Social Ties, Social Capital, and Recruiting Managers in Transnational Ventures

Abstract

Social capital provides access to resources, however, how migrant entrepreneurs use

social capital in the recruitment of managers for their transnational ventures (TNVs) in host and

home countries, is less understood. We conducted eight17 in-depth interviews with transnational

entrepreneurs (TEs) of Indian origin in the UK, and nine confirmatory interviews with managers

of their TNVs. Our findings show that TEs substitute or complement international and local

social capital in the recruitment of managerspersonnel for their TNVs contingent on a) whether

they live in UK or India, and b) whether they use social ties in UK or develop local ties in India

to recruit managerspersonnel. We discuss the implications of these findings for research, policy

and management.

Keywords: social capital; social ties; transnational entrepreneurs; UK; India

1

Introduction

Social networks facilitate access to r e s o u r c e s i n n e w v e n t u r e s ( A l d r i c h a n d

Z i m m e r 1 9 8 6 ; A n d e r s o n a n d J a c k 2 0 0 2 ) a n d s m a l l f i r m s ( L e u n g 2 0 0 3 ) .

Studies have recognized the importance of social capital for access to resources by migrant

entrepreneurs that found a venture in their home country (Pruthi 2014) or new country of

residence (Deakins et al. 2007). In contrast, an understanding of social capital of migrant

entrepreneurs that traverse host and home countries in founding their ventures is limited.

In this paper, we focus on transnational entrepreneurs (TEs). TEs migrate from one

country to another, concurrently maintaining business links with their countries of origin and

currently adopted (host) countries (Drori, Honig, and Wright, 2009). Unlike ethnic entrepreneurs

that create a venture in their host country or returnee entrepreneurs that return home to found a

new venture, TEs initiate entrepreneurial processes in at least two social and economic arenas in

which they are embedded (Oviatt and McDougall 1997). TEs draw on formal and informal

networks to access critical resources and overcome liabilities of newness in these environments

(Autio, Sapienza and Almeida 2000), factors likely to have implications for the use of social

capital in their transnational activities.

Our objective is to develop an understanding of social capital of TEs in the recruitment of

managers for their transnational ventures (TNVs). In accordance with Wong and Ng (2002), we

define TNVs as small transnational enterprises with separate operational components located in

different (host and home) countries, and coordinated by entrepreneurs traveling between

locations. We define managers of TNVs as individuals that TEs recruit to manage an operational

component of the TNV in the host or home country. Given our focus on TEs that are migrants,

we refer to the country from where TEs have migrated as ‘home country’, and currently adopted

country as ‘host country’. On the one hand, social capital from TEs’ host country social ties may 2

be critical for establishing local operations in the home country (Saxenian 2002, 2005). Evidence

based on entrepreneurs returning home suggests they keep frequent contact with family, friends,

or former colleagues in the host country to exchange information related to customers,

technology, or funding (Wadhwa et al. 2011), and leveraging social capital from abroad enables

them to outperform domestic entrepreneurs at home (Filatotchev et al. 2009). On the other hand,

liabilities of newness and foreignness (Autio, Sapienza and Almeida 2000) at home may

necessitate the development of local social capital. TEs may draw on transnational family ties

(Bagwell, 2007), or networks of managers with other firms or regulatory agencies at home

(Bartlett and Ghoshal 1991; Birkinshaw and Hood 1998) if they have previously worked in the

home country. Such connections may be especially important in emerging economies where

social networks help overcome institutional constraints in the conduct of business (Li and Zhang

2015). Alternatively, TEs may relocate to live at home to develop relevant connections. Unlike

other types of migrant entrepreneur, TEs travel between host and home countries to conduct

transnational activities (Portes, Guarnizo and Haller 2002). Therefore, their physical location

may also impact the ease of developing, and using, social capital based on relevant social ties.

According to the mixed embeddedness approach in the migrant entrepreneurship

literature, besides their social networks, migrant entrepreneurs are embedded in the socio-

economic and political-institutional environment of the host country that shapes the opportunity

structure in which they find possibilities to start and maintain a business (Kloosterman and Rath

2001). However, unlike ethnic entrepreneurs that found and operate enterprises in the host

country (Deakins et al., 2007), TEs are embedded in both host and home countries. Compared to

large multinational corporations (MNCs), the ‘transnational communities’ created by TEs

provide an alternative and potentially more flexible mechanism for transfers of skills and

knowhow between very different business cultures and environments (Saxenian 2005). Saxenian

and Hsu (2001) argue that the transnational links of TEs that bridge geographic barriers may 3

supersede conventional international business relationships, and the MNC may no longer be the

preferred organizational vehicle for transferring personnel across national borders. An

understanding of TEs’ social capital in the recruitment of managers for their TNVs in host and

home countries may thus yield important insights and challenges into developing capabilities for

venture creation across multiple institutional contexts that go beyond insights related to the

impact of host country institutional environment on the creation of ethnic enterprises. For policy,

our findings may have implications for harnessing the competitive asset of social capital in

TNVs, and hence developing entrepreneurship in both host and home countries, beyond ethnic or

returnee-based entrepreneurship in the host or home country, respectively. However, we know

little about the role of TEs’ social capital in recruiting managers for their TNVs. Therefore, we

explore the following research questions in this paper: How do TEs use social capital in the

recruitment of managers for their TNVs in their home country? To what extent do they use social

capital acquired in the host country versus develop local social capital at home in the

recruitment of managers for their TNVs and why?

We focus on TEs of Indian origin in the UK. Migrants of Indian origin have established a

much higher proportion of ventures engaged in international activities than counterparts from

other countries (Basu 1998; Bachkaniwala, Wright and Ram 2001) and have self-employed

relatives abroad, with implications for the organization of their transnational activities and access

to social capital based on personal ties (Ram & Jones, 2008). An understanding of Indian TEs’

social capital in the recruitment of managers for their TNVs may help comprehend the role of

‘bottom-up’ measures for stimulating indigenous entrepreneurship in a context where an

understanding of entrepreneurship is limited (Goldfarb and Henreksen 2003; Kiss, Danis and

Cavusgil 2012) and policy initiatives are dominated by ‘top-down’ measures for creating clusters

of entrepreneurial activity (Breshnahan, Gamberdella and Saxenian 2001; Paul and Mass 2016).

Yet, recent migration research in the West is focused on the social networks of East European 4

migrants (Favell, 2008). While US literature on TEs has begun to document Indian migrant

exploitation of transnational trade and business opportunities, little of this discussion has filtered

through to the UK context (Ram and Jones 2007).

We make two contributions to the literature. First, we contribute to the migrant

entrepreneurship literature. Studies investigating the social capital of migrant entrepreneurs in

the host country have mainly focused on the role of family-based social capital in replacing

institutional sources of finance or advice (Deakins et al. 2007). Research on use of home country

social ties pertains to choice of location or mode of entry by migrant entrepreneurs extending

operations from the host country. In examining family and non-family (industry and

intermediary) sources of social capital in the recruitment of managers by TEs embedded in both

host and home countries, we extend the migrant entrepreneurship literature by highlighting its

heterogeneous nature in a new aspect of entrepreneurial activity. Second, we contribute to the

human resource management (HRM) literature where recruiting by small firms has generally

been based in a single geographic setting that does not address different types of networks. In

exploring TEs’ social capital based on family and non-family ties in the recruitment of managers

in TNVs, we extend this literature into a new organizational form beyond small firms in a single

geography.

Literature Review

Social capital theory and migrant entrepreneurs

Social capital is portrayed in various ways in the literature (Adler and Kwon 2002; Lee

2009), and viewed at both firm (Burt 2000; Tsai and Ghoshal 1998) and individual levels

(Bourdieu 1986; Coleman 1988). Nahapiet and Ghoshal (1998) define social capital as the sum

of actual and potential resources embedded within, available through, and derived from the

networks of an individual or social unit, a definition we adopt in this paper. Network-based 5

theories stress that social networks or the actual set of links amongst a set of individuals (Jack

2005) or organizations (Kontinen and Ojala 2011) extend their resource base (Li 2007).

Relationships tying them together could take many forms such as those between customers,

suppliers, service providers, or government agencies. The structural dimension of social capital

we draw on in this paper thus refers to social ties that reflect the sources of social capital.

Several entrepreneurship studies explore the role of social capital for access to resources

(Aldrich and Zimmer 1986; Davidsson and Honig 2003; Dubini and Aldrich 1991). From a

position of disadvantage, social capital of migrant entrepreneurs may mitigate the lack of other

resources (Anthias 2007) such as information, clients, suppliers, finance (Hussain and Matlay

2007), and even personnel (Evangelista 2005) otherwise unavailable to founders of new firms

(Adler and Kwon 2002; Iyer and Shapiro 1999; Kreiser, Patel and Fiet 2003). Co-ethnic

recruitment is linked to trust relations, effective communication and common understandings as

well as to common experiences in the host country (Anthias 2007).

According to the mixed embeddedness approach, besides their social networks, migrant

entrepreneurs are embedded in the socio-economic and political-institutional environment of the

host country that shapes the opportunity structure in which they find possibilities to start and

maintain a business (Kloosterman and Rath 2001). This suggests that the social capital required

depends on the level of institutional development as this impacts the range and types of

opportunities that individuals act upon (Gedajlovic et al. 2013; Lee 2009; Yan and Sorenson

2005). Due to unique local market knowledge and understanding, ethnic ties of migrant founders

of internationalizing firms act as a bridge between host and home countries, enabling them to

engage in high resource commitments at home at the outset (Chung and Tung 2013). In home

countries with volatile political and legal environments, these ties provide expeditious access to

resources absent government or institutional support (Kiss et al. 2012; Wright et al. 2008) and

help forge greater understanding and trust, making it easier to establish and enforce contracts 6

(Jean, Tan and Sinkovics 2011; Mineev and Bourmistrov 2015). Ethnic ties with home country

governments enhance performance of firms founded by migrant entrepreneurs in developed

markets (Peng and Luo 2000).

The social capital literature distinguishes between strong and weak ties (Granovetter

1973; 1983). Encouragement from parents or close friends owning businesses is particularly

important for providing resources for entrepreneurship (Zimmer and Aldrich 1987). Due to

strong cultural values, social capital of migrant entrepreneurs is different from, and possibly

stronger than that of other entrepreneurs (Deakins et al. 2007). Exclusion in the host country

increases reliance on family-based social capital by migrant entrepreneurs that typically do not

engage with formal networks (Hussain and Matlay 2007; Nwankwo, Akunuri, and Madichie

2010). Strong ties may be particularly important for overcoming resource constraints for TEs that

face liabilities of foreignness in the host country (Patel and Terjesen 2011). Strong ties of TEs

increase trust and reciprocity, and activate and facilitate exchange of resources through a range

of networks, thus enhancing the performance of transnational ventures. Transnational family and

kinship networks also enable migrant entrepreneurs to access contacts across borders in

internationalizing their businesses to the home country (Mustafa and Chen 2010). The dispersal

of families due to globalization is driving the use of transnational family networks for initial

staffing in a large number of ethnic businesses in developed host countries (Bagwell 2007).

Family members also indirectly provide introductions to third parties with the necessary

resources. Compared to other types of networks, these networks are long lasting and do not need

frequent contact to be activated.

Although important in early stages, strong ties are fraught with the risk of

‘overembeddedness’ (Uzzi 1997). Even though strong ties of TEs provide reliable connections, a

lack of network range can lead to closure (Patel and Terjesen 2011). The use of personnel from

the family in transnational ventures inhibits the introduction of new staff (Bagwell 2015). In 7

contrast, weak ties are easier and quicker to obtain (Oviatt and McDougall 2005) and reconfigure

(Han 2006) and even make strong ties more effective (Jack, 2005). Where close family members

are unavailable, migrant entrepreneurs rely on community-based networks to recruit employees.

Ethnic businesses that grow and diversify into new industry sectors are also more likely to seek

information and advice from outside the family (Deakins et al. 2007). The role of family ties of

migrant entrepreneurs is also complex due to differing attitudes within second and third

generation owners, and perceived role of the family as a constraint to business development

(Janjuha-Jivraj 2003).

Altogether, social capital is key to the conduct of operations by migrant entrepreneurs in

developed countries. However, evidence mainly pertains to the role of social capital in replacing

institutional sources of finance or advice in the host country. Although studies acknowledge the

dynamic influence of social capital on the international growth of new ventures (Prashantham

and Dhanaraj 2010), there is a gap in our understanding of social capital of migrant entrepreneurs

that found a transnational venture in host and home countries.

Social capital theory and recruitment

Social capital theory provides a useful foundation for explaining the processes and

outcomes of social interactions including job search outcomes (Bian et al. 2015), and staffing

and recruitment in both small (Kang and Shen 2013) and large (Han and Han 2009) firms. We

build on this strand of literature given our focus on recruitment by TEs. Recruiting in small firms

helps overcome resource constraints and liabilities of newness (Greer, Carr and Hipp 2015).

Although several recruitment methods of recruiting are identified in the literature (Guerci et al.

2015), recruiting in small firms is of ten informal with substantia l relianc e o n word of

mouth or referrals, and often communicated by founders ’ relianc e o n thei r own

social networks (Baron, Hannan and Burton, 1999; Cardon and Stevens 2004; Leung 8

et al. 2006). Evidence suggests that founders’ personal networks are important for

accessing the core management team in venture founding (Leung 2003). Employers use

employees’ social networks to acquire a larger and more qualified applicant pool

(Fernandez, Castil la and Moor e 2000; Han and Han 2009). By improving the match between

employers and job seekers, and creating a pre-hire tie between referrers and job seekers,

networ k-based recrui ting positively impacts post-hire performance.

In the context of entry into emerging economies, Wang and Hsiao (2002) found

that Taiwanese firms employed Chinese professionals in their Vietnamese subsidiary on the

basis of s o c i a l c a p i t a l o f l o c a l p e r s o n n e l i n t e r m s o f l a n g u a g e a n d

T a i w a n e x p e r i e n c e r a t h e r t h a n because of knowledge or abilities. Local managers in

MNCs have high levels of local social capital including relationships with customers, suppliers,

institutional actors, and potential recruits (Bartlett and Ghoshal, 1991; Birkinshaw and Hood

1998; Makela, Bjorkman and Ehrnrooth 2010). They also have the potential to build

relationships within and across different employee groups (Kang, Morris and Snell 2007), across

geographic and cultural boundaries (Kostova and Roth 2003; Taylor 2007), and enable informal

control through socialization (Chiu et al. 2009; Rosenzweig and Nohria 1994). Local social

capital of managers with other firms or regulatory agencies in developing economies is

particularly important for small firms in uncertain and competitive environments where these

connections help overcome institutional hazards (Peng and Luo 2000; Xin and

Pearce 1996).

In sum, the importance of informal, network-based recruiting for small firms is

established in the HRM literature. However, cresearch in this area is limited. Compared to small

firms where the HR function can analyze the network of relationships and provide avenues for

developing connections with potential recruits outside the organization, TEs establish network

ties as a result of interpersonal relationships. I, and it is the reproduction of their dual host-home 9

networks in their capacity as individual actors that leads to the accumulation of social capital . As

prior studies (Pruthi 2014), we classify TEs’ social ties as personal (friends & family), industry

(former colleagues, suppliers, customers, etc.) and intermediary (conferences, networking

organizations, etc.). Compared to other migrant communities in the UK, Indian TEs may be more

likely to seek managers from friends or family in the UK or India in the conduct of business

(Chand and Ghorbani 2011). At the same time, however, many of these entrepreneurs have

recently diversified away from traditional businesses into more knowledge-intensive sectors

(Ram and Jones 2008). Second generation Indian migrants in the UK, especially those with prior

work experience in highly-skilled sectors, may be more assimilated into British culture

(Bachkaniwala et al. 2001), with implications for the extent to which they draw on industry,

relative to personal ties, to recruit managers for their ventures. These TEs may also attend

professional forums, conferences or events (Saxenian 2005) that may lead to introductions to

managers for their ventures (Crick and Spence 2005) both in the UK and India.

Methodology

We adopted a qualitative methodology based on eight case studies in order to generate

‘thick’ knowledge about TEs’ social capital (Eisenhardt 1989). Altogether, we conducted eight17

in-depth, face-to-face interviews (Yin 1994) with owner-founders of Indian origin in the UK that

entered India to commercialize their business idea, and nine confirmatory interviews with

managers they recruited for their TNVs. The TEs were selected on the basis of theoretical

sampling (Thompson 1999). As our objective was to understand the social capital of TEs that

founded a venture in their home country, the relevant population was limited to these TEs. We

aimed to compare different TEs within this sub-group in the way they leveraged international

and local social capital rather than compare the TEs that entered their home country with those

that did not. 10

The target population was further narrowed down to TEs of Indian origin in the UK. The

similarities and differences in cultural and institutional realms in the UK and India may have

implications for use of social capital in the two countries (Drori et al. 2009; Mineev and

Bourmistrov 2015; Zhuplev and Shtykhno 2009). Publicly funded initiatives to support ethnic

businesses have been a feature of the small firm policy agenda in the UK since the early 1980s

(Nwankwo et al. 2010; Ram and Jones 2007). Although the ‘motor’ for much of self-

employment, especially among the South Asian community, comes from the intense utilization

of group-specific social capital rather than support from public sector interventions (Janjuha-

Jivraj 2003), social capital based on intermediary ties may become more relevant in the light of

policy initiatives to facilitate business ties with India (McEwan, Pollard and Henry 2005). A

burgeoning IT industry (Hira 2003; Mani 2004) and policy reforms since 1990s have signaled a

significant decline in the role of government as investor and creator of enterprise in India in

recent years (Dossani and Kenney, 2002; Majumdar, 2007; Thatchenkery et al., 2004). However,

burdensome regulations, lack of infrastructure and incentives to establish intellectual property

rights or commercialize technology continue to challenge the development of entrepreneurship.

In contrast to the UK, India is an emerging economy characterized by a large population and

ethnic, regional and linguistic complexity (Zaheer et al. 2009), which means that the role of

informal, social ties in facilitating access to resources is even stronger than in the UK due to

cultural norms in the conduct of business (Birtchnell 2011; Khanna and Palepu 1997).

We selected both first and second-generation Indian migrants in the UK. Compared to

first generation, second generation Indian migrants, or offspring of first generation Indian-born

parents, are placing greater importance on taking advantage of links with their country of origin,

yet, with few exceptions, second-generation Indian migrants have largely been ignored in the

literature (Dhaliwal and Adcroft, 2005). In the absence of any publicly available database,

participants were identified through BIBF (British India Business Forum), TiE (The Indus 11

Entrepreneurs), and UKIBC (UK India Business Council), the three main networking

organizations for Indian entrepreneurs currently operating in the UK. BIBF was formed in 2008

to raise the profile of British Indian entrepreneurs in the UK. Founded in 1992 by entrepreneurs

of Indian origin in the Silicon Valley (California, USA), TiE is currently the world’s largest

entrepreneurial organization with over 10,000 members in 18 countries. With a mandate to

increase bilateral trade & investment between Britain and India, and backed by UKTI (UK Trade

& Industry), a British government department, UKIBC is a premier network dating back to 1993

that connects businesses considering their first market entry in India. Although several other

networking organizations for Indian immigrants operate in the UK, either they are non-business

organizations or mainly cater to established businesses seeking growth opportunities in India,

which gives us reason to believe that the three organizations we approached represent the

population of Indian TEs in the UK.

Key administratorsive personnel at these organizations were requested to circulate a

cover letter outlining the key aims & objectives of the study to their members that had a business

link with India, and a total of 39 individuals positively responded to the request to participate. As

it was not possible to differentiate TEs from non-TEs on the basis of prior information, all

individuals expressing a willingness to participate in the research were interviewed. These

interviews revealed that 24 of the 39 individuals entered India to extend their business due to

strategic motivations such as cost reduction or market seeking at a late stage in the life of their

ventures rather than to commercialize an idea across the UK and India at the outset (Drori et al.

2009). These individuals were eliminated from the sample. Of the 15 remaining TEs, seven were

in the early stages of entering India, one of whom was validating his business idea with friends &

family in the UK and India at the time of the interview and yet to recruit any employees for his

venture. These seven individuals were eliminated because they did not yet have a counterpart

12

manager for their TNV, so it was not possible for them to respond to the focal questions of this

study.

The lead author conducted in-depth, face-to-face interviews with eight TEs and nine

managers of their TNVs. The first round of interviews was held in the UK between January and

March 2013. Although three TEs had relocated to India, they were interviewed in the UK where

they were visiting at the time. A brief interview guide was administered, asking about age,

education, prior work experience, and motivations for migration to the UK. They were also

asked about their TNVs such as industry and year of founding, size of top management team, and

frequency of travel between the UK and India. Open-ended questions were designed to explore

the nature of social ties in the UK and India, and how TEs used these ties to recruit managers for

their TNVs. TEs were probed about their motivations for establishing a TNV, and who helped

them recruit managers for their TNV and how: ‘Why did you decide to start a new venture that

involved hiring managers in the UK and India?’; ‘How did you use your social ties in the UK

and India in recruiting managers for your TNV?’ ‘Did you ever consider moving back to India

yourself? Why or why not?’ These questions were developed on the basis of prior literature

related to TEs (e.g. Drori et al. 2009), and role of social capital for migrant entrepreneurs (e.g.

Deakins et al. 2007) and recruitment in small firms (e.g. Leung et al. 2006), and followed up

with several sub-questions during the interviews. Most meetings were held at the participants’

offices in London and surrounding areas. All interviews were audio-recorded. Stand-alone cases

were developed for each TE based on interview transcripts and secondary information collected

from websites or company reports. These case studies were read and re-read and individual case

histories were summarized in tabular form. Next, we compared the conceptual categories

developed on the basis of the aggregate data to discern general patterns in TEs’ use of social ties.

The co-authors also exchanged notes on their interpretation of the data.

13

Subsequent to the first interview round, a further nine face-to-face interviews were

conducted with managers of TEs between June and August 2013. Two interviews were held in

the UK and seven in India. The purpose was to probe these individuals and triangulate

information provided by TEs in the first round. Interviews were held at participants’ offices in

London (two interviews), and Bangalore (one interview), Delhi (four interviews) and Mumbai

(two interviews) in India, and were at least 60 minutes in duration. Mostly, interviewees were

directly contacted based on their email addresses obtained from TEs in the first round. TEs were

copied on these emails to establish the context of the proposed meetings. The objectives were

clearly communicated to the managers. In all cases, these individuals readily agreed to

participate, and reflected at length on the nature of their association with TEs and how they used

their social ties for the TNV. Again, stand-alone cases were written, and insights from each

interview used to triangulate and elaborate upon the key issues identified in the first round.

Altogether, our analysis is based on approximately 25 hours of audio recording and 220 pages of

transcripts. The second author was distanced from the fieldwork to avoid confirmatory biases.

The information from TEs was triangulated based on secondary sources such as company reports

and websites, and press releases where possible. In some cases, the TEs or their counterparts

were contacted again via email to seek clarifications or fill gaps in the interview transcripts.

Tables 1 and 2 present background information related to the sample. The TEs were

42.62 years old on average, with the youngest 29 and oldest 53 years old (Table 1). Four

individuals were born in the UK and four in India. Individuals born in the UK were second-

generation migrants or descendants of India-born parents who had migrated to the UK. On

average, TEs had prior work experience of 2.85 years in countries other than UK and India, and

4.38 years in the UK prior to starting up. All except two had founded their venture after 2005,

and all except one entered India post 2005, the earliest entry being 2003 and latest 2012. There

were seven males and one female (Case H). Cases A, F and G had previous start up experience in 14

the UK, with Case A having a very successful track record of turnarounds during his several

years of former employment in the UK. Besides the TNV, both Cases A and G were involved in

other ventures in the UK or India. Whereas Case A’s investment portfolio was located in the UK,

Case G was an investor in multiple ventures in India. In two cases, TEs’ nearest family were also

entrepreneurs. Whereas Case B’s father had founded a business representing manufacturers of

building services equipment in the Middle East, Case F’s parents were entrepreneurs in the UK.

TEs were engaged in a range of sectors and travelled between the UK and India at least

thrice a year. On average, they had three members (including themselves) in their top

management team in India and managed 205 employees in India. TEs’ managers were 41.1 years

old on average with the youngest 29 and oldest 50 years old (Table 2). Seven were located in

India, whereas two were based in the UK. On average, these individuals had eight years prior

work experience in India and 4.1 years in the UK. Seven of the nine individuals located in India

had managed this venture for 4.85 years on average; two located in the UK had managed for an

average three years.

Tables 1 and 2 about here

The TEs interviewed referred to various motivations related to ‘desire to do good’ or

strong personal or cultural affinity with India underlying their entry into India. Several also had

prior work experience related to India in the UK.

Findings

Our analysis shows the heterogeneity of TEs in how they leverage international and local

social capital in the host and home countries, respectively, contingent on a) whether they live in

the UK or relocate to India, and b) whether they leverage social ties in the UK or India,

respectively, to recruit managers for their TNVs. We present the findings below using illustrative

15

direct quotes from the interviews. Table 3 presents a summary of social capital of TEs and their

managers in the UK and India.

Table 3 about here

Substitution of international social capital in UK for lack of local social capital in India

These TEs lived and worked in the UK prior to becoming entrepreneurs. They called on

family, friends or former colleagues in the UK for advice or for them to become co-founders or

employees. It was important for these TEs to transfer knowledge to India as well as adapt to the

local context and build local partnerships in India. However, either they did not have any ties in

India or did not consider them helpful for recruiting managerspersonnel. Therefore, they drew on

former colleagues for referrals to managers for their TNV. In some cases, intermediary ties in the

UK also helped locate managers.

Although Case A tried replicating the model of technology commercialization in India he

had previously implemented during his investment banking career in the UK, his business idea

was based on sourcing technology from local universities in India. Therefore, it was important to

build partnerships with academic institutions in India. He approached a close friend from his

banking career, a key executive at a reputed academic institution in the UK, to forge a

partnership for lending credibility to his TNV in India, and a UK advertising agency to hire a

manager for his local India operations. Case C entered India to tap the local market in the

economic development space related to prior UK work experience, and extensively leveraged his

links with British universities and a consortium of UK development organizations to attract

premier research institutes from India into a partnership for his TNV. He also networked with his

wife’s extended family in the UK, many of whom were alumni of a top engineering school in

India, to seek expert advice and investment funds. A former colleague in the UK introduced him

16

to his friend, a pioneer in water innovation in India, with whom Case C partnered after

perceiving potential synergies in expertise:

So when I was in the XXX [development organization in UK]…my wife who’s uncle is

one of the alumni and cofounders of the YYY [top engineering school in India] network

so, they would host their…parties…. and we got invited to a few of them. So that’s how I

got introduced to the network (Case C).

Either these TEs had no local connections in India or their links there were not relevant to

their TNV. Even though Case A had many friends in India, he did not have any academic

connections relevant to his TNV. Although Case B had family in India, they were unable to help

him as they had ‘a sense of disbelief’ about his venture and potential solutions to economic

development problems he proposed. The following quote from Case A is illustrative:

I’m not sure how they [close friends] could have helped… I don’t think anyone that I

know, has tremendous academic connections, which is what I needed in the first

instance… I wasn’t very well plugged in to that so, that XXX [partner school in UK]

really had to…fill that one for me (Case A).

The managerspersonnel TEs recruited in the UK leveraged their local ties in India to

exploit the venture opportunity. A returnee research scientist who had spent several years

commercializing new technologies and creating spin-off ventures based on academic research in

Silicon Valley, Case A’s manager, a returnee research scientist from Silicon Valley, leveraged

his local links with friends and alumni network from his alma mater, a top engineering school in

India, to screen potential investment prospects and build relationships with local academics in

India. Case C’s The top executive Case B sent to India from the UK leveraged his industry

17

connections to recruit a local manager in India. The local manager, who had extensive networks

with bureaucrats and industry specialists in India, introduced new investment opportunities and

facilitated partnerships with large global corporates based on these networks. The following

quote from Case A’s manager is indicative:

I had some loose connection in XXX (top engineering school in India] because… one of

my professors…is the director at XXX so I knew him. But that was personal connection,

nothing to do with business connections. So, but in India, connections are not that hard to

make. If you are especially part of some network like XXX, then you have lots of your

friends who are in different places. (Manager, Case A).

Complementarity of international social capital (based on industry and intermediary ties) in

UK with local social capital (based on industry and intermediary ties) in India

The only case in this category, Case D, lived in the UK and leveraged ties based on prior

work experience in India to recruit managers. Case D first arrived in the UK as an expatriate of

an India-based company. Subsequently he gave up his employment to found an independent

venture, leveraging relationships with clients he had serviced for his former employer in the UK

and India. He combined industry ties from his former company with intermediary ties such as

networking organizations in the UK to access personnel or clients. Additionally, he approached

industry contacts in India to implement the business in India. He hired managers through

recruitment agencies and local competitors he knew based on his prior work experience in India.

The local managers leveraged ties in India to build the team, create market expertise, and search

for investment opportunities. One manager in India also built relationships with institutional

investors in London. The following quote from Case D is illustrative:

18

…my chief technology officer from XXX [former company in India], my operation guy from

XXX and then some other people…you know we hired from India (Case D).

Complementarity of international social capital (based on personal, industry and intermediary

ties) in UK with local social capital (based on personal, industry and intermediary ties) in

India

The personal and industry ties these TEs cultivated in the UK were vital to connecting

with India. TEs leveraged these connections to build the founding team, collect market

intelligence, form partnerships, and recruit managers for their TNV. However, unlike

counterparts that remaininged in the UK, theyse TEs relocated to India where they built local ties

to secure physical infrastructure and make, gather market information and make market contacts

with customers and suppliers. InitiallyAt the outset, they leveraged their personal connections in

India to acquire these resources but these. Although attributed to the nature of the local context

and culture of using connections in the conduct of business in India, personal ties, however, were

exhausted very quickly. Therefore, they used personal connections to provide introductions to

industry or intermediary ties beyond the family.

For example, Case E, a medical graduate in the UK, who set up a business to take

European students to India for internships, teamed up with close friends and classmates from

medical school in the UK to establish the venture with mentoring from. His parents and friends’

parents i in the UK also mentored the team. Case F, who decided to create an independent

venture after his former employer in the UK closed down their India operations, was introduced

to a businessman in the UK through a common friend, and appointed him as his manager. in the

UK was introduced through a common friend in the UK. Based on several years’ prior

experience in the industry and of entering India in the past, the individual partnered with Case F

with a view to providing strategic advice and investment. Case F also leveraged connections

19

based on his former employer in the UK that had established an office in India prior to closing

down their operations. He drew on referrals from former employees at the company’s office in

India to recruit personnel However, these TEs relocated to India to build local networks with

customers and suppliers. As his co-founder and manager in the UK developed the business

thereplan, cold-called universities to acquire student interns, and approached a local company in

the UK to forge a partnership for the TNV, Case E moved to India to search for local partner

companies for placing student interns from abroad, hire recruits, and arrange local support

services for his business. He extensively leveraged his own personal connections and

intermediary ties such as business chambers or UK-based professional organizations of which he

was a member, to acquire the necessary resources. He first drew on personal ties to connect to

partner groups, as originally belonging to a small ethnic community in India helped him access a

‘close-knit’ group of people who all knew each other. Through personal links, he recruited an

employee, and leveraged his family knowledge and networks to set up another office in India. He

complemented these networks with intermediary ties, notably such as business chambers or UK-

based professional organizations of which he was a member. , and advertisements, for marketing,

hiring, or providing transport services or new employees for his venture.

LikewiseSimilarly, even though Case Fhe gained knowledge and expertise through his

prior UK work experience, Case F deemed it imperative to do market research in India.

Therefore, he relocated to India to build the office and recruit local personnel based on networks

in India and the UK with family, friends and industry, clients. Case F leveraged his sister-in-

law’s, and family friend’s networks in the UK and India, local recruitment agencies and

conferences, in addition to connections based onincluding his UK-based former employer

employer, that had established an office in India prior to closing down their operations, for

referrals to local personnel or clients. The following quote from Case E is illustrative:

20

So I do lot of work with the business chambers and the expat community here in Bombay

and I was a strategic decision maker, because it’s better for networking, I am the treasurer

of the associate of XXX [British college] and I also sit on the committee for a British

business group so these just helps (Case E).

Substitution of local social capital in India for lack of international social capital in UK

Alhough they initially tried to leverage ties with former colleagues in the UK for advice,

funding or credibility for their TNV in India, TEs in this group found it difficult to implement

their idea in India from the UK, and decided to relocate to India to acquire market-specific

knowledge and experience to set up the TNV. They attended local conferences or management

institutes in India to penetrate the local network and make connections with potential clients and

investors. They also recruited managers through local ties developed in India.

Case G, who perceived the opportunity to set up a business venture in India based on a

proposal from industry associates in the UK, found his first client in India through a former

colleague in the UK. Lacking personal or industry ties in India, industry ties in the UK also

provided referrals to service providers or investors in India in the initial stages. However, he

found it difficult to implement and hone his idea in India at a distance and relocated to live

therein India to hone the business model and engage with the venture on a more hands-on basis.

He also considered it imperative to cultivate strong local networks to acquire investment or

gather market intelligence: . Case G initiated a local angel investment organization to penetrate

the investor network in India, and attended local networking events to gather market-specific

knowledge:

Being a Brit and I had no family relationships in Delhi, nothing…I found it very tough to

get in to the network in India…it probably took me two years to get in to the local

network…But the network in Delhi is very powerful…once you’re inside the network it’s

21

very easy to make connections and meet people. I joined a few organization, which really

helped (Case G).

Case H, who migrated to the UK to live with her husband upon completing medical

education in India, initially called on colleagues in the UK to provide training to doctors and

nurses for her healthcare venture in India. She frequently travelled to India in the initial stages to

give lectures to build credibility in India. Subsequently, she relocated to India for more hands-on

involvement and to acquire market-specific information. She cultivated links with local partner

hospitals and regulatory agencies in healthcare, but realized it was important to find a manager

beyond the family to navigate the local institutional environment.

These TEs recruited managers through local ties in India. For Case G, a chance meeting

through a client in India led to an introduction to a local marketing & advertising professional he

recruited to manage his TNV. This individual leveraged local networks based on prior work

experience in India. He tapped into his local angel networks, for instance, for investment. Case H

emphasized the direct role of her family in helping her set up the business in India in the initial

stages: . Case H’s mother, a university professor, assisted in screening potential recruits, while

her father, a healthcare professional himself, acted as mentor and key advisor who gave referrals

to local experts and potential partner institutions. Case H also drew on her sister to help maintain

accountability at the local clinics she set up:

My mother…she came in and she did do the interviews because she did interviews for the Delhi

national exam board....my sister is a gynaecologist in Delhi, so she’s helped us with being able to

keep accountability at the centres...and my father goes down and checks and makes sure that

things are going well (Case H).

Eventually, she hired a close friend of her brother’s, who she had known since childhood,

as manager. Based on his prior international experience of implementing new ideas for large

22

corporations, the manager leveraged his local ties to do market research, build links with local

government, and explore partnership opportunities with foreign universities.

Discussion

Prior studies have examined social capital of migrant entrepreneurs in their host (Deakins

et al. 2007) or home (Pruthi 2014) country. A novel contribution of our study is that our analysis

highlights the heterogeneity in how TEs substitute or complement international and local social

capital in recruiting managerskey personnel for their TNVs in host and home countries

contingent on their location relative to the location of social ties they use to recruit managers key

personnel for their ventures (Table 4). TEs that live in the UK, and draw on social ties in the UK

to recruit managers key personnel for their TNV in India, leverage international social capital

based on personal, industry and intermediary ties in the UK (Quadrant I, Table 4). These TEs

substitute international social capital acquired in the UK because they lack social capital in India.

TEs that live in the UK and use social ties in India to recruit managers for key personnel to

manage their TNV in India are able to complement international social capital based on industry

and intermediary ties acquired in the UK with local social capital based on industry and

intermediary ties in India (Quadrant II, Table 4). TEs that relocate to India, and draw on

personal, industry and intermediary ties in the UK to recruit managers key personnel for their

TNV, are able to complement international social capital based on these ties with local social

capital based on personal, industry and intermediary ties they cultivate in India (Quadrant III,

Table 4). Finally, TEs that relocate to India, and use social ties in India to recruit managerskey

personnel for their TNV, substitute local social capital based on personal, industry and

intermediary ties in India because they lack international social capital in the UK (Quadrant IV,

Table 4).

23

In short, entrepreneurs in Quadrants I and IV engage in substitution as they lack ties in

whichever country where they do not live, whereas entrepreneurs in Quadrants II and III are able

to complement as they have social ties in whichever country where they do not live. Exploring

further the impact of social capital on strategies and performance of TEs based on whether they

complement or substitute social capital in host and home countries, we found some differences in

the business model and role of the India based function, and growth trajectory, across the four

categories in our sample (Table 5). TEs in both Quadrants I and IV, which substitute host and

home country social capital were aggregating resources or expertise in other parts of the world to

provide a solution (e.g. technology or water innovation in Quadrant I; advertising or healthcare

in Quadrant IV) in India. TEs in Quadrant I intended to gradually expand into other markets and

had international social capital outside of India to help enable this. In contrast, those in Quadrant

IV had no immediate plans to expand to any other market outside of India as they lacked social

capital outside of India. In contrast, India was both a market and backend R & D center in

Quadrant II, with the entrepreneur rapidly expanding into several global markets outside of

India, and especially had industry and intermediary ties in both countries to enable this. Cases in

Quadrant III connected clients in the UK and Europe with clients in India and desired to expand

to other countries in the future. Even though cases in Quadrants I and IV were more India

focused, those in Quadrants III and IV seemed less international in their growth orientation. In

both cases, these TEs were located in India. These tentative insights suggest that TEs engaging

with emerging economies may need to locate there, but may then be constrained in becoming

more international.

Table 4 about here

Contributions

These findings contribute to the literature in two ways. First, we contribute to the

literature on migrant entrepreneurs. The discourse on migrant entrepreneurs emphasizes the need 24

for a conceptual base that underpins policy initiatives towards ethnic minority entrepreneurship

(Ram and Jones 2007). In contrast with the cultural determinism of the ‘ethnic resources’ model

and relative neglect of the context in which migrant entrepreneurs are embedded, a mixed

embeddedness perspective recognizes the economic and social environment of ethnic businesses

(Kloosterman and Rath 2001). Besides their own social capital, migrant entrepreneurs are

embedded in the wider political and institutional context that shapes their opportunity structures.

Studies have explored use of social capital by migrant entrepreneurs in venture founding in the

host country (Deakins et al. 2007), or for overcoming institutional constraints in extending

operations to the home country (Chung and Tung 2013). Evidence mainly relates to role of

family-based social capital in replacing institutional sources of finance or advice in the host

country (Deakins et al. 2007; Hussain and Matlay 2007) or choice of location (Zaheer, Lamin

and Subramani 2009) or mode of entry (Chung and Tung 2013; Mustafa and Chen 2010) in the

home country. Unlike migrants that integrate with their host country and rely on predominantly

ethnic networks in venture creation in the host or home country, TEs go beyond ethnic networks

to identify and exploit opportunities arising from their dual fields in the host and home countries

(Portes, Guarnizo and Haller 2002). Although studies explore the motivations (Portes et al.

2002), typology (Sequeira et al. 2009), significance of social ties (Patel and Conklin 2009; Chen

and Tan 2009), internationalization strategies (Terjesen and Elam 2009) or economic

contribution of TEs (Riddle and Brinkerhoff 2011), the way they use social capital in host and

home countries is less understood.

In showing how TEs substitute or complement international and local social capital

based on family and non-family ties in host and home countries contingent on their location, and

location of social ties to recruit managers for their TNVs, our findings extend the mixed

embeddedness approach in the migrant entrepreneurship literature to the case of TEs. Where TEs

are located in either host (Quadrant) I or home (Quadrant IV) country, and use social ties in the 25

same location to recruit managers for their TNV, they substitute social capital in their country of

residence for the lack of social capital in the other institutional environment. However, where

they recruit managers based on social ties outside of their country of residence, TEs complement

international and local social capital in host and home countries. Sequeira et al. (2009) show that

TEs are heterogeneous in the extent of their embeddedness in the home country. Our findings

extend these insights by showing the heterogeneity of TEs in their embeddedness in both host

and home countries.

Further, we show that this heterogeneity influences how they use their social capital in

the recruitment of managers for their TNVs contingent on their location relative to the location

of social ties they use to recruit managers for their ventures. A combination of availability of

relevant social ties for recruiting managers in a particular location, as well as the mobility of TEs

to build local social capital in the home country, influences their use of social capital in host and

home countries. For example, where TEs live in the host country, they reach out to pre-existing

ties at home to recruit managers for their TNVs (Quadrant II); however, where such relevant ties

are unavailable at home (Quadrant I), they substitute social capital in the host country for the

lack of social capital at home. In other cases, TEs relocate to live in the home country to build

social capital. Where ties to recruit managers are also available locally (Quadrant IV), they

substitute local social capital for the lack of social capital in the host country; however, where

they draw on their social ties in the host country to recruit managers (Quadrant III), they

complement international and local social capital. According to the mixed embeddedness

perspective, the openings that migrant entrepreneurs create to start a business are not everywhere

the same; they are contingent on the wider socio-economic context at the national, regional and

neighbourhood levels (Kloosterman and Rath, 2001). In empirically exploring the interplay

between individual actors, their social capital, and the broader institutional environments in the

host and home countries in which they are embedded, these findings regarding TEs extend the 26

mixed embeddedness perspective. We highlight that rather than only involving a one-way move

from home to host country, migrant entrepreneurs are heterogeneous in their use of social capital

to recruit managers, introducing new configurations of substitution and complementarity

between international and local social capital. In our focus on TEs from India, we respond to the

research call in the mixed embeddedness literature to explore the social networks of the ‘new’

highly skilled migrants from emerging economies that bridge their countries of settlement and

origin, and the social capital transmitted through these networks (Kloosterman and Rath, 2001).

Policy initiatives for migrant entrepreneurs thus need to be cognizant of their institutional

embeddedness and mobility (Drori et al., 2009) beyond the host country, and its implications for

their use of social capital based on personal, industry and intermediary ties, beyond family-

based social capital, in recruiting managers in host and home countries.

Second, we contribute to the HRM literature. Studies in HRM explore the role of social

networks in recruiting in both small and large firms. However, with few exceptions (e.g. Leung

et al. 2013; Li and Zhang 2015), they are based in a single geographic setting. Although the

importance of founders ’ social networks for accessing the core management team in

venture founding is acknowledged in this literature, the limited evidence points to the

importance of personal (rather than industry) networks (Leung 2003). A large proportion

of international HRM research considers social capital of personnel in firms that cross borders,

however, it is mainly focused on MNCs (Collings, Scullion and Dowling 2009) and suffers from

a lack of understanding of new phenomena such as owner-founders of small or international new

ventures beyond MNCs (Dabic et al. 2015). This is an important omission since large and small

firms have different types of social capital at their disposal, and social capital in entrepreneurial

ventures is likely to be markedly different from that in established firms (Gedajlovic et al. 2013).

Our findings show that TEs, as entrepreneurs that traverse geographic boundaries, are

heterogeneous in their use of personal, industry and intermediary ties in recruiting managers for 27

their TNVs, and where they use these ties. The social ties TEs use to recruit managers may be

situated in either host or home country, which may be different from TEs’ own location or

country of residence. Further, we show how TEs’ location and location of social ties they use to

recruit managers for their TNVs influence their use of social capital in host and home countries.

In our focus on recruiting in TNVs as a new form of entrepreneurial small firm that crosses host

and home country borders, these findings extend insights related to informal recruiting in small

firms in a single geographic setting in the HRM literature to the case of TEs.

Limitations and further research

Several limitations of our study provide opportunities for future research. First, even

though the objective of our qualitative research approach is to generalize conceptually across

cases rather than empirically across the entire population (Eisenhardt 1989), our findings must be

interpreted with caution as the analysis is based on only eight case studies. Second, as the nature

and role of social capital significantly differs among communities of migrant entrepreneurs even

in the same country (Hussain and Matlay 2007; Nwankwo et al. 2010), our findings may not be

applicable to entrepreneurs of other ethnic origin or to different country pairs. Entrepreneurs

from other ethnic groups need to be systematically studied to understand the nature of their

social capital in their transnational activities. Our sample includes both first and second-

generation Indian migrants in the UK. Prior research on migrant entrepreneurs has examined

migrants that are first generation, or undifferentiated in their embeddedness in the host country.

Our further analysis revealed that the second-generation migrants in our sample were embedded

in India based on strong family connections or frequent travel to India with their respective

families since childhood and, in some cases (e.g. Case G), even on the basis of time spent

studying in India. It might be worthwhile for further research to examine whether the home

country connection persists or disappears in successive generations. While there is no significant 28

difference between first and second-generation ethnic minority businesses in their propensity to

access resources from formal sources at start up (Ram et al. 2002), future research may usefully

explore differences in social capital between foreign born, first generation migrants and their

second-generation descendants born in the host country.

Third, the distinction between international and local social ties ignores other structural

dimensions of social networks such as direct and indirect ties, or strength of ties that may offer a

more fine-grained analysis of social capital of TEs (Gedajlovic et al. 2013). It may also be

worthwhile taking into account such factors as differences in personality (Arenius and De Clercq

2005), individual capabilities (Kreiser et al. 2003) or networking strategies (Tang 2011) of TEs.

Evidence shows that differences in entrepreneurs’ human capital based on prior entrepreneurship

(Mosey and Wright 2007) or work (Arenius and De Clercq 2005) experience influence their

ability to develop social capital. Some TEs in our sample had prior start up experience in the UK,

or experience of working in India with a former employer that may impact the nature of social

capital, and hence their ability to recruit managers for their TNVs.

Table 5 about here

Fourth, TNVs also offer a fertile opportunity to explore the nature of control & co-

ordination outside the context of MNCs (Dabic et al. 2015; Massingham 2010), an issue beyond

the scope of this paper. For example, do TEs that live in the host country and recruit local

managers based on social ties in the host country perform a more strategic role compared to

those that relocate to live at home who may be more hands-on in their approach? It may also be

interesting to understand the way TEs and their managers apportion responsibilities and build

social capital in a situation of commitment to two different work units in the host and home

countries (Harvey, Novicevic and Garrison 2005), issues that may also extend research in the 29

area of virtual teams in the HRM literature (Collings et al. 2009). Fifth, we have been able to

provide only preliminary indications of the link between the substitution and complementarity

aspects of social capital and performance as the entrepreneurs we studied were at an early stage

with their ventures. Further research may seek to examine these links by collecting larger

samples of ventures that have become more established to explore if differences in the nature of

social capital in the host and home countries translate into sustained differences in competitive

advantage between TEs that complement social capital in host and home countries and those that

substitute social capital in the host or home country for the lack of social capital in the other

country. Finally, even though we conducted in-depth interviews and drew on multiple sources of

information for our case studies, our study is cross-sectional in nature. The dynamic nature of

social capital in transnational activities may be usefully captured through longitudinal studies in

future.

Managerial implications

For TEs that found a venture in their home country, our findings suggest that they may

draw on social capital in either host or home country, or usefully leverage social capital in both

host and home countries depending on where they choose to live, and location of social ties they

access to recruit managers for their ventures. TEs do not need to relocate to live at home to

recruit managers for their TNVs. The social capital originating from their circle of friends,

former colleagues, recruitment agencies or networking organizations in close geographic

proximity in the host country itself, may be sufficient. However, should they decide to relocate to

their home country, local social capital may altogether substitute for the lack of social capital in

the host country as long as TEs recruit managers based on local ties. However, they must

cultivate social relationships from across the border to recruit managers if they wish to combine

social capital in host and home countries. Our findings also suggest potentially interesting policy 30

support implications for home countries as there may be potential spillover benefits from

nationals who have gone abroad but who may bring back entrepreneurial expertise and

employment benefits by recruiting domestically based managers for their businesses.

Conclusions

Entrepreneurs returning home are an innovative source of new jobs and skills,

particularly in emerging economies, and the transnational links of TEs may supersede

conventional international business relationships for transferring knowledge or personnel across

national borders (Saxenian and Hsu 2001). An understanding of social capital of TEs in the

recruitment of managers for their TNVs is important in a scenario where temporary and cross-

border flows of personnel are replacing more permanent forms of migration, and knowledge

flows in a network configuration are becoming more prevalent (Gupta and Govindarajan 1991).

Our findings establish that there is no one way to use social capital in the recruitment of

personnel by TEs. We contribute to theory by providing insights into the use of social capital in

the recruitment of managers by migrant entrepreneurs that traverse host and home country

institutional contexts, thus extending the ‘mixed embeddedness’ perspective in the migrant

entrepreneurship literature. A novel contribution of our study is that TEs substitute or

complement international and local social capital in the recruitment of managers for their TNVs

contingent on their own location and location of social ties that they leverage. In demonstrating

the role of international and local social capital in the recruitment of managers based on personal,

industry and intermediary ties, our findings also extend the HRM literature on informal

recruiting in small firms to the case of TEs.

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