of the owner-manager for business growth.


In essence, the approach taken on leadership is a reflection of what has been learned. For a business manager/owner, this could basically relate to the concept f family with them as the parent/caregiver (Kefalas, and Schoderbek 1973). According to research, this could be as a result of the overriding early learning from early foundations which have not been altered by other examples, knowledge or learning that fits the demands of leadership in a given context with business that are required to embrace collective, multiple and shared strategies to leadership that have capabilities to cope with expansive line of decisions, communication, empowered actions and behaviors and network exploitation for growth purposes (Butler, and Hansen 1991).

Numerous studies indicated that the rising number of entrepreneurs is greatly relying on their personal networks in maintenance of their businesses (Bourgeois, 1985). Woodward, Rosen and Aldrich (1986) established that business owners and managers could spend a consideration amount of time and resources in engaging other individuals concerning their respective businesses and maintaining contacts. Findings from the authors suggested that the respective business owners/managers spent approximately 40 percent of their time to make internal or external contacts. The study went further to note that the personal relationship strategies by the entrepreneurs were quite significant in overcoming the liabilities associated with newness and general business development. According to the findings, businesses owners and managers invest a considerable amount of time in activities associated with network establishment and maintenance. On their part, Schroeder, Hudson, and Ven (1984) argued that business managers and owners who tended to be more effective were those who were more oriented to broader, richer and complex networks of consistent relationships with individuals and outside the business (p. 101). In other words, the authors were suggesting that entrepreneurs who had external orientation and were ready to incorporate the outsider’s opinions had a high probability of succeeding in their businesses. This is even more peculiar for business that engages themselves in high technology environments.

Sawyerr, and McGee, (2000) undertook a study to find out the effect of personal network features on presumed environmental uncertainty. In this paper, the authors were focused on examining the correlation between the features of personal networks of managers/owners of high tech businesses and the presumed environmental improbability. Findings from this investigation established that specific network features are apparently related with the degree of presumed environmental uncertainty. The assessment went on to note that this correlation vary among managers from firms that were more mature and new ventures.

Ibara and Hunter (2007) conducted a follow up of 30 managers over several years as they went through various stages of leadership transition. Accordingly, they established that networking, which in this case entailed establishing a fabric of personal engagements and contacts that would offer support, insights, feedback and information, was apparently considered as the most feared challenges and self-evident development which aspiring leaders in business contexts needed to address. In other words, the managers and business leaders were not comfortable in addressing challenges associated with exploitation of personal networks. The rationale provided by the authors was that when rising up through the ranks, various aspects and features have to be evaluated in them including the technical, skill and experience aspects associated with their jobs and the capability to manage teams and assist in realization of the team objectives.

Accordingly, it becomes rather a complex issue when such managers are challenged to go over beyond their regular functional roles and work on leveraging the specific strategies issues which the business is facing. This owes to the fact that many of these managers do not know how such tasks should be handled out, considering that they are now outside their capabilities, expertise or skills. This is why they require personal networks for the purpose of complimenting their deficiencies in terms of expertise to solve emerging or new issues, or capability to handle a specific issue that could be presumed as overwhelming for one person. However, there are also those who see that the necessary interactions and exchanges within personal networks and with a diverse range of potential and current stakeholders are part of their actual work and not distractions at all. Furthermore, many now consider that such an interaction should be at the epicenter of their roles as leaders.

A study by Smallbone, Ayol, Aculai, Welter and Schakirova (1996) was interested in analyzing the effect of networking for women entrepreneurs in fragile environments. In particular, the authors evaluated the core features of business owners who were engaged or whose businesses required them to be engaged in networking activities. The survey also checked the contexts that necessitated the use of networking, the stages where networking is needed in business development, the role and nature in diverse environments, and its impact in the overall business performance. The assessment noted that majority of business owners did not seek aid from external sources for the purpose of solving strategic issues facing their respective businesses.

In most cases, many of them preferred informal sources, for instance, there is a tendency of men seeking assistance from their business colleagues in solving issues associated with their businesses. Furthermore, the authors also noted a strong social tie including spousal and gender roles, and family who are normally assigned different functions in the course of business developments. Szarka (1990) went on to note that in most cases, women seek help from personal ties and connections when raising the capital for their businesses as well as when registering them. However, there is a slight change in this perspective as they these women continue to gain more experience and confidence in themselves. What is more, cultural traditions in some regions for instance, in places where widows are prejudiced compel women business owners to employ strong business ties in accessing capital and other resources for their businesses.

Another research by Cromie and Birley (1992) was focused at examining the network employed by women and men business managers/owners in Northern parts of Ireland. In this endeavor, there were four hypothesis that were suggested by the authors and which include: a) women do harbor a lesser dense networks compared with men, b) women are less active in matters networking compared with men, c) female business managers/owners tend to consider family members as the most significant members in contact networking and d) there is an orientation of women towards seeking aid or views from fellow women when discussing about business affairs. The collection of data for this research was through various networking aspects, including but not limited the background and demographics of women managers, the type of business established and managed by them, and previous employment background.

Findings from this research contradicted the researcher’s expectations in the sense that the study revealed that the contact networks for women were not necessary narrow as projected. Instead, they noted that such contact networks for these women were as diverse as those of their male colleague. Therefore, it was not true that women had more leanings towards their family members and friends for business consultation purposes more than men. Furthermore, both men and women have a higher likelihood of borrowing and drawing the expertise, wisdom and skills of other practitioners from a higher performing businesses both private and private to improve their own. The research went on to establish that women business owners tend to seek advice and assistance individuals who harbor a higher degree of organizational, business and commercial experience in maintaining or improving their own businesses. Additionally, there is also a tendency for women to rely on their male counterparts, especially when cross-tied as their basic contacts, although they will later shift to members of their own gender. According to this study, this is also the same case with men business owners/managers.


As per this analysis, the personal network of the owner-manager is the most important resource upon which he or she can draw by Ostgaard and Birley (1994) holds true. In essence, the swiftly developing and complex reality of the business environment today where knowledge is broadly dispersed and sophisticated require a range of scientific and intellectual skills which exceeds the capabilities or skills or any single manager/business owner or a business entity. Therefore, it is important for businesses owners and managers to understand the important of personal networks not only for business development, but also for their own developments.


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