360 ENTREPRENEURSHIP
ships characterized by less trust, once reciprocity is broken, displeasure is communicat-
ed, or a verbal argument takes place, the parties are disinclined to do business anymore,
and they exit the network.^51
Personal networks have strong ties,
52
formed because the relationship has a long his-
tory, is based on a family connection, or arises from a common culture, common values,
or common associations. Strong ties are especially important in the early stages of busi-
ness formation, particularly in financing and securing the initial resources for new ven-
ture creations.
53Extended Networks. The extended network^54 consists of formal, firm-to-firm rela-
tionships. The entrepreneur develops these by means of boundary-spanning activities
with other owners and managers of enterprises, customers and vendors, and other con-
stituents in the operating environment. These are the normal cross-organizational activ-
ities required for the operation of an “open system.”^55 Extended networks become more
important as the firm moves beyond the initial founding stage.
Extended networks contain more diversity than personal networks and, consequent-
ly, more information. The relationships are more instrumental and based less on trust,
more uncertain and less predictable. The customer of a customer may be included, as
well as the supplier of a supplier. There may be many indirect associations in an extend-
ed network, so these are weak ties.
But there is “strength in weak ties.”^56 Weak ties make a network much larger by
encompassing more diverse information, people, resources, and channels. Whereas
strong ties produce trust but redundancy, weak ties provide unique information about
opportunities, locations, potential markets for goods and services, potential investors,
and the like. In addition, the extended network adds to the credibility and legitimacy of
the firm and expands its reputational capital.
Outside directors involved in the enterprise are good examples of the benefits of weak
ties. These outside directors are an invaluable check on the entrepreneur’s decisions and
possible mistakes, because such directors complement the entrepreneur’s information
base and offer an objective outside viewpoint. This fresh perspective can change the
course of the venture’s strategy. For example, Kurtz Bros. Inc, a family-run landscape
materials business in Cuyahoga Falls, Ohio, decided to diversify a few years ago. It was
ready to move into industrial materials, and initially its management forgot to consult
the firm’s three outside directors. When these directors heard of the plan, “They were
pretty tough on us,” concedes Lisa Kurtz, company president. “They told us we were
fracturing our organization, and that we should stick to our knitting.” The outsiders’
views made a deep impression: The family owners quickly reconsidered their decision
and liquidated the new unit.^57
One technological example of the extended network is the proliferation of blogs and
electronic bulletin boards designed and used by entrepreneurs to share and receive infor-
mation. Take the case of Bill Vick, owner of a Dallas-based executive recruiting firm.
When he needed new ideas for getting clients and building his visibility and reputation,
he put out a call for ideas on a bulletin board used by thousands of entrepreneurs. He
received many suggestions, including one that proved to be a bonanza: Vick started
mailing boxes of Vick’s Cough Drops to sales executives with a postcard saying that his