One of the authors of a recent academic study tells how the surprising findings could help U.S. entrepreneurs doing business abroad
Business networks made up of homogenous members benefit a startup in the beginning, but may actually hinder it later on. That's just one of the findings in Bat Batjargal's research on how entrepreneurs network around the world. Batjargal, 41, is a research associate at the Davis Center for Russian and Eurasian Studies at Harvard University, and an assistant professor at Beijing University, who has been studying cross-cultural networks for about a decade.
Batjargal's study, Emotional Men Versus Rational Women: Gender, Networks, and Entrepreneurship in China and Russia, co-authored by Michael Hitt of Texas A&M, Jean-Luc Arregle of EDHEC business school in France, and Anne Tsui of Arizona State, draws on data from 700 male and female entrepreneurs from China, Russia, France, and the U.S. and attempts to discover some of the hidden intricacies of how men and women network differently, while comparing behaviors in emerging economies with those in more developed nations.
Batjargal's other research, which examines the ties among entrepreneurs, their networks, and investors, also points to differences in how business is done in the U.S. compared with China and Russia. It's knowledge that he says could help U.S. entrepreneurs doing business abroad.
BusinessWeek writer Jeffrey Gangemi recently spoke with Batjargal about his ongoing research. Edited excerpts of their conversation follow.
What are the biggest lessons gleaned from your research that U.S. entrepreneurs and investors can use in their dealings in China and Russia?
It is difficult to provide a definite list of dos and don'ts because each entrepreneur's situation is unique. But it's important to be yourself from the very beginning. Don't try to be more Chinese than the Chinese, or more Russian than the Russians, because you will always be perceived as a foreigner, and they expect you to be different from them.
In China, it is important to find out what is the relationship base between two persons. In other words, to find out whether two persons are family members, or classmates, or came from the same town, and so on. The Chinese often structure their social networks according to these principles, and therefore it is vital to know relational bases for successful networking. In contrast, in Russia, relational base is not that important. In Russia, relationship history is very important—how long two persons know each other. Therefore, knowledge of who knows whom for how long is vital for successful networking in Russia.
How do you establish trust in networking across cultures? And how much does that differ in places like China and Russia?
Interpersonal trust, in general, is higher in China than in Russia, because of the social and political stability, the Confucian cultural legacy of trusting relationships, and the large rural population in China. In this sense, the Chinese entrepreneurs and venture capitalists are advantaged because higher trust generates certain benefits—for example, reducing monitoring cost.
In Russia, the sudden institutional collapse generated lots of chaos and violence, and therefore, interpersonal trust is lower. In the Chinese and Russian cultures, interpersonal trust often is based on affection. Therefore it is important to find out likes and dislikes of the person, and capitalize on those habits. Voluntary self-disclosure may generate trust. And having a trusted intermediary helps to establish trust across cultures.
How can a large network stunt a firm's growth in the four countries [China, Russia, France, and the U.S.] you've studied?
The networks of women entrepreneurs have more women and family members in their networks [than male networks]. However, large networks of women entrepreneurs, in particular, large advice networks, seem to harm firm performance. Women's networks are often composed of lots of the wrong people, and people who have no useful resources that facilitate entrepreneurial success. Second, large networks increase opportunity costs to female entrepreneurs—establishing and maintaining large networks redirects attention, energy, and resources of female entrepreneurs away from their ventures, and in this way, female entrepreneurs lose lots of sales opportunities.
How does an emotional support network help male entrepreneurs?
It's difficult to say exactly why emotional support networks of male entrepreneurs facilitate revenue growth, but I can suggest a few reasons. Getting praise and encouragement from their friends boosts self-confidence of entrepreneurs. Also, emotional support may indicate high social legitimacy and approval for starting new ventures, and therefore lift the social standing or informal status of entrepreneurs, which can be an asset itself.
Those entrepreneurs who receive more emotional support may develop greater psychological resources such as persistence, perseverance, and risk tolerance. And those network ties may provide not only emotional support but generate other resources and benefits such as finance, supplies, product ideas, and introduction to new clients and distributors.
How did you come to the conclusion that male entrepreneurs have more emotionally supportive networks than female entrepreneurs in China and Russia?
One reason is that women are trying to suppress their emotions. Venture capital is dominated by men, so when women start businesses, they seem to think that in order to be successful, they have to imitate male behavior—to be competitive and tough, and to behave in a "male" way. They think if they act in a female way, they won't be successful.
Where have you seen the strongest examples of such behavior?
I've come across some women who seemed to change their voice tone, talk in a deep voice—especially in Russia. Some women there think they should dress in a powerful way with lots of jewelry to be perceived as a successful woman who can compete with men.
In your research, you say there are advantages to heterogeneous and homogeneous networks, at least among Internet entrepreneurs in China. How should entrepreneurs ideally approach their network?
My findings suggest that homogeneous networks, where people in your networks are very similar, are useful at the earlier stages of venture development because network members tend to be more cooperative and trusting of each other, and it is easier to mobilize resources in such networks. However, once a venture starts to grow faster, it is important for entrepreneurs to diversify their networks because diverse networks generate new opportunities, facilitate access to diverse information, knowledge, and resources, and help to locate new suppliers, clients, and distributors.
The implication is that entrepreneurial networks should evolve according to the venture's development. Network evolution and dynamics seem to be path-dependent—who you know and who knows you seem to depend on your family and education background, race, ethnicity, career experience, personality, and networking skills. However, there are abundant opportunities for entrepreneurs to expand and restructure their networks because of social mobility, new communication modes, and open-mindedness of many stakeholders.