Guanxi, performance and innovation in entrepreneurial service projects

Purpose: This paper aims to analyze the role played by two dimensions of entrepreneurs' private social capital in the survival, growth and innovativeness of entrepreneurial service ventures: local size and preferential attachment degree. Design/methodology/approach: Data were collected by a questionnaire, the unit of investigation being the private entrepreneur in the service sector in the city of Shanghai. The questionnaire allows the authors to identify the social network of the entrepreneurs, estimate the empirical degree distribution for the entire sample, and estimate local size and preferential attachment degree. Findings: There is empirical evidence that entrepreneurs do not create social networks with preferential attachment structure and a large local size of the network increases the chances of survival of new ventures; however, the chance to become a dynamic venture is only related to entrepreneurs' preferential attachment degree. Social implications: Any entrepreneurial strategy should include an investment plan to generate a minimum level of social capital or guanxi. Additionally, efficient strategy to generate social capital for dynamic entrepreneurship should focus on the creation of quality social capital. The underestimation of the role of social capital seems to have a deeper impact when analyzing the phenomenon of entrepreneurial innovation. Originality/value: This conclusion suggests that the role of social capital in the entrepreneurial process could be underestimated systematically, since most of the literature only considers local measures of social capital. This underestimation seems to have a deeper impact when analyzing the phenomenon of entrepreneurial innovation.