The art of networking: Trust and social capital

Networking is the core of the Silicon Valley spirit. The Valley's entrepreneurial psyche is deeply rooted in a professional system of social and business networks. An advanced system that links startups, corporations, venture capitalists, lawyers, accountants, consultants, political actors, and interest groups. In combination these agencies constitute a specialized network support system that is highly beneficial to startups and new venture formation. It gives them access to capital, resources, partners, and counseling. Networking, consequently, is an essential feature of our ‘Silicon Valley Innovation & Startup Model’ both at the meso-level (organizations) and at the individual level (startup teams). It builds and strengthens commercial relationships between startups and established companies, investors, talent, potential clients, and stakeholders. Through networking new opportunities arise that startups may take in order to open new markets and to meet new business partners. Networking, so to speak, transforms startups from outsiders to insiders. A vital network mirrors strong social and geographic relationships and indicates active startup community involvement. It builds and maintains interactive network systems and ties the participating actors and firms.

Networks, innovation, and entrepreneurship are interconnected. Innovation knowledge diffuses through effective networks. As Emilio Castilla and his co-authors argue: “Innovation is so central to high technology industry that it is not an exaggeration to say that effective social networks determine a firm's chance for survival.” It enables collective learning, exchange of innovation experiences, diffusion of market information, mobilization of resources, communication and cooperation, joint projects, and creates bonds between startups and other organizations (e.g. universities, government). Castilla et al. made an interesting attempt to map the particular Silicon Valley institutional configuration. Their network analysis shows how actors in the regional economic infrastructure are interrelated and how these connections affect, in their case, IPO deals.

Networking also has a fundamental cultural dimension: it reflects social trust and the amount of social capital within a community, including a business community. Mutual social trust among actors is assumed to create community bonds, to positively affect the functioning of social institutions, and to generate a cultural climate in which cooperation is sought.