The Network: Social Ties

How it influences the Entrepreneur‘s

Opportunity Recognition

Halmstad University, School of Business and Engineering

Entrepreneurship and Innovation, 2016

Group 3

Isabel Hahn 921219-T309

Maik van Vugt 941106-T097
Rasmey Heang 930413-T270
Saskia Wichmann 920914-T309
Talita Da Silva 910617-T342

Abstract
The purpose of this paper is to identify how the entrepreneur‘s network influences on
opportunity recognition. It argues that entrepreneurs diverge on how they interpret
different opportunities due to the different social networks they are embedded in. The
focus is on two different segments of social networks‘ ties which are classified as (1)
strong ties and (2) weak ties, both of which are further discussed throughout the paper.
The analyze aims to show how these two different social ties influences the
entrepreneur‘s perception of opportunities and how according to each tie the entrepreneur
takes actions on the recognized opportunity. Furthermore, findings how the network
changes its impact over time and consequently a possible shift between ties.

Keywords: network, social ties, entrepreneur, entrepreneurship, opportunities,

opportunity recognition.
TABLE OF CONTENTS

1. INTRODUCTION 3
2. THEORETICAL BACKGROUND 3
2.1 AN OPPORTUNITY AND THE OPPORTUNITY DEVELOPMENT PROCESS 3
2.2 OPPORTUNITY RECOGNITION AND THE INFLUENCES ON IT 4
2.3 SOCIAL NETWORKING 5

3. METHODOLOGY 6
3.1 DATA COLLECTION 6
3.2 DATA ANALYSIS METHOD 7

4. CROSS CASE ANALYSIS 8

4.1 THE CASES - AN OVERVIEW 8
4.2 CROSS CASE ANALYSIS: THE INFLUENCE OF THE NETWORK ON THE
ENTREPRENEUR‘S OPPORTUNITY RECOGNITION CONCERNING THE
ESTABLISHMENT OF THE BUSINESS 9
4.3 CROSS CASE ANALYSIS: THE INFLUENCE OF THE NETWORK ON THE
ENTREPRENEUR‘S OPPORTUNITY RECOGNITION CONCERNING
INTERNATIONALISATION 12

5. CONCLUSION 16
REFERENCES 17
APPENDIX 20
APPENDIX 1: The influence of Social Networking Ties on Staffan‘s Opportunity
Recognition (Polaris AB) 20
APPENDIX 2: The influence of Social Networking Ties on Bjorn‘s Opportunities
Recognition (Index) 21
Appendix 3: The influence of Social Networking Ties on Gunnar‘s Opportunities
Recognition (Liko AB) 22

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1. INTRODUCTION
Shane and Venkataraman (2000) suggested that a unique aspect of entrepreneurship
research pertains to the question of how individuals recognize opportunities for new
business ventures. Prior research on entrepreneurial opportunity recognition has focused
on the role of the individual, for example, the role of the entrepreneur‘s prior knowledge
(Shane, 2000) and the entrepreneur‘s alertness to entrepreneurial opportunities (Kirzner,
1973).

In this paper, the aim is to further develop the already existing literature on opportunity
recognition by using a network-based approach and more in depth classify these
opportunities within different social ties. Although there has been various research that
examines different aspects of the relationship between network and entrepreneurship,
such as: the creation of new firms (Johannisson and Ramirez-Passilas, 2001), resource
acquisition (Birley, 1985; Aldrich and Zimmer, 1986), performance (Podolny et al.,
1996), firm survival (Reese and Aldrich, 1995; Ingram and Baum, 1997) and even a
closer research that relates network to the entrepreneur‘s opportunity recognition
(Arenius and Clercq, 2005), we believe that the specific relationship between the
networks‘ social ties linked to how the entrepreneur recognizes opportunities has not
been adequately addressed.

The literature used confirms the importance of an individual‘s interaction with different
networks and relationships with others (Granovetter, 1973; 1985), then understanding the
definition of network (Borgatti and Halgin, 2011) as an amount of ties consisting of many
nodes in order to further explore the different two classification of social ties within a
network: strong and weak. Overall, different entrepreneurship research have pointed to
the importance of networks to entrepreneurs, and even argued that social networks may
be the most significant source of knowledge for entrepreneurs (Johannisson, 1990).

In this study, it is argued that the differences amongst entrepreneurs in relation to the
networks they are embedded in not only affect how the entrepreneurs recognize
opportunities but also how these different social ties have major impacts on how the
entrepreneurs act on the recognized opportunities. Furthermore, changes that these social
ties might undergo over time are demonstrated.

2. THEORETICAL BACKGROUND
The following three chapters consists of a literature review aimed in giving a theoretical
background to support this study.

2.1 AN OPPORTUNITY AND THE OPPORTUNITY DEVELOPMENT

PROCESS
“An opportunity is an idea or a dream that is discovered or created by an
entrepreneurial entity and that is revealed through analysis over time to be potentially
lucrative” (Short, Ketchen, Shook & Ireland, 2010, p. 55). Short et al. include three main
components of opportunity research in this definition: First: Are opportunities discovered
by an entrepreneur using his knowledge to exploit them and thus already exist? Or are
they created by an entrepreneur‘s actions and reactions (Alvarez & Barney, 2007)?
3
Second: The evolutionary process of an idea or a dream that becomes an opportunity
through creativity and entrepreneurship. This distinction between ideas/dreams and
opportunities make the coexistence of the second component of opportunity research with
the one mentioned before possible. It states that the discovery/creation question is not
concerning opportunities as generalised in most of the literature (Alvarez & Barney,
2007; Peiris, Akoorie, & Sinha, 2013; Ardichvili, Cardozo, & Ray, 2003), it rather
concerns ideas and dreams as the pre-stage of opportunities (Dimov, 2007). Third: The
evidence that factors such as for example the social context, personality traits or the prior
knowledge of an entrepreneur influence that process (Ardichvili et al., 2003; Peiris et al.,
2013; de Koning, 1999).

Consequently, this definition implies that an opportunity is the outcome of a development

process consisting of opportunity recognition, opportunity evaluation and opportunity
―development per se‖ (Ardichvili, Cardozo, & Ray, 2003, p. 106). Opportunity
recognition, or identification, is the first step in the opportunity process. According to
Baron (2006), opportunity recognition can be defined as the cognitive process, or
processes, through which individuals conclude that they have identified value, newness,
and perceived desirability. Opportunity evaluation refers to the question if it is worth or
possible to continue the opportunity development. It includes an analysis of the market
needs or the company‘s resources or a feasibility analysis in case of new inventions
(Ardichvili et al., 2003). The final process stage of opportunity development is ―a
continuous, proactive process essential to the formation of a business‖ (Ardichvili et al.,
2003, p. 109). This paper focuses on the first stage of the opportunity development
process, the opportunity recognition, which is described further in the next chapter.

2.2 OPPORTUNITY RECOGNITION AND THE INFLUENCES ON IT

Ardichvili et al. (2003) state that opportunity recognition is build up out of three distinct
processes of the entrepreneur regarding opportunity recognition; sensing/perceiving
market needs and/or underemployed resources, recognising or discovering a match
between a market and the specified resources, and creating a new match and therefore
separate needs and resources in the form of a business concept.
Baron (2006) claims that the opportunity recognition is influenced by perceived patterns
in events, trends and changes. These perceived patterns are formed by a combination of
the events, trends, and changes itself, as well as the knowledge and experience of the
individual. In addition, Baron states that the entrepreneur‘s social network is a point
worth noting.
Ardichvili et al. (2003) on the other hand conclude that the reason why some recognize
opportunities while others do not, is because of five main drivers that influence the
cognitive process of individuals. The containment of these drivers differs per
entrepreneur. The five drivers of Ardichvili et al. are:
1. entrepreneurial alertness;
2. information asymmetry and prior knowledge;
3. social networks;
4. personality traits, including optimism and self-efficacy, and creativity; and
5. type of opportunity itself (Ardichvili et al. 2003, p.106).

During this paper the framework regarding the OR of Ardichvili et al. (2003) is used.

4
2.3 SOCIAL NETWORKING
Borgatti and Halgin (2011) define a network as an amount of ties consisting of many
nodes who are connected, which means that “Networking refers to social interactions
(...)” (Maritz, 2010, p.19). Håkansson and Ford (2002, p.134) state that "The total
network is formed by investments and the life of a node is the result of the interplay
between internal investments and those that are made in the threads". Furthermore,
Borgatti and Halgin (2011) point out that networks and groups differentiate regarding to
"natural boundaries" which the latter have. Every network is different since it is shaped
by the individuals but Birley, Cromie and Myers (1991) have the opinion that the
networking styles might diverge from different countries.
Considering entrepreneurs Birley (1985) stresses the importance of having a network
during the entrepreneurial process. She differentiates between formal and informal
networks. The first comprises "local, state and Federal agencies" which offer support to
emerging companies if they have a specific issue. The informal network includes people
who might not have a great knowledge about the opportunities the entrepreneur has; this
can be friends, relatives, previous colleagues. Considering this kind of network it "(...) is
more likely to be willing to listen and to give advice." (Birley, 1985, p. 109).

Social Networking has been separated into two types, strong ties and weak ties. Ties can
vary regarding to the strength within a network especially in view of age stages (Hite and
Hesterly, 2001). Whereas emerging companies have mainly strong ties, companies
usually widen their networks with weak ties in the course of time (Hite and Hesterly,
2001). Granovetter (1982) defines the strong ties as the relationship between an
individual and its kinship, close friends and family members. He also refers weak ties to
friends and acquaintances, which include accordingly to Susan, Seyran & Ali Naghi
(2014), other entrepreneurs, relatives and the community of people.

STRONG TIES

Strong ties show some key characteristics between the parties of the relationship, such as
frequent interaction, extended history, intimacy and sharing, reciprocity in exchanges that
allows for mutual confiding, and trust-based interactions (Granovetter, 1982).
Furthermore, strong ties facilitate the flow of richer, more detailed, and redundant
information and knowledge resources between individuals and their respective groups.
He also added that strong ties are particularly valuable when an individual seeks socio-
emotional support and often entail a high level of trust because people trust him/her to be
benevolent and competent (Daniel Z., 2002). In addition, Mastura J., (2009) agreed that
having many strong ties working within the industry‘s environment helps business
owners in acquiring useful information.

WEAK TIES

Weak ties can give an individual access to new information and ideas (Granovetter,
1982). In other words, resources that otherwise would be impossible to be found in the
immediate network. He emphasizes and argues that weak ties are less reliable but more
likely to provide access to a variety of new information. Furthermore, he also mentions
that weak ties are more valuable when individuals are seeking diverse or unique
information from someone outside their regular frequent contacts. This information could
include new job or market opportunities. Similarly, Greve and Salaff (2003) addressed
that the amount of weak ties is relatively high in the emergence stage. Modern societies
and large networks in general are less dense and have structural holes (Kadushin, Charles,
5
2012), more dense parts of a network that are hardly connected at all. However, if
connected, then it is by nodes that serve as brokers between the otherwise barely
connected regions. Large modern world networks are held together by weak ties—
relationships that are infrequent, less close and less intimate, but for that reason very
important. Flows through networks are critical and can take place through redundant
dense ties or through weak ties.

Some social networking researchers have demonstrated the effect of tie strength on
information acquisition. Entrepreneurs (Birley, 1985) used their own informal business
and personal networks to establish new firms. Since there are many researches claiming
that strong ties contribute to access to useful information including new job or market
opportunities, and some scholars conversely think that weak ties could work well on this
matter, our ambition is to explain on this conflicting finding on the influence of social
networking ties on opportunity recognition.

3. METHODOLOGY
The case study is a useful method for a process-oriented (McGrath and MacMillan, 1995)
and comparative exploration, especially as we have little control over events (Flyvbjerg,
2006; Kuivalainen et al., 2010; Yin, 2009).

3.1 DATA COLLECTION

This study includes primary and secondary data collected between 2000 and 2007. The
primary data consist of a total of 108 semi-structured interviews with 58 people as well as
a number of follow up e-mail and telephone interviews. The first case had 26
respondents, the second 14, and the third 23. The ideal design for the present research
would have been to start collecting data at the time of an INV‘s establishment and follow
the company throughout its internationalisation, in order to identify changes in its core
competence. However, predicting the birth of such a company before it has even been
established is impossible. Therefore, to conduct longitudinal case studies within the
timeframe specified for this project, we chose INVs that were in an advanced stage of
their foreign operations, and did not wait for ‗ideal‘ cases to come up.

Consequently, the data collected on firm establishment and early internationalization are
retrospective in all cases. Still, as we visited the firms several times over the years, we
were also able to collect longitudinal data on any changes occurring between our visits.
One must recall that, as Leonard-Barton (1995) has pointed out, there are problems with
historical data. For example, respondents may not recall important events, and even if
they do, their recollection may be subject to bias. As a result, data and methodological
triangulation become even more vital to increase the validity of results, when using
historical data.

The respondents were selected through snowball sampling. Potter (1996) describes this
technique as beginning with a purposive sample in which key informants who can
provide important insights are selected. Snowball sampling can be placed within a wider
set of link-tracing methodologies that seek to take advantage of the social networks of
identified respondents and provide a researcher with an ever-expanding set of potential
contacts (Spreen, 1992). In every case, we started by interviewing the person who had an
overview of the organisation. This person was usually very well informed and was able to
report on the organisation‘s policies, history, and future plans. This person was the
6
founder, owner, and CEO of the company. Using this information as a starting point,
during each interview, we identified potential internal and external respondents who
might supply additional relevant information; internal respondents included export
managers, product development managers, design managers, owners, CEOs, and board
members, while external respondents included spouses, business acquaintances, former
partners or employees, agents or distributors, and people with good insight into the
organisation, industry, or founder/entrepreneur under investigation.

In each interview, we tried to maintain an informal and passive role in the conversation,
using the interview guide as a simple checklist to ensure that all relevant topics were
covered; consequently, we adapted both the wording and sequence of questions to each
interview. In the context of the interview, we were free to build a conversation in a
particular subject area, to word questions spontaneously, and to establish a conversational
style. The interview locations depended on the respondents, and interviews were held in
several countries. Interviews lasted from one to four hours, and were recorded,
transcribed, and sent to respondents for correction and verification. The transcripts were
written up in case summaries, which were validated by the key informants.

Secondary data were collected from annual reports, internal reports, newspaper articles
and memos. If available, other academic studies (undergraduate and/or graduate)
investigating the case companies were used as secondary data. This heterogeneous
approach, which provided a multifaceted perspective and facilitated comprehension and
analysis, had two purposes: first, to enrich the empirical cases with multiple descriptions,
which improves their trustworthiness and enhances content validity (Rouse and
Daellenbach, 1999); and, second, to enhance reliability by triangulating the data and
method (Creswell, 1994). (Ljungquist and Ghannad, 2015).

3.2 DATA ANALYSIS METHOD

Qualitative data analysis consists of data reduction, data display, and conclusion
drawing/verification, according to three concurrent flows of activity (Huberman and
Miles, 1998; Miles and Huberman, 1994). Data analysis is widely recognised as the most
difficult and least structured area of case study research (Eisenhardt, 1989).

In this paper, three different case studies are analysed and from this analysis opportunities
recognized by the entrepreneur are identified accordingly. Once the opportunities are
identified, different networks which the entrepreneur is embedded in are noted and
segregated into two different social ties: strong and weak, and subsequently linked to the
earlier recognized opportunities (see tables in appendix). The findings of the within-case
analysis consisted of any similarities or dissimilarities in correlation to the entrepreneurs‘
social ties influences on opportunity recognition.

Qualitative data analysis consists of data reduction, data display, and conclusion
drawing/verification, according to three concurrent flows of activity (Huberman and
Miles, 1998; Miles and Huberman, 1994). Data analysis is widely recognised as the most
difficult and least structured area of case study research (Eisenhardt, 1989).

With demonstrated literature and resources, conclusions from the within case analysis are
drawn to show the earlier discussed correlations. These in-depth within case analysis are
then concluded by a cross case analysis with the aim to uncover cross-case patterns.

7
4. CROSS CASE ANALYSIS
Cross-case analysis is a research method that facilitates the comparison of commonalities
and difference in the events, activities, and processes that are the units of analyses in case
studies. (Khan and VanWynsberghe, 2008). Engaging in cross-case analysis extends the
investigator's expertise beyond the single case. It provokes the researcher's imagination,
prompts new questions, reveals new dimensions, produces alternatives, generates models,
and constructs ideals and utopias (Stretton, 1969). Cross-case analysis enhances
researchers' capacities to understand how relationships may exist among discrete cases,
accumulate knowledge from the original case, refine and develop concepts (Ragin, 1997),
and build or test theory (Eckstein, 2002).

In the beginning of this chapter an overview of the cases is given to ease the
understanding of the following cross case analysis. To analyse the influence of the
network on the entrepreneur‘s opportunity recognition two examples of opportunity
recognition are compared throughout the cases. The first example is the opportunity
recognition concerning the establishment of the three companies Polaris AB, Index
Braille Printer Company, and Liko AB. The second example is the entrepreneur‘s
opportunity recognition concerning the internationalizations of the above mentioned
firms.

4.1 THE CASES - AN OVERVIEW

Polaris group is a privately-owned niche company, whose headquarter is located in the
North of Sweden, selling and manufacturing rimless eyewear. The company was
established in 1979 by the entrepreneur and current owner, Staffan Preutz. Polaris group
has been constantly standing in the market over the past decades. In 2011, the company
had employed 57 people worldwide including 20 employees working in Sweden; the
company‘s turnover was approximately 68 MSEK. Furthermore, Polaris‘s foreign market
contributed around 95% of total sales: Japan and the United Kingdom played vital roles
in the foreign market by generating 65% of company‘s sales.

Index Braille AB is a privately-owned company which manufactures and sells high

quality and technically advanced Braille printers. The Swedish company is the world-
leader within the market segment for single and double-sided Braille embossers. Index
Braille had 11 employees and a turnover of 50 MSEK in 2011.

Liko AB was a privately-owned company which is specialized in developing,

manufacturing and marketing lift and transfer equipment to people whose mobility is
impaired. Liko AB is one of the 20 major players in this niche market with 20% market
share worldwide. Which generates 80% of the 402 MSEK turnover. The other 20% of
turnover is gained within Sweden, the homebase of Liko AB, Within the Swedish
market, Liko AB holds 60% market share. The company was founded 1979 by Gunnar
Liljedahl.
The company was sold after the data collection in 2008 for 1.3 billion SEK to the
American manufacturer Hill-Rom.

8
4.2 CROSS CASE ANALYSIS: THE INFLUENCE OF THE NETWORK
ON THE ENTREPRENEUR‘S OPPORTUNITY RECOGNITION
CONCERNING THE ESTABLISHMENT OF THE BUSINESS

Polaris AB Index Braille Printer Liko AB

Company

Network influence Coloured plastic Braille printer: Furniture Leg

on Business glasses: Staffan / Strong Tie (blind Extender: Weak Ties
opportunity Work at father‘s mother) (physio- &
recognition store (strong tie) occupational
therapists, disabled)

Comparing the influence of the entrepreneur‘s network on the opportunity recognition

concerning the establishment of the business there are different kinds of network
influences in the cases. While Staffan Preutz had no major influence by his network on
the opportunity recognition of eyewear with colored plastic glasses, Björn Löfstedt‘s
blind mother, a strong tie, was the major influence on the opportunity recognition of
braille printers and the County Council surrounding consisting of occupational therapists,
physiotherapists and the disabled, therefore weak ties, mainly influenced Gunnar
Liljedahl‘s opportunity recognition of solutions for disabled.

The opportunity recognition of Staffan was a combination of his personal future fashion
suggestions combined with his superior knowledge about how to use and colour plastic
glasses.

As Staffan worked since his early childhood in his father‘s shop for watches and glasses,
his father can be added as a strong tie to Staffan‘s business opportunity recognition
because this gave him access to and knowledge about the eyewear industry. To this, his
early dream of designing and manufacturing glasses can be connected. On a 50/50 basis
he founded Polaris AB together with his close friend and strong tie Lars Karbin as brand
for his coloured plastic eyewear. Staffan needed Lars for calculations and help with the
paperwork. The opportunity recognition itself of designing and manufacturing coloured
plastic eyewear is, however, not mainly influenced by either of these strong ties (father
and Lars).

The reason why Staffan‘s opportunity recognition is mainly not influenced by his
network is because he is the only entrepreneur within these three cases whose product
does not only fulfil a practical need but is also about fashion and luxury. Thus, it‘s not
only about transforming the needs or problems of others into an opportunity but also
about recognising the future fashion trends.

Björn wanted to help his blind mother since his early childhood. He noticed the big
efforts his mother had to spend to complete her work with a braille writer that had no
memory at that time. Since he had access to facilities for the product development being a
research assistant at university, Björn saw the possibility to create a solution for his
mother. Later he established Index Braille Printer Company together with his colleague
Torvald Lindqvist, a strong tie, who developed the software and electronics for the braille
printer.

9
On account of the job at the county council (constructor and problem solver), Gunnar had
the possibility to travel with physiotherapists and occupational therapists and to find ways
to help handicapped patients (p.216). He did this for 13 years and could therefore learn
about the patient side and also the helping side. Hence, he was able to recognize that
there are a lot of business opportunities. One could say, that this network was an indirect
accelerator, since it helped Gunnar to give him further education and therefore he started
to sell his ideas and drafts to larger manufacturers and later under his own brand ―Liko‖.

The brother of Gunnar and strong tie, Sören, can also be connected to the business idea
recognition as he helped Gunnar to discover the entrepreneur and inventor in himself. It
was him encouraging Gunnar to apply to the County Council even though originally
Gunnar suggested the job to Sören (p. 215). Taking the great influence that job had on the
business idea recognition into consideration the job itself can be seen as an opportunity.
Here one advantage of strong ties becomes clear: Strong tie network members know the
strength and weaknesses as well as the aims of each other and are hence able to identify
opportunities for each other. Sören initiated the opportunity recognition process of
Gunnar in this case. Nevertheless, Sören is of the opinion that the close relationship is
rather negative for the business, since they deal differently with each other than they
would with weak ties. This difficulty would not exist in weak ties, since people would
rather behave friendly but without the fear to hurt the other person‘s feelings. Hence, it
may be more helpful to have a weak tie- relationship since objective discussions without
an emotional base might be more efficient.

It can be stated that strong ties are often the source of early dreams or needs that later end
up being an opportunity. In Staffan‘s case, his father and his work woke the idea in him
to design and manufacture glasses. In Björn‘s case, his mother‘s disability urged him to
help her and in Gunnar‘s case his brother encouraged him to use his abilities and
creativity. This can be connected to the theoretical background given in chapter 2, where
ideas and dreams are described as the pre-stage of opportunities (Dimov, 2007).
Furthermore, the definition of Granovetter (1982) of strong ties as social relationships
which might have an extended history matches the relationships described above.

While rather strong ties influence the pre-stages of the opportunities recognized by the
three entrepreneurs, there is no specific tie that can be identified as major influence on the
opportunity recognition itself concerning the establishment of the business.

Polaris AB Index Braille Printer Liko AB

Company

Network influence Frameless eyewear Björn‘s focus on First stationary lift:

on Product with plastic glasses: Braille printers → Competitor Arjo
recognition Staffan / Lars (strong split into two
tie) different firms, Index
(Björn) and Polar
Print AB (Staffan +
wife): Strong Tie
(Staffan Syk)

10
Throughout the three cases the original business opportunities were changed or focused.
Together with Lars (strong tie), Staffan recognized that the real opportunity is not the
framed plastic eyewear in different colours, but the frameless eyewear. Björn needed to
refocus his company on braille printers which was influenced by differences with his
close friend and colleague Staffan Syk (strong tie). Gunnar recognised a stationary lift as
an opportunity being influenced by the non-cooperative competitor Arjo (weak tie) and
then focussed the company on lifts and transfer equipment as main products.

Frameless eyewear was first intended to be just a side project in Polaris but the sales led
Staffan and Lars to the conclusion that the business idea should be focused on frameless
eyewear. This was a jointly opportunity recognition where Staffan and Lars influenced
each other as strong ties. Nevertheless it was the market and the sales as external
influences that mainly led to the opportunity recognition itself. Consequently, there are
no strong influences by network ties connected to this opportunity recognition.

Björn and the Syks (Staffan + Wife) who ran Index together had a different focus. While
Björn wanted to concentrate on developing the braille printer, the Syks saw opportunities
in selling a wide product range for blind people to the swedish market. At that point they
decided to split the company in two to make it possible for everybody to follow his aims.
In this case there was no real opportunity recognition of Björn because this was his aim
since the beginning. Nevertheless, the Syks as a strong tie influenced him in a way that he
lost track of his original focus for a period of time. Here the negative side of strong ties in
business become visible as opposed to the positive influence of strong ties mentioned in
the context of Sören encouraging Gunnar to use his ability and creativity professionally.

Gunnar passed some improvement suggestions for the stationary lift to Arjo, which the
competitor ignored. This led Gunnar to build the lift himself and to focus the R&D of
Liko on lifts. The opportunity recognition was in that case influenced by a weak tie that
does not directly belong to his network. As in the case of Polaris AB it‘s not the network
itself that influenced the opportunity recognition but the market as an external influence.

The further development of the original opportunity is according to the examined cases
strongly influenced by external factors such as the market and the competition (Polaris
and Liko). Björn didn‘t give the original opportunity a new focus but rather refocused it
on his original aim. Consequently. the entrepreneur‘s network plays a minor role in the
opportunity recognition concerning the focusing of the original establishment
opportunity. But it could be difficult for the entrepreneur to follow his ideas (which could
result in opportunity recognitions according to Divon (2007)) and original opportunity
recognitions. The reason for this difficulties could be the inhibited communication
between strong ties. This phenomena is also visible in the case of Liko where the brothers
Gunnar and Sören couldn‘t speak straight forward about business, which led to problems
as well.

THE DEVELOPMENT OVER TIME

The opportunity recognitions concerning the establishment of the companies are

forcingly connected to the products that led to the establishment of the business. Thus,
the above can also be seen as the early stage of opportunity recognition related to
products. In the following analysis, this early stage findings are compared with the
influence of the network on opportunity recognition for products in the later stage.

11
An example in Polaris for a later stage product is the SP-Collection. Staffan‘s opportunity
recognition here was again not influenced by his network but by an external influence,
the nature. Nevertheless, he could only work on it since he had an established network
that could be trusted with the design of ordinary glasses (Kicki and the woman in Japan),
which he neglected during that time. In the early as well as in the later stage it was mainly
Staffan himself that recognized new product opportunities without any major influence of
his network.

As Index is a one-product-company there are no new products in the later stage. But
Index continually developed its printers further and recognized improvement
opportunities. Also since the beginning the product development process and the
recognition of improvement opportunities was influenced not only by Björn, as Torvald
for example did the whole software and electronics part. Later (late 1990s) especially
employees contributed to software and programming improvements, where Björn just
assisted as the project manager. Consequently, the opportunity recognition was almost
never just centered on Björn. His mother (strong tie) was the influence on the initial
opportunity recognition, Torvald (strong tie) contributed at first with improvement
recognitions concerning electronics and software and later mainly the employees as weak
ties.

As Gunnar lost the contact to the patients after he left the county council he was
dependent on input generated through the established product committee which was
responsible for forwarding end user/customer ideas to the R&D department. The latter
consisted mainly of Gunnar and his son (strong tie). Therefor in the early stage as well as
in the late stage opportunity recognition related to new products were influenced by weak
ties, in the early stage by the county council surrounding and in the late stage by
customers and patients which is basicly the same es in the early stage. Since Gunnar‘s
son was involved in R&D a strong tie can also be added to the late stage opportunity
recognition. This nevertheless is a minor influence as it is said that the innovation process
is still centered on Gunnar.

The cases of Polaris and Liko show no or minor changes of the network influence on
opportunity recognition concerning new products over time: In the case of Polaris the
innovation process was and is centered on Staffan in the early as well as in the late stage.
There is no major network influence here. In the case of Liko, the new product
opportunity recognition is mainly influenced by weak ties in all stages. In the case of
Index, strong ties (mother and Torvald) influenced Björn‘s new product opportunity
recognition in the beginning and weak ties (employees) in the later stage. Thus, the
network influence on the new product opportunity recognition shows a tendency towards
no changes over time.

4.3 CROSS CASE ANALYSIS: THE INFLUENCE OF THE NETWORK

ON THE ENTREPRENEUR‘S OPPORTUNITY RECOGNITION
CONCERNING INTERNATIONALISATION
The recognition of opportunities regarding to internationalisation may vary between the
three cases and the early and late stages.

EARLY STAGES

12
Some ties of Staffan‘s network influenced the internationalisation positively. Although
there were several opportunities to increase his firm in the domestic market, Staffan
prefered to develop the market abroad. The fact that people in his country did not take
him serious and did not believe Staffan was capable of designing trendy glasses, he was
resulted to expand abroad. From this it can be deduced that the weak ties he had in
Sweden were rather useless than supporting him.
The majority of new international markets were recognized by Staffan‘s connections—
acquaintances and business contacts, known as weak ties, except the UK and US markets
that Polaris have expanded its business through Staffan‘s family and close friend which
are strong ties. The market entrances in general of Polaris were rather based on personal
feelings than on hard facts. As he mentioned “[s]ometimes you know that you can earn
much money, but you don’t like the person. In such cases, you don’t have fun, are not
comfortable, and therefore I don’t make business with him.” (p.132). This can be
explained due to the reckless and impulsive decisions that Staffan took to enter new
international markets without any or little risk calculations. For instance, Polaris entered
the Australian market, although the research in the beginning showed, that the market
was rather small. Polaris made big losses and Staffan had to admit “this was a crazy
establishment. It was never a strategic decision, but more because it was a fun idea. The
Swedish optician I had met seemed to be a nice guy and I thought it would be a good
adventure.” (p.144). Moreover, a former marketing manager added “It could be that
Staffan met someone on the plane or in a trade show and the chemistry was right. That
was all that was needed.” (p.145). An accelerator for internationalisation was the
attendance of trade shows in Paris and Milano, since these shows were a good
opportunity for Polaris to get in touch with opticians who could later help by entering
new countries.

Björn also profits from strong ties in the earliest development stage. A colleague of
Björn, Torvald, provided the software and electronics for the braille printer. The two of
them therefor started Index together.
Moreover, Björn used his network for the entrance in the french market. His close friend
Staffan, who spoke a bit french could negotiate with french distributors. This strong tie
helped Björn to get over the language barrier and to make it possible to enter the french
market. Therefore, he provided Björn with new knowledge.
However, mostly weak ties in his network contributed to the early internationalisation.
He met distributors on trade shows which resulted in travels to the different home
countries of the distributors in order to show them his product: “(...) There was lots of
money and opportunities.” (p.179).

However, Liko‘s internationalisation process was rather influenced by weak ties and
coincidently occasions in the early stage. One example is the entering of the North
American market, which was entered before the European market (except for the nordic
market). This is a peculiarity which is not directly based on Gunnar's network itself but
on a coincidence which is based on his network. Gunnar and his wife got to know a
couple from the United States when they visited Sören (p.220). This couple can be seen
as a weak tie. Gunnar did not know them before and additionally this weak tie could give
Liko information about the North American market which Gunnar would probably have
had no access to otherwise at that stage. This is one characteristic of weak ties, as it was
illustrated in the theoretical part of this paper. In addition, this weak tie is probably less
reliable, since there is no close relationship between Gunnar and the married couple Ethel
and Hans Sigvardsson but it is presumably that this couple can offer information about
the unknown market to a bigger extent than strong ties in Gunnar‘s network could.

13
Although Liko had to close the North American office after a couple of years because of
the lack of profit, it was an unexpected opportunity at that early stage of Liko. It becomes
clear that weak ties also have disadvantages since the nodes cannot be sure about the
qualifications of the ties. In this case, Ethel, who was responsible for the sales in the US,
“had difficulties penetrating the market and convincing the US customers” (p.221). This
failure could also have happened if this had been a strong tie, but the difference is that
Gunnar would have known the qualifications in a better way and could have probably
estimated if Ethel was talented or not. In 1997 Liko tried to enter the US market again
with Hans as the CEO (p.240); this time was more successful.
As it can be seen in the analysis above, that weak ties may have information where the
node, Gunnar, would have no access to in his close network. Gunnar himself is of the
opinion that strong ties as his brother Sören for example are important but not essential
for the business. The authors however are of another opinion as explained below.

Sören was not only involved in the early stage of the company but also in the late stage,
including internationalisation. “[T]he ten years that Sören spent in Liko definitely
boosted the speed and behavior of the internationalization process” (Ghannad, 2013, p.
249). Strong tie network members know the strength and weaknesses as well as the aims
of each other and are hence able to identify opportunities for each other, which is an
advantage of strong tie compared to weak ties. In Ghannad‘s opinion Sören “decreased
Gunnar’s negative perception towards internationalization, risk taking abroad, foreign
market entry and investing abroad” (p. 255). This change of perception contributed to the
opportunity recognition of expanding sales abroad which led to a significant growth of
Liko. In the early stage Sören just influenced Gunnar to recognise the fact that
internationalization is in general a significant opportunity for the company but the single
market opportunities were mostly identified by Sören as he was the export manager.
Considering that Sören was responsible for nearly the whole early stage
internationalisation the influence of a strong tie is crucial here.

Liko is the only company in the three cases which internationalization was mainly
influenced by a strong tie (Sören). Index and Polaris profit from the Entrepreneur's strong
ties in the earliest stage of internationalisation. But overall, this stage was driven by weak
ties (distributors and acquaintances) in both companies. All companies used trade shows
as an accelerator for their internationalisation, since trade shows were opportunities to
widen their network with weak ties. This is why in the early stage of opportunity
recognition concerning internationalization the tendency goes to weak ties as the major
influence. This is coherent with the theory of Greve and Salaff (2003) who stated that the
amount of weak ties is relatively high in the emergence stage.

LATE STAGES

The fact that Staffan entered the Japanese market was based on a coincidence, since Mr.
Iwaki, the owner of a major top-end optical chain in Japan, saw Polaris‘ glasses in the
Blue Jeans store in US and wanted to have them in Japan (p.142). Upon request from
Japanese company, Polaris decided to start supplying its product to them. Although he
died before Polaris was established, his brother took responsibility for the Japanese
market. After some years of successful cooperation, Staffan was asked to built a joint
venture. Staffan agreed to start it on a 50:50 basis. This tie can be identifies as a weak
tie. It that he recognised this opportunity which came up by a coincidence and which led
Staffan to enter a market, which was culturally completely different from the home

14
market. As explained in the theoretical part, weak ties can give individuals access to
new information which otherwise would be impossible to find in the closer network
(Granovetter, 1982). The theory underlines the findings in the case, since Staffan has no
relatives or friends in Japan.
However, doing business with Japanese people in their country is not only the business
matter but also the relationship matter. According to Staffan: ―To have a joint venture
with a Japanese person in his country is like marrying into their family. It is not only the
responsibility of the company that has to be shared, but also the respective families
become a matter for the other partner.” (p. 143). Therefore the Japanese partner asked
Staffan at some point to take care of his son for a while and send him to Sweden.
According to Granovetter (1982) characteristics of a strong tie are: frequent interaction,
extended history, intimacy and sharing, reciprocity in exchanges that allows for mutual
confiding, and trust-based interactions. Thus, this relationship with the Japanese became
a strong tie over time as this criteria usually need to be fulfilled if somebody trusts
another to take care of the own son. In this case, it was obviously shown that weak ties
played a vital role to recognize the opportunity in the early stage of internationalization;
however, they have been developed over time by the culture to be strong ties at later
stage.

One problem Staffan faced in the late stage refers to the age factor of his network,
because not only the entrepreneur gets older but also his network. In Japan an older age
is rather an advantage since it gives the person more respect (p.153) but in other
cultures, the older age is rather a disadvantage, since the ties from his network get
retired and therefore he had to establish a new network with the younger generation,
which demands obviously more effort and which he had difficulties with.

Björn‘s network increased in course of the time, since he went to many trade shows
where he could extend his business network. After years of experience with
disappointing results of weak distributor relations, Björn decided to obtain stronger
relationships with foreign distributors before doing business with them. However, these
relationships cannot be classified as strong ties as they don‘t fulfil the criteria of
Granovetter (1982) such as extended history, intimacy and sharing for example.
Therefore, it can be stated, that weak ties are the main influence of Björn‘s
internationalization opportunity recognition in the late stage. this entrepreneur is rather
reserved than out-going which affects also his network, especially regarding to his
social network.

During the time Sören worked for Liko, he transferred his knowledge about
internationalization to Gunnar and enabled him to recognise and evaluate foreign
market opportunities (p. 255). Gunnar‘s opportunity recognition concerning the
internationalization in the late stage, when Sören left the company, was mainly
influenced by distributors he met on trade shows or through unsolicited orders.
Opposed to the above, the relationship between Gunnar and Sören also showed a
disadvantage of strong ties in the business environment. Sören expresses his concerns as
followed: “I think, due to the fact that we are brothers, we don’t talk straightforward
about business” (p. 224). An inhibited communication could have a negative impact on
the opportunity recognition because there it might also include a disrupted knowledge
transfer.
15
As it is mentioned above, the fact that Staffans network gets older makes it more difficult
for him to use and maintain it, since the ties become retired and he cannot easily establish
connections with the successors. This is why for Polaris strong ties, which he established
over the past years, are the main influence on opportunity recognition concerning
internationalization in the late stage.
In the case of Index and Liko, the weak ties become more important in course of time and
the strong ties lose their influence, as in both cases internationalisation consists mainly of
loose distributor contacts.
Therefore in the late stage the tendency of the network influence on the opportunity
recognition concerning internationalization goes to weak ties. Over time this tendency
hasn‘t changed as weak ties are also the main influence in the early stage. Thus it can be
stated that according to the examined cases weak ties are the main influence on the
entrepreneur‘s opportunity recognition concerning the internationalization of his
company.

5. CONCLUSION
It becomes visible, that the entrepreneurs identified value and newness of the cognitive
process concerning new products and internationalization which defines an opportunities
recognition, as it was illustrated in the theoretical part (Baron, 2006).

Moreover, it can be concluded that the entrepreneur‘s social network has a greater impact
on the dreams and ideas of an entrepreneur at a pre-stage of the initial opportunity related
to the establishment of their business, as well as on the opportunity recognition related to
internationalization. However, the impact of the entrepreneur‘s social network on the
initial opportunity recognition itself is minor. Furthermore, the network influence on the
new product opportunity recognition examined in the three cases is not likely to change
over time.

The entrepreneur‘s opportunity recognition related to internationalization is mainly

influenced by weak ties in both stages, which underlines the importance of weak ties and
the entrepreneur‘s ability to establish them for a company‘s internationalisation.

Comparing the entrepreneur‘s network influence on the two kinds of opportunity

recognition, establishment of the business/new product innovation and
internationalization leds to the inference that the role of the network varies. The social
network of an entrepreneur is crucial for some kinds of opportunity recognition, such as
Internationalisation, but does not always play the major role in others, as the
establishment of the business/new products.

16
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APPENDIX

APPENDIX 1: The influence of Social Networking Ties on Staffan‘s

Opportunity Recognition (Polaris AB)

Recognized Type of Social Network Remarks

Opportunity Ties
Early education Strong Ties Direct admittance through father
Early employment Strong Ties Worked at father‘s optician store
Youth Hostel Weak Ties For hitchhikers
Manufacturer visit Weak Ties 10 eyewear manufacturers in
Europe (Exhibition Catalog during
visiting his sister)
Start Synsam Chain Weak Ties Volunteer-driven organization
(Five other opticians)
Open own optical store in NA (Staffan)
Lulea
Colorful plastic glasses Strong Ties Assessment by Lars Karbin,
in 1975 Childhood close friend
Frameless eyewear NA (Staffan)
Establish Polaris in 1979 Strong Ties Lars & Staffan (50-50)
Capital invest 50,000 SEK
investment each
Establish Facility in Weak Ties Got the idea by visiting French
Boden in 1979 Family business
Early stage business Strong Ties Childhood friend Lars
feasibility
USA Market (Blue Jeans Weak Ties A French-American friend met in
Chain) Milano
Polaris Collection in Weak Ties Former customer in Boden
USA (Captain in the military)
Polaris Optic US Inc. Weak Ties Meg, Swedish contact, whom he
met at a party arranged by the
Captain‘s family
Canadian Market Weak Ties David Opie, Customer in Sweden
(Design Optical in 2002
Precision—DOP)
German Market Weak Ties Fritz, German Optician having
store at Skelleftea in Sweden
Joint Venture, 50% Polaris, Fritz
25% and His wife 25%
French Market— Weak Ties Pierre Marly, Friend of French-

20
Exclusive dealer (seller) American Friend in the USA
Market
French Market—Agent Weak Ties One salesman from Marly‘s store
of Polaris
UK Market Strong Ties - Mr. Wilde, an
acquaintance of Lengton
- Lengton Wildman
(husband of Staffan‘s
Sister)
- Ann Marie (Staffan‘s
Sister)
Japanese Market Weak Ties Owner of top-end Japanese
Optical Chain, Mr. Iwaki, seen
Polaris products in Blue Jeans
(USA)
Australian Market Weak Ties Swedish Family in Brisbane,
Australia
Swedish Market Strong Ties Close colleagues in major cities of
Sweden
Board Members Strong Ties All established or new members
of the board were either close
friends or direct relatives
Polaris Academia Weak Ties Distributors and customers are the
ones invited

APPENDIX 2: The influence of Social Networking Ties on Bjorn‘s

Opportunities Recognition (Index)

Opportunity Type of Social Ties Remarks

Early education Strong Ties Direct admittance through father
Early employment Strong Ties Worked at ironworks where
father worked
Renting out his house NA
Job: caretaker at a high Strong Ties Father arranged the job
school
Braille printer Strong Ties His blind mother
Production of the Strong Ties Torvald Lindqvist, a colleague at
electronics of the product the university
Loan money Weak Ties Government agency
Product testing Strong Ties Bjorns blind mother
Expand to Norwegian Weak Ties Braillo (Norwegian company)
market

21
Getting rid of the Weak Ties Rolf Osterberg
Norwegian distributor
International Market NA
German market Weak Ties German Distributor
British market Weak Ties British Distributor
Norwegian market Weak Ties Norwegian Distributor
Assembling printers Strong Ties Staffan Syk, long time friend
French market Weak Ties NA, ―he had heard that there was
a very strong union for blind
people in France
Staffan, who spoke some French
US market Weak Ties American distributor in LA
UK Market Weak Ties An Englishman
Product Strong Ties Family, friends
development/production
Product improvement NA
Finishing the improved Weak Ties Investment company
product
US Market Weak Ties Jack Woods
Board Members Strong Ties
Module System Strong Ties Kjell Lindfors

Appendix 3: The influence of Social Networking Ties on Gunnar‘s

Opportunities Recognition (Liko AB)

Recognized Opportunity Type of Social Network Remarks

Ties that influenced OR
Liljedahl Konstruktion Weak Ties (ASEA)
County Council Public Strong Ties (Sören)
Health Board
Furniture Leg Extender Weak Ties (occupational
therapists,
physiotherapists,
disabled)
Selling ideas / blueprints NA (Gunnar)
to manufacturers for mass
production
Established to help ASEA (previous
employer) with single projects as a
constructor
- Sören encouraged Gunnar to apply
for the job.
- Job at CC led to establishment of
Liko
Aim: Extend the target group of his
solutions for the County Council

22
Manufacturing inventions Weak Tie Gunnar felt cheated by
by himself under the name (Manufacturers) manufacturers
Liljedahl Konstruktion
Liko AB NA (Gunnar) Realization of large potential in the
firm
First stationary lift Weak Ties (Competitor: Major defaults in Arjo Hospital
Arjo) → do competitors Equipment‘s product, which they
belong to the network? didn‘t want to fix after Gunnar‘s
suggestions, so he decided to do it
himself.
Market Entry in Denmark, NA (Gunnar) Swedish Market too small
Norway and Finland
Liko Intercare NA (Gunnar) Sören becomes head of export
division because Gunnar needed
assistance in internationalization
Inclusion of external NA (Gunnar) New knowledge as if only family
people on the board members are on the board
French Subsidiary Weak Tie Liko employed one of Arjo‘s
(competitor) managers
Golvo (world‘s first NA (Gunnar)
mobile lift capable of
lifting from the floor),
Liko Amputee Slings,
Liko Lift Pants
Subsidiary in UK Weak Tie Ron Smith
Little Green Book (?) Weak Tie Business acquaintance
Entrance in the US market Weak Tie Hans and Ethel Sigvardsson (1st
(Liko Medical Inc.) time), (2nd time?), Hans (3rth
time) and Ethel member of the
board of Liko
European markets + Israel, Weak Tie ?
China, Hong Kong, Russia
Taiwan, South Korea,
New Zealand
Entrance Canadian Market Weak Tie Sören/Gunnar met Canadian
distributor at trade show
Entrance Japanese Market Weak Tie Sören/Gunnar met Japanese
Distributor
Market Entry in Germany Weak Tie Inquiry from abroad
Market Entry in more than Weak Tie Unsolicited orders
20 countries from 1987-
1990

23
Market Entry in South Weak Tie Hardy Brännström CEO
America
Market Entry in Middle NA
East and China
Market Entry in Africa Weak Tie Continent-wide distributor

24