HOW CAN ENTREPRENEURS CHOOSE THEIR COOPTATION NETWORK? A SOCIAL NETWORK APPROACH

Mickaël Géraudel Assistant Professor Groupe Sup de Co Montpellier Business School Montpellier Recherche Management [email protected]

Abstract Access to resources like information, knowledge and social support is crucial for the performance of small businesses. Informal and formal networks are often the channels for transferring these resources. Little research has paid attention to an important type of networks: cooptative. However, cooptative networks are critical for professionals as they allow access to social, political and financial resources. We propose to help young entrepreneurs to choose the networks most useful for their needs. Indeed, it is complicated for young entrepreneurs to know why and how to select networks. Based on 11 interviews, we create a typology which positions cooptation networks according to value and status homophilies.

Keywords: cooptation, networks, social capital, entrepreneurs.

INTRODUCTION SME CEOs are increasingly embedded in a variety of networks to help their firms access informal resources like information, knowledge, political support and advice (Granovetter, 1973; Burt, 1992; Ingram and Roberts, 2003). The access to resources can be facilitated by formal networks such as business clubs or associations. Some of these clubs offer members the opportunity to meet other community professional people to exchange advice, information and knowledge, and so on. Many are also well known for their substantial charitable work. The common feature for these types of clubs is the membership process: all potential members must be sponsored by a current member and then elected. For these reasons, we refer to these clubs as cooptation networks. To our knowledge, little research has focused on the benefits of membership in these networks. Moreover, little has been published on the cooptation process. The only papers about cooptation have focused on the board interlock ties (Pfeffer, 1972; Burt, 1980, 1983; Galaskiewicz et al., 1985; Westphal et al., 2006). Therefore, this exploratory study sought to draw up a typology of some of the well-known clubs in France. We want to better equip SME CEOs to choose the appropriate network wisely, according to their professional and personal expectations. Firstly, we present a literature review about social capital, cooptation and homophily. Based on this literature, we position these networks according to two axes: status homophily and value homophily. Secondly, we present the sample, the interview protocol and the data processing. Our results are used to draw up a typology of cooptation networks.

LITERATURE Social capital and social resources Social resources are intangible assets provided by social networks. The literature about social capital highlights the configurations that optimize the outputs of network use. Some authors have referred to embeddedness (Granovetter, 1985) to designate situations where business decisions appear to be governed by social framing and the structure of the network of social ties (Uzzi, 1997; Yli-Renko and Autio, 1998), whereas others have evoked social networks

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(BarNir and Smith, 2002; Molina-Morales and Martinez-Fernandez, 2010) or social resources (Lin, 1999). Adler and Kwon (2002) showed that social networks and social resources are the two streams of the broader concept of social capital. One stream emphasizes the collective dimension of social relationships, seeing social capital as “an attribute of a social unit, rather than an individual” (Inkpen and Tsang, 2005: 150) and as a public good that is shared, available to, and bringing benefits to all members of a group (Inkpen and Tsang, 2005). This is the case for cooptation networks. The other stream sees social capital more as “a private good” (Inkpen and Tsang, 2005: 150), based on the notion that the configuration of social ties surrounding an actor is highly idiosyncratic and can therefore bring unique advantages to one actor over others. This latter research stream clearly established that the ideal configuration of social capital has to be analyzed in terms of the quality and structure of the ties surrounding an actor rather than their number (Adler and Kwon, 2002). Both these qualitative and structural dimensions have been discussed, raising two theoretical debates, one over the benefits of weak versus strong ties (Granovetter, 1973; Hansen, 1999) and the other over the benefits of dense networks of interconnected contacts versus sparse networks of unrelated others (Burt, 1992).

Cooptation According to Selznick (1949, p.13), “cooptation is the process of absorbing new elements into the leadership or policy-determining structure of an organization as a means of averting threats to its stability or existence”. For us, cooptation is the process of selecting and integrating a person into a socially distinguished group. The selection is very important because the majority of the group must be convinced that the person will fit well with the group members. This definition emphasizes the two main aspects: the entry conditions which dictate the selection process and the homophily in the group (McPherson et al., 2001). The selection process of a network is an indicator of the quality of the network. Prestigious networks are highly selective and this selectivity is part of the cooptation process. Indeed, to reproduce the same social structure, members have to integrate people who are similar.

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Homophily The concept of homophily is central to our paper. “Homophily is the principle that a contact between similar people occurs at a higher rate than among dissimilar people” (Mc Pherson et al., 2001, p. 416). Thus, entrepreneurs who participate in a cooptation network are looking for homophilous relationships: “Birds of a feather flock together”. After a brief review of the relevant literature, we chose two types first introduced by Lazarsfeld and Merton (1954) as most pertinent for our research question: status homophily and value homophily. Status homophily refers to the tendency of people to interact with others of the same socioeconomic status. This can be formal (for example, two lawyers) or informal (one researcher in biotechnology and one in management). For McPherson et al. (2001), status homophily includes the major sociodemographic dimensions that stratify society-ascribed characteristics like race, ethnicity, and so on, and acquired features like religion, education, and so on. Entrepreneurs should be interested in exchanging with other entrepreneurs because of the similarity of their professional problems. Integrating a network composed of entrepreneurs is a source of expertise for each member and a way to exchange relevant information. Value homophily refers to the tendency of people to interact with others holding the same values. For entrepreneurs, cooptation networks are a potential means to develop and share values. Although certain networks are business oriented, some are much more socially oriented, such as service clubs (for example, the Lions Club and the Rotary Club). In any case, these networks provide entrepreneurs with opportunities for self-development. In this exploratory research, we construct profiles of cooptation networks based on their respective positioning on status homophily and value homophily.

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Figure 1: Homophily positioning

METHODOLOGY

Cooptation networks Our sample is composed of 9 active members of a variety of cooptation networks and 2 experts of these networks: a consultant and a journalist. On average, the membership fee is 300-400 euros per year. People in these networks meet one or two times per month (except for Freemasons for whom the number of meetings depends on the Masonic degree). These networks are: -

The Grande Loge Nationale Française (GLNF) is a French Masonic obedience created in 1913. It is the only obedience that is recognized by the United Grand Lodge of England, which means that the GLNF is the only official regular obedience in France. As a Masonic obedience, the GLNF is a hierarchical organization at the national and local levels. The goal of every mason is to leave the secular world and enter the spiritual world through rites. Masons seek a spiritual life and selfimprovement within a brotherhood. 5

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The international Rotary Club was created in 1905 by a lawyer in Chicago. The main goal of the Rotary Club is to promote a better world through the actions of its members. It is a professional club and not just a humanitarian organization. Members stay in close contact and develop skills and competences at their conferences and meetings.

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The Lions Club was created in 1920. Its mission is to empower volunteers to serve their communities. Members can connect with other members to develop humanitarian projects at local and international levels. Members are expected to have or develop leadership skills to carry out actions that will positively impact people’s lives.

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The Entrepreneurs et Dirigeants Chrétiens (EDC; French Christian Entrepreneurs and CEOs network) is a small network that is part of a much larger one, UNIAPAC (UNion Internationale des Associations PAtronales Catholiques). The EDC network was created at the beginning of the 20th century. The goal of the organization is to enhance people’s lives and to study social problems from the Christian point of view. Members pray together and are supported by a preacher.

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The International Order of Anysetiers (L’Ordre International des Anysetiers) is an organization dedicated to the virtues symbolized by the anise flower. In the 12th century, an association of caregivers became the Order of Anysetiers because of the medical virtues of anise flower. In the 1950s, the Order was revived by people wanted to help others in their community.

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The World Association of Women Entrepreneurs (WAWE; Femme Chef d’Entreprise) has one goal: promoting and reinforcing women’s entrepreneurial initiatives worldwide. To belong to WAWE, you need to be a woman and to be a manager or a CEO. It was created in France in 1945 and became international two years later. Women participate in WAWE look for information exchanges, help, solidarity between members.

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CEOs and Sales Representatives of France (Dirigeants et Commerciaux de France) is a business network created in 1930. DCF members deal with economic and management topics once a month. 6

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The Montpellier Presidents’ Club (Le club des Présidents). This is a supranetwork of the presidents of the main economic organizations of Montpellier (south of France). The goal is to coordinate schedules in order to carry out economic events together.

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Jacques Molénat is a journalist specialized in cooptation networks located in the south of France and especially Freemasonry.

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Florian Mantione is a consultant who is well-known for his expertise in networks. Many of our interviewees recommended that we contact him for information about networking.

Sample

Please find the interviewee features of our sample in Table 1.

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Network name

Interviewee’s Professional and social features

Function in the network

Lions Club

A female management coach who is 56 years old.

She was previously the manager of a Lions club for 15 years in the south of France.

Rotary Club

He is a retiree. He is 60.

He is a district secretary of a Rotary Club in the south of France.

Entrepreneurs et Chrétiens (EDC)

Dirigeants A female consultant in human resource management. She is the assistant of the district chief in She is 55 years old. the EDC network.

Dirigeants Commerciaux France (DCF).

de CEO of an Insurance company. He is 39 years old.

He is DCF President at the local level (big city in the south of France).

Ordre des Anysetiers

He is a retiree.

He is the Associate Director at the national level.

Femme Chefs d’Entreprise

CEO of a restaurant/hotel.

She is the district responsible.

GLNF

CEO of several SMEs. He is 47 years old.

He is in charge of the Lodge.

GLNF

Real estate agent for 20 years. He is 46 years old.

He is an deacon in the Lodge.

Club des Présidents

Director of the greater Montpellier district.

She is President President’s Club.

Florian Mantione

Director in a consultancy in the south of France.

He belongs to many cooptation networks and has created several networks.

Jacques Molénat

News magazine journalist: L’Express. He is an He does not belong to a network. expert on networks in the south if France.

of

the

Montpellier

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Interview protocol and data processing We conducted an individual semi-directive interview with all participants. Each interview lasted at least 1 hour, although some were conducted by telephone due to difficulties in time scheduling. This concerns the general secretary of “Ordre des Anysetiers” and the journalist of L’Express which is a French leading weekly news magazine. We were not authorized to record these interviews because of the sensitive nature of some of the interview contents, but extensive notes were taken. This research is exploratory (Miles & Huberman, 1991). We took notes about the predetermined theoretical parts we wanted to deal with: presentation of the network, types of homophily, network involvement, relative importance of the networks, multiplexity and control variables. Profiles emerged from the analysis of our notes. We also use some quotes to illustrate these profiles.

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RESULTS We positioned the cooptation networks on the theoretical model and we identified 3 groups.

Table 2: Cooptation network positioning

Gr 1

Gr 2

Gr 3

Group 1: These networks are business-oriented and are focused on a specified target: women, CEOs, sales representatives: the WAWE (Femme Chefs d’Entreprise) and CEOs and Sales Representatives of France (Dirigeants et Commerciaux de France). These networks connect people for business reasons. Members are recruited by cooptation and also through open application. Selectivity is not very high because homophily is overall based on status. “To enter in the DCF network, people have to come two times in our meetings and explain their motivations” (Dirigeants et Commerciaux de France). “To belong to FCE, you need to be a woman and to be a CEO (or in charge of your company)” (Femme Chefs d’Entreprise).

Group 2: These networks are both business and social action-oriented: Rotary Club and Lions Club. Members participate in charity events and networking. They exchange professional advice and work to improve people’s quality of life. Historically, the degree of selectivity has 10

been high because members were expected to be well-known in the community and engaged in social actions. Today, more and more people are encouraged to become members. “We recruit the best. People with quality like CEOs, liberal professions, people with responsibility”(Rotary Club). “At the Lions Club, people enter by cooptation (…) It is forbidden to use the Lions directory for professional reasons” (Lions Club).

Group 3: This network is only social action-oriented and helps entrepreneurs who share the same values and to implement these values in their jobs: French Christian Entrepreneurs and CEOs network (Entrepreneurs et Dirigeants Chrétiens) and International Order of Anysetiers (L’Ordre International des Anysetiers). To avoid competition and conflicts, they encourage members from a wide range of professional activities. Thus, members are in these networks only because of value homophily. “To belong to EDC you need to be a Christian, or to have affinity with Christian values, and to be a CEO” (Entrepreneurs et Dirigeants Chrétiens). “We recruit by cooptation: the candidate must be nice and can help sad people”(L’Ordre International des Anysetiers).

We found that there is a specificity for the Freemasons’ cooptation network. Indeed, there is no official criterion regarding status but, in fact, people from the lower socioeconomic classes are underrepresented because of the low probability that they are friendly with people from higher classes. The people who propose candidates for membership generally select from their own milieu. Thus, there is a social reproduction (Bourdieu & Passeron, 1970) which limits the relationship heterophily. “To enter at the GLNF: -

You need to believe in God,

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You must not be condemned by justice,

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You must not belong to a nationalist political party”(Grande Loge Nationale Française)

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The Montpellier Presidents’ Club is not represented. Indeed, this network is only useful for coordinating the different schedules between the networks; for example, to avoid holding a conference on the same evening, to share costs for a common event, and so on.

DISCUSSION The role of networks is central for entrepreneurs. It is crucial for them to be connected to resources such as strategic information, expertise, social support and so on (Granovetter, 1973; Burt, 1992; Lin, 1999). The literature on social networks has emphasized these outputs but little research has focused on the role of cooptation networks. However, these networks are often well-known to journalists, business people, politicians and the local communities in which they operate. They therefore merit a closer look from researchers. Our goal is to better equip SME CEOs to choose the appropriate network wisely, according to their professional and personal expectations. This is the managerial implication of our paper. We provide a guide to entrepreneurs so that they can be efficient in their networking activities. We also contribute to the literature by studying cooptation networks (Selznick, 1949; McPherson et al., 2001). We propose a social network perspective based on homophily to describe these networks. Nevertheless, our sample is composed of only 11 interviews. Our results could be strengthened through more extensive research on cooptation networks. We plan to contact other cooptation networks and to refine our analysis by distinguishing the different types of value and status homophily.

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