A Theoretical Analysis of the Role of Social Networks in Entrepreneurship

Entrepreneurship involves innovation and uncertainty. We outline a theory of entrepreneurship, which highlights the importance of social networks in promoting innovation and reducing uncertainty. Our findings suggest that this “social” aspect of entrepreneurship increases the probability of entrepreneurial success. The results also lend credence to theories of entrepreneurship that suggest that entrepreneurial opportunities are formed endogenously by the entrepreneurs who create them. We also consider the public policy implications of our findings.