By Elizabeth MacBride
The benefits of personal networks in business are well documented, but do personality types help predict the ultimate success of those networks? New research from Stanford Graduate School of Business based on work in India says yes. Moreover, it's having extroverts in the network that eventually produces better ideas for startups and teams.
The researchers examined the experiences of more than 100 entrepreneurs who attended a June 2014 boot camp in New Delhi. Networks of peers, the researchers found, help entrepreneurs generate ideas, find talented cofounders, and gain the skills they need to scale businesses.
Networks, the research also suggests, could be especially vital to develop entrepreneurship in emerging markets, where entrepreneurs don't yet know the norms of startup life. A rich network can inform an entrepreneur of those norms.
"By talking to people, you get a view and perspective that others don't have," says Sharique Hasan, associate professor of organizational behavior at Stanford GSB. His co-researcher was doctoral student Rembrand Koning. "You can grasp onto an idea to design around, to elevate you out of your very narrow well. You can see a broader perspective."
The work shows that matching people with specific traits--extroversion and openness--makes networking easier, and eventually produces better ideas. It also shows that networking helps cofounders find each other by removing some of the uncertainty around pairing up in advance, and that entrepreneurs use information gained during networking to find talented cofounders. So far, two papers have been produced; a third is planned.
The researchers brought together the entrepreneurs for three weeks during a boot camp supported through a research grant from Seed, the Stanford Institute for Innovation in Developing Economies.
To examine how the traits of openness and extroversion affected the quality of ideas by individuals and in teams, the researchers assigned the boot camp participants to come up with concepts for startups in the Indian wedding industry, estimated to be worth around 2.25 trillion Indian rupees, or $38 billion, annually. On Nov. 27, 2011, for instance, over 60,000 weddings took place in New Delhi, because the date was considered auspicious. "Even on less auspicious days, Indian weddings are big, fun, complex, loud, colorful, and most of all expensive," the researchers wrote.
The ideas got better from people, especially those open to new ideas, after they were paired with extroverted people. "These results together provide strong evidence that peer interaction--namely, interaction with extroverted peers--increases the quality of individual ideas. Further, we find evidence that this effect is larger for individuals more open to experience," the researchers wrote.
To determine how networking affects the quality of the cofounders that entrepreneurs find, the researchers used data from the application process and weekly 360 reviews to generate measures of entrepreneurs' underlying talent and interpersonal ability. Then they set up randomized interactions between entrepreneurs and tracked them. Just before the third week, they asked entrepreneurs' preferences for whom they wanted to work with. The researchers found, first, that entrepreneurs had a greater preference simply for working with someone they'd worked or had any interaction with before. More interestingly, the researchers found that entrepreneurs learned different things about potential cofounders through the three types of interactions created by the researchers--direct collaborations, indirect relations, and short conversations. The researchers found that direct collaborations--working intensively on a team together--resulted in the most information about potential cofounders. However, they found that short conversations led to the entrepreneurs learning only about a potential cofounder's ability, but not interpersonal skills. Conversely, indirect connections (that is, having a shared friend or acquaintance) led to more information about a potential cofounder's interpersonal ability, but not talent.
The researchers plan to track the results of the entrepreneurs who have gone on to join or found fast-growing startups.
Hasan says the work produces some ideas for people who want to help entrepreneurs in emerging markets. Organizations that want to help promote networks could focus on creating public goods and places where networking events can be held, and on bringing people together. They can support data and research in the field, to show what works and what doesn't. Networks that help raise awareness and identify role models are effective, he says.
"People can model themselves after stories of successful entrepreneurs," he says. "It's about getting more people interested in becoming entrepreneurs."
This story first appeared on Stanford Business Insights.