Social Networks Foster Entrepreneurship

THE IMPACT OF SHARING IDEAS AND PROJECTS IN AN EXPERIMENT CONDUCTED BY FERNANDO VEGA REDONDO IN GHANA

Entrepreneurs should take every opportunity to interact with their peers, exchanging views and sharing skills. They are all chances to create or grow enterprise, Fernando Vega-Redondo says. He is studying Virtual social networks and entrepreneurship in low-income countries to understand how peer networks affect innovation. The project started with a pilot experiment in Ghana and it eventually evolved in a large-scale field experiment that involved 5,000 entrepreneurs coming from 45 African countries. “There is a huge potential for enterprise in Africa where 60% of the population is below 25,”  Vega-Redondo says. “In many countries there are stable institutions, a significant fraction of well-educated people, and an enterprising population. The environment is ripe for some tool that promotes entrepreneurship.” At the beginning of the experiment, participants were divided into two groups. Both followed an online business course, but only the treatment group enjoyed a specially-created Internet-based chatting platform designed for sharing ideas and creating a community of entrepreneurs.

The experiment lasted two months and a half. At the end of the process, all business proposals were evaluated by a panel of professionals. The best of them were then subsequently assessed, and some funded, by real investors. “According to the feedback provided by the professionals and investors, interactions matter: the entrepreneurs of the treatment group did better, especially when all group members belonged to the same country.” Diversity is important. If entrepreneurs only interact with people like them, they will not have much to gain. “Our experiment identifies virtually implemented social networks as a cost-effective and scalable way of promoting entrepreneurship.”

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by Claudio Todesco