Network Diversity Value and Local South African Entrepreneurial Development in a Globalizing Economy: A Grounded Theory Analysis

Studies of African development convey both the triumphs and struggles in achieving the viability of local, small economic actors within a heightened era of global integration. Theoretical studies examining the role of social capital in economic development suggest that understanding the broader context of social relationships within which the market operates is vital in understanding market behavior. Hence, this perspective presents a distinct approach by which to grasp how small business men and women in globalizing African economies socially position themselves to manage and thrive under market pressures on all spatial levels. Drawing from this literature, this investigation explores how the social structure - specifically, the diversity of relationships in the social networks -of local South African entrepreneurs contributes to the development of their small businesses. Employing the qualitative analytical methodology of grounded theory, data is generated via in-depth interviews of twenty-four entrepreneurs from the clothing manufacturing and service industries in Greater Johannesburg, South Africa. Empirical research in this regard is growing but is still limited. Hence, grounded theory- as other qualitative methodologies - captures the nuances and cultural interpretations vital to comprehending the social structure of the local economy. Distinct from other qualitative methodologies, however, grounded theory derives relationships between prevailing conceptual themes so as to form a testable framework for an emerging theory drawn directly from the data. The findings reveal, and form the first two hypotheses, that the structure and value of social network diversity vary across entrepreneurs of different economic sectors. To gain more empirical insight regarding network diversity variation, the study presents the analysis of particular variables - highlighted by the data and literature - in relation to entrepreneurs' social networks. Clothing manufacturers' emphasis of international trade as a threat forms the third hypothesis that their vulnerability to cheaper garment imports may be an explanatory factor for the structural and value differences of their network's diversity from those of service entrepreneurs. Recognizing that vulnerability to global imports does not fully account for the variation of network diversity among entrepreneurs within the same sector, however, continued analysis focused on the potential explanatory value of an entrepreneur's business phase and firm size. Findings supported the formation of the fourth and fifth hypotheses, which state that network diversity varies across entrepreneurs within different business phases in both sectors, and inconclusively across small firms of different sizes. The analysis notes that variation across firm size may be a function of business phase. At the end, the study lays out an emerging theoretical framework for the central concept of network diversity value, presenting the prevailing hypotheses and conceptual relationships to be tested in further studies