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How Much Time Should You Spend Networking?

How Much Time Should You Spend Networking?

Karen E. Klein / BusinessWeek

Entrepreneurs are often advised to network in order to secure sales leads, find investors, and to get an outside-the-box perspective on their company or industry. But does networking truly change a company, and if so, how? So far, this question has been difficult to measure, but William Baker, marketing professor at San Diego State University, has conducted research on the topic.

He spoke recently to Smart Answers columnist Karen E. Klein about his findings. Edited excerpts of their conversation follow.

Last year, you studied 1,600 business executives from a cross-section of U.S. firms, half of them small and midsize companies and half large companies. What questions were you hoping to answer?

I wanted to see how what I call “external social capital” affected company performance. So I controlled for the effects of other business variables I’ve studied in the past and added networking to the mix.

And what was the bottom line—did networking make a significant difference?

I found it had a strong main effect on performance measures relating to innovation, most notably the ability of firms to develop new products.

Were entrepreneurs who do a lot of networking more successful in terms of profit or market share?

I didn’t see a direct impact on those things, but those who do a lot of networking were more likely to be innovative and to have a large percentage of new products.

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How did you define and measure networking?

External social capital means the extent to which firms go outside of their walls to talk to people—inside or outside of their industry—who they think have a valuable opinion. So entrepreneurs with high external social capital do a number of things, from business round table groups to industry associations, to talking to their competitors and suppliers, and even going out beyond their industry and talking to opinion leaders in other areas.

I think there’s a trend where firms are doing this more and more as they recognize you can’t depend on the group-think mentality inside your company. After all, entrepreneurs tend to hire people who think the same way they do and have the same perspective.

That might be particularly true in small companies, where there are fewer employees, perhaps less variety of expertise, and a smaller universe of ideas.

And it’s a very dangerous thing in this world to not share information. People are paranoid about giving out information, and you don’t want to be stupid, but you have to think that competitors can also be colleagues. The old business models are changing and you’re putting yourself at a positional disadvantage if you’re just relying on internal information now.

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