Investigating the effects of offline and online social capital on tourism SME performance: A mixed-methods study of New Zealand entrepreneurs
Introduction
The tourism industry is the highest contributor to foreign exchange earnings in New Zealand (Tourism Industry Aotearoa, 2019), predominantly comprising of SMEs (85% with less than 10 employees (Tourism Industry Aotearoa, 2017)). Thus, the performance of tourism firms is crucial to the success of the tourism industry and the visitor economy. Evidence suggests that an entrepreneur's professional and social networks facilitate access to resources integral to business success such as market information, innovation, and finances. These social and professional connections build entrepreneurial ‘social capital’, defined as ‘the sum of actual and potential resources embedded within, available through, and derived from the network of relationships’ (Nahapiet & Ghoshal, 1998, p. 243). In addition to physical/real world connections with family, friends, colleagues, and suppliers, entrepreneurs build social capital by using online social networking platforms such as Facebook, LinkedIn, and Twitter (Fischer and Reuber, 2011, Sigfusson and Chetty, 2013). However, social ties created and managed through online and offline environments present nuanced relationships and diverse opportunities which, in turn, can have varying types of impacts on a tourism business' activities.
In offline (i.e. face-to-face) environments, the evidence shows an entrepreneurs' social capital positively influencing enterprise performance (Stam, Arzlanian, & Elfring, 2014). Social capital is important to enterprise success as it enables opportunity recognition (Anderson & Miller, 2003), inter-firm alliances (BarNir & Smith, 2002), access to lines of credit (Honig, 1998), access to potential employees (Bosma, Van Praag, Thurik, & De Wit, 2004), development of business acumen (Zhou, Wu, & Luo, 2007), and the sourcing of ideas for innovation (Hughes, Ireland, & Morgan, 2007). However, our review of the literature also highlighted significant gaps on how social capital can develop from an entrepreneurs' online social networks. Although studies looking at online social networking in a tourism context have emerged (c.f. Lo, Mckercher, Lo, Cheung, & Law, 2011; Kim, Lee, & Bonn, 2016; Wang, Kirillova, & Lehto, 2017), most studies to date predominantly use a demand-side approach, focusing on the consumer's perspective and their engagement with social networking sites. In contrast, this study takes a supply-side approach to examine how tourism entrepreneurs utilise online social networking to build social capital and the consequent outcomes on firm performance.
A recent systematic review of research on social media and entrepreneurship demonstrates the adoption, usage, and outcomes of social media use by entrepreneurs (Olanrewaju, Hossain, Whiteside, & Mercieca, 2020). Several studies have examined how engagement with social media platforms can be used for business networking. Kasavana, Nusair, and Teodosic (2010) presented a conceptual paper on the historical development of online social networks and their implications for hotel businesses. However, the applicability of their concepts, which focus on large hotel properties, may not be suitable in the context of tourism SMEs that lack the time, resources, and skills necessary to develop, for example, proprietary online social network sites that can track customers (Kasavana et al., 2010). Smith, Smith, and Shaw (2017) presented a conceptual paper on how entrepreneurs may use online social networks to build their social capital resources, developing 12 propositions to explain how online social networks increases bridging and bonding social capital. However, these propositions are yet to be tested using empirical data. Studies have also looked at entrepreneur's use of Twitter and LinkedIn to build social capital. Fischer and Reuber (2011) examine the role of business-to-business (B2B) interactions on Twitter in enhancing an entrepreneur's goal-setting abilities (Fischer & Reuber, 2011). However, it is unanswered whether these interactions have implications on business success, nor does the study explore equally important connections that can be made between entrepreneurs and other stakeholders such as customers, suppliers, or their local community. Other studies focus on the retweets, posts, or interactions of Twitter and LinkedIn members in online groups for professionals (Sigfusson & Chetty, 2013; Quinton & Wilson, 2016; Wang, Mack, & Maciewjewski, 2016). However, the data extracted for these studies were from groups or discussion boards where membership was not exclusive to entrepreneurs. Therefore, it is unclear whether the interactions were between business owners (i.e. actual entrepreneurs) or individuals with merely an interest in entrepreneurship. In addition, the previous studies reviewed here bind their research settings to a single online networking platform (Twitter or LinkedIn), excluding larger and potentially more relevant online networking platforms to tourism such as Facebook and Instagram (Euromonitor International, 2019).
In light of these research gaps, this study will contribute to the literature on entrepreneurial social capital and empirically examine how entrepreneurs in the tourism sector develop social capital resources through offline (face-to-face) connections, and through online engagement via multiple social networking platforms (in our case Facebook, LinkedIn, Twitter, and Instagram). In addition, drawing on theories of entrepreneurship and social capital theory, the study examines the extent to which different forms of social capital (online and offline) have varying effects on tourism firm's performance outlooks. We conduct a mixed methods study through a survey of 285 tourism SMEs in New Zealand, as well as follow up in-depth interviews with tourism entrepreneurs. We use quantitative and qualitative methods of analysis that includes cluster analyses to segment different groups of tourism entrepreneurs according to their social capital resources. Parametric and non-parametric tests are then applied to profile ‘social capital clusters’ of firms and examine key differences across business and owner characterises, as well business performance and future growth outlooks. Post-survey in-depth interviews with seven entrepreneurs from the survey sample were conducted to help validate and explain the findings of the quantitative analysis. Through this approach, the study contributes to the body of knowledge on tourism entrepreneurship, social networks, and social capital by understanding the configurations of tourism entrepreneur's offline and online social capital in a single study, and the subsequent implications these configurations have with regards to tourism enterprise performance.
Section snippets
Entrepreneurial social capital
Social capital is defined as the actual and potential resources available through an actor's network of relationships with others (Stam et al., 2014). These ‘others’ refer to people an actor knows or, who are known by the people that an actor knows (Greve & Salaff, 2003). Such connections can serve as resources/assets to help achieve certain objectives (Burt, 1992; 2000). Social capital is an important resource in entrepreneurship as it provides access to other resources including financial
Methodology
The research questions are examined through a mixed methods approach using both quantitative and qualitative methods. This enables ‘complementarity’, exploring different facets of the same complex phenomenon to provide a deeper understanding of the issue under study (Greene, 2007), as well as ‘triangulation’ through corroboration of inferences (Teddlie & Tahsakkori, 2009). The mixed methods approach followed an explanatory sequential design (c.f. Kallmuenzer, Kraus, Peters, Steiner, & Cheng,
Cluster analysis
To segment the tourism SMEs based on their online and offline social networking practices, hierarchical cluster analysis using the z-scores of the thirty two offline and online social capital measures, the Ward clustering algorithm, and the squared Euclidean distance was conducted. The agglomeration coefficient usually indicates too few clusters as a solution because maximum heterogeneity is reached when moving from a two to one cluster solution (Milligan & Cooper, 1985). Thus, the three
Discussion
This study addresses two fundamental research questions with regards to tourism entrepreneurship and social capital. RQ1 concerns the configurations of tourism entrepreneurs’ offline (personal, professional, associative, institutional networks) and online (Facebook, LinkedIn, Twitter, and Instagram connections) social capital connections. Results of the cluster analyses on data collected from 285 tourism entrepreneurs in New Zealand identified and supported three distinct clusters of tourism
Conclusion
This study expands on the body of knowledge on tourism entrepreneurship by uncovering: 1) configurations of tourism entrepreneurs online and offline social capital, and 2) the outcomes of social capital configurations on tourism firms' performance outlook. Our analysis revealed three distinct clusters of tourism entrepreneurs based on their social capital configurations. The first cluster (Active Online Networkers) developed social capital through online networks, with a lesser focus on face to
CRediT authorship contribution statement
Craig Lee: Conceptualization, Data curation, Formal analysis, Funding acquisition, Investigation, Methodology, Project administration, Resources, Software, Supervision, Validation, Visualization, Writing - original draft, Writing - review & editing. Rob Hallak: Conceptualization, Methodology, Supervision, Validation, Writing - original draft, Writing - review & editing.
Declaration of competing interest
None.
Acknowledgements
The authors would like to thank the University of Otago Research Grant Scheme, University of Otago, New Zealand for providing the funding to conduct this research.
Dr Craig Lee is a Senior Lecturer in the Department of Tourism, University of Otago. His research interests lie in the fields of innovation and entrepreneurships in hospitality and tourism, with the goal of identifying how these two factors can enhance the performance of small and medium sized enterprises. His work in this area, applying quantitative and qualitative methods, has been published in leading academic journals. Across his teaching experience he has taught hospitality and tourism
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Dr Craig Lee is a Senior Lecturer in the Department of Tourism, University of Otago. His research interests lie in the fields of innovation and entrepreneurships in hospitality and tourism, with the goal of identifying how these two factors can enhance the performance of small and medium sized enterprises. His work in this area, applying quantitative and qualitative methods, has been published in leading academic journals. Across his teaching experience he has taught hospitality and tourism subjects related to research methods, enterprise management, entrepreneurship and small business, festivals and event management, marketing, and business ethics.
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