cultural entrepreneurship: the impact of social networking on success

Cultural Entrepreneurship:The Impact of Social Networkingon Success

Elmar D. Konrad

Because of the complex structures characteristic of the arts sector and creative industries, it isoften thought that external network ties of leading managers are critical to the success of theircultural enterprises. Based on research into entrepreneurship and promoters’ activity, thisstudy examines the influence of social network relationships on the success of cultural estab-lishments in Germany. The regression analysis of data from 121 private arts and cultureventures presented here clearly shows that founders as well as managers can overcome numer-ous barriers through their engagement and activity in social networks, and thereby exercise toa significant degree a positive influence on establishing their enterprise. As expected, thiseffect is even stronger in cases of low sponsorship of cultural activities on the part of cities andcommunities. Contrary to expectations, the positive effect of intensive networking activities isnot increased by a high intensity of competition; it is worth noting that the effect is strongestin situations of low competitive pressure. The results of this study demonstrate that successfulnetworking expertise, as postulated by research into promoters’ activity, is of great importancefor overcoming significant barriers in the cultural sector, but that its effectiveness also haslimits.

Introduction

In the course of the last five to ten years, thecultural and creative industries have become

increasingly important and grown continuallyat an above-average rate. The companies andbusinesses founded in these economic sectorsdirectly provide new jobs and thus increasethe added value for the collective good of thecity, the region or the entire national economy(Eurostat, 2012). In addition, they contributeindirectly to the creation of an innovative andcreative environment (Deutscher Bundestag,2008). Apart from many soft factors, they alsosupport the consolidation of new trades aswell as the acquisition and retention of inno-vative and well-trained personnel (Hausmann,2010).

Due to the shortage of public funds and agrowing number of new start-ups in the cul-tural sector, the arts and creative industriestoday is looking increasingly to a strong eco-nomic sector as a job motor (Söndermann,2012a). Besides the big public cultural institu-

tions of a community or region, organizationsoperating in the private sector play a majorrole, as do artistic initiatives. About 10,000new cultural enterprises were founded inGermany between 2001 and 2005 (EuropeanCommission, 2012). These new enterprises aremostly small – if not very small – businessesthat are usually run and managed by theirfounders and/or other individuals involved inthe founding process (Söndermann, 2012b).The central obstacles for the establishment of acultural business can generally be subsumedunder the liability of newness and the liabilityof smallness (Hager, Galaskiewicz & Larson,2004). Privately financed cultural event compa-nies are not only assessed in terms of culturalquality, but also in terms of their economicperformance. Founders and directors of suchcompanies increasingly rely on entrepreneur-ial success measures.

In this context, effective and efficient socialnetwork activities are an important – perhapsthe most important – element in the entrepre-neurial behaviour of cultural business found-

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ers and managers. The central challenge forstart-ups is to find external partners in the cul-tural sector in order to establish and maintaina long-lasting sponsorship network (Sorensen& Waguespack, 2006). According to findingsfrom entrepreneurship research (Lechner &Dowling, 2003), start-ups must skilfully estab-lish their networks and maintain their busi-ness relationships in order to raise theirreputation and to have access to information,financial means as well as other resources. Thelatest entrepreneurship research, dealing withthe early stages and formation of cultural andcreative businesses, focuses mainly on theperson of the cultural entrepreneur, but alsoon artists and freelancers in the cultural sector(Swedberg, 2006).

Culture entrepreneurs especially need toknow how to build up the right set of relation-ships with external partners, and how to act ina complex social network. But many creativepeople and artists are either unaware of theimportance of social networks, or do notunderstand what constitutes the best inputinto such networks to achieve their goals andto promote success (Hausmann, 2010). In timesof reduced allocation of public funds for cul-tural affairs by regional governments andincreasing pressure of competition, culturalentrepreneurs often overdo or neglect theirnetwork activities by wasting time and humanresources without any prospects of success.Up to now there have been no concreteanswers to questions of how much and inwhich way social network activities by entre-preneurs and managers in the arts and culturesector influence the reputation and establish-ment of their cultural business in the context ofexternal barriers. Therefore the focus of thepresent study, which attempts to fill this gap, ison the ability of cultural event enterprises,both non-profit and profit-oriented, to exerciseentrepreneurial competence in social net-works in the arts and culture sector in order tomeet challenges such as promotion of culturalaffairs and degree of competition.

Formulation of Hypotheses

Performance Measurement inCultural Businesses

How can the success of such cultural busi-nesses in the context of the cultural sector bemeasured and evaluated? It is possible to useobjective, i.e., clearly measurable items whichare not dependent on the issue to be meas-ured. Since objective data have the advantageof easy collection and comparability, they areused in most studies. But when assessing thedata for successful start-ups, it is difficult to

determine which figures are relevant and whatexactly the criteria for success should be.Depending on the author’s preference, itemssuch as turnover, profit, productivity orvarious combinations of these, are used instudies of success factors (Song et al., 2008).

With regard to the cultural businessesunder consideration here, a measurement ofsuccess based on purely management-drivenindicators, such as turnover, growth or annualrate of return, is not desirable, nor does itmake sense (Hinz, Jungbauer-Ganz & Kriwy,2004). Therefore, the author here applies asuccess indicator referred to as ‘establish-ment’. In the cultural sector, the establishmentof a business, i.e., how a business or enterpriseis publicly perceived in terms of its reputationor image, is of major importance (Colbert &Courchesne, 2012). Being well establishedlocally and having a good reputation in thecultural scene would seem to be importantindicators, because cultural businesses do notproduce classic services and products likecommercial enterprises (Colbert, 2012). It isthus not relevant, whether looking at profit-oriented companies or private sector non-profit cultural institutions. Achieving a firmfooting as a business in a certain region oreconomic sector can be evaluated on the basisof the attainment and consolidation of amarket position.

Since the author is dealing with small cul-tural businesses in the private sector, whichdoes not explicitly focus solely on commercialgrowth, the evaluation of a business’s establish-ment is closely linked with the profile, image,publicity and reputation of its leading players.Through their performance in the culturalsector, potential players can not only acquirehuman resources, but also a reputation – eitherby becoming known among insiders, or by thecompany’s reputation for cultural events(Burton, Sørensen & Beckmann, 1999). It canthus be assumed that knowledge regarding thereputation and image of a certain person ororganization is widespread in a social network,especially within a local or regionally limitedcontext (Colbert, 2012). Moreover, the reputa-tion of a leading player can have a direct effectupon the establishment and development of anentire cultural enterprise.

The Networking Specialist inCultural Businesses

The role of the networking specialist is pre-sumed to be important, if not essential, inestablishing a cultural business (Konrad &Hoegl, 2005). The importance of the effects of anetwork specialist, particularly in the inter-organizational context of business and project

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development, are discussed in the innovationmanagement research (Konsti-Laakso, Pihkala& Kraus, 2012). Based on the results of researchon champions and relationship promoters, thepresent study applies theoretical issues to thecreative and cultural business sector (Walter,2003). In this role, either founders or leadingpersonnel of a cultural business bridge thegap between their own organization andexternal partners by initiating and maintainingco-operative relationships and long-termexchange processes (Dickel et al., 2009) Net-working specialists are characterized by aportfolio of good connections and relationswith key figures such as informants, experts,decision makers, opinion leaders and refer-ence people. Those who hold such a portfolioof personal relations can look effectively forimportant players in the market beyond theirown company in order to support their comp-any’s own projects and strategic goals. Inbringing these players together, the network-ing specialist can influence them and thuscreate or open up specifically new resources(Walter, 1999).

A networking specialist’s most importantcontribution with respect to the establishmentof a cultural business is the establishment ofcontacts with and between representativesfrom cultural politics, the media and otherimportant opinion leaders (Bussel & Forbes,2006). Good personal relations with importantpeople and partners in the culture sectorwill help to influence decisions favourably(Assassi, 2007). In such relations, one findsthe appropriate mindset (e.g., common andagreed upon motives, complementary knowl-edge, a common language as well as under-standing, confidence and solidarity) in orderto be supported by the respective other and tosystematically influence the other’s decisionsand activities (Berg & Piner, 1990). Maintain-ing and expanding relations to a great extentwithin a cultural network will foster strategicco-operation and interactions with partners,open up efficient resources, and thus contrib-ute to the growth and long-term survival, i.e.,the establishment, of a cultural business(Colbert, d’Astous & Pamentier, 2005). A studypublished by Debenedetti (2006) shows thattapped resources like public subsidies,funding, sponsorship or an increase in public-ity due to a large number of media reactions,have a direct effect on the degree of establish-ment of a cultural enterprise (Walter et al.,2011). Taking all of this into account, theauthor formulates the following hypothesis 1:

H1: The more strongly a cultural entrepreneuroperates as a networking specialist, the higher isthe establishment of a cultural enterprise.

Due to the complexity and structural quality ofthe cultural sector, young cultural enterprisesare facing a great number of uncertainties withregard to their chances of establishment anddevelopment (Hausmann, 2010). The culturalsector is a dynamically growing and highlyinnovative market as far as customers and thegeneral public are concerned – a fact that alsomanifests itself in the degree/intensity of com-petition (Garnham, 2005).

Degree of Promotion of Cultural Affairs

The most important influence for the develop-ment of a cultural business comes from theofficial department for the promotion of cul-tural affairs (Deutscher Bundestag, 2008). Thisauthority is usually the first destination inorder to seek out support for the establishmentof a business or project initiative in the culturalsector (Rentschler et al., 2002). Due to its spe-cific communal duties and responsibilities, thedepartment for the promotion of culturalaffairs significantly regulates and determinesthe cultural climate of a community or region(Bendixen, 2000). Thus, it exercises a stronginfluence on the cultural environment and sur-roundings. Such duties and responsibilitiescomprise, among other things, the financialsupport for official cultural institutions, forprivate cultural enterprises and organizations,as well as the promotion of cultural events likefestivals or projects such as the expansion ofthe cultural infrastructure. A weak or non-existent promotion of cultural affairs con-strains the establishment and development ofcultural businesses in two ways. Firstly, assome cultural-economic surveys reveal, wheregenerous public funds are lacking, privateenterprises are usually not supported becausemost financial means available in those casesare allocated to public institutions. Secondly,an insufficient promotion of cultural affairsresults in support for merely a small numberof selected branches or businesses, which inturn narrows the range of cultural activitiesoffered. Hence a diverse cultural life with awide array of activities and organizations isnot fostered (Dewey, 2004). If cultural politicsmerely focus their financial support on publicinstitutions, e.g., if about 90 per cent of thecultural budget is used to support the localcity theatre or only a single cultural division,thus excluding many cultural businesses, thenprivate institutions will have a hard time tobreak into the cultural market of a city orregion (Turbide et al., 2008).

In the case of a well-developed, structuredand diversified funding system provided bythe department for the promotion of culturalaffairs, it is easier to gain access to public



resources as public funds are granted moreeasily. Therefore, entrepreneurs and theirleading personnel can concentrate and focuson programmatic tasks and occupations withpublic appeal without running the risk ofbeing cut off from public funds due to a lack ofnetworking. The second hypothesis is there-fore formulated as follows:

H2: The relationship between a cultural entre-preneur in the role of the networking specialistand the establishment of his cultural business ismoderated by the public promotion of culturalaffairs. The higher the degree of public promo-tion and support, the weaker the positive effect ofthe networking specialist on the establishment ofthe cultural business.

Intensity of Competition

Another influential factor regarding the envi-ronment for cultural enterprises is the degreeor intensity of competition. FollowingJaworski and Kohli (1993), the factor ‘intensityof competition’ in the context of this studyrefers to the degree to which competitors of acertain cultural business attempt to gain com-petitive advantages by means of differentia-tion. It is assumed that a high degree ofcompetition poses a considerable challenge forthe establishment of a cultural enterprise. Aregion or community has only a limited clien-tele. Cultural businesses thus must advertisetheir range of products, services and activitieswhen trying to find favour with customers,because in no market can every product besold by everyone to everyone. Moreover,private cultural businesses are a direct compe-tition for other cultural institutions in a region,i.e., institutions which either operate inthe same cultural branch or focus on asimilar target audience (Prieto-Rodriguez &Fernandez-Blanco, 2000). The more culturalinstitutions, businesses and organizations thatare found in a cultural community, the higheris the degree of competition. While the numberof cultural products, services and eventsincreases, the demand remains the same.

In the case of a high degree of competition,several players compete for limited – public aswell as private – resources (Seaman, 2004). Thepresent author maintains that in order toincrease the chances of gaining access to theseresources in such a competitive environmentwithin a closed social network, contacts andrelations with cultural commissioners andmedia representatives must be established andcarefully maintained by the networking spe-cialist. One may thus conclude that thestronger the competition, the more intense thepressure on networking in order to gain a leadover competitors (Heilbrun, 1997). Due to

intense networking the entrepreneur’s per-sonal portfolio will improve in comparison tothat of competitors. This in turn has a positiveinfluence on the establishment as resourcesand access to financial means may be granted.

It can thus be assumed that the higherthe competitive barriers are, the greater thenecessity for intense networking. Hence, thenetworking specialist becomes more impor-tant for the establishment of a cultural enter-prise. In conclusion, one may formulatehypothesis 3:

H3: The relationship between cultural entrepre-neurs who are operating as networking special-ists and the establishment of their culturalbusinesses is moderated by the degree of compe-tition. The higher the competition, the strongerthe positive effect of the networking specialist onthe establishment of a cultural business.

Figure 1 presents the framework of the impactof engaging of a network specialist on theestablishment of a cultural business.

Empirical Investigation

Data Collection and Sample

The data the author evaluated in the presentstudy was collected in the context of a broader,nationwide research project aimed at investi-gating and analysing successful formationsand developments of cultural enterprises inGermany. A total of 350 German cultural eventorganizations that met the characteristics,structure and profile of the investigation wereidentified and extracted out of the larger dataset. In this context, only cultural events enter-prises were addressed that: (a) are privatelyheld or organized (both profit-oriented andnon-profit) and not publicly (e.g., city or state)owned; (b) fall under the art category of music(classic, jazz, rock, pop, folk and ethnic music),theatre (drama, comedy, puppet theatre),dance (ballet, modern, etc.) and cabaret/variety; (c) have a local or regional focus; (d)are no older than 20 years; (e) concentrate onart events as their core business; and (f) haveat least their founder still involved in theorganization.

The cultural events enterprises were ini-tially contacted via telephone. The objective ofeach phone call was to identify an appropriateperson from the leading personnel or manage-ment with whom an appointment for a per-sonal interview could be made. In each case,one person was chosen for such an interview.On location, only 213 organizations fulfilled allconditions (a)–(f). Of those 213 organizations,11 respondents were not the founder ormembers of the top management. The 202



remaining respondents were mainly occupiedwith the development of and strategic plan-ning for the respective cultural business.

Experts were consulted in order to assessand evaluate the degree of establishment of acultural business. This evaluative step wastaken after the interviews. Important repre-sentatives from the department of culturalaffairs, such as cultural commissioners, chiefofficers or heads of cultural policy depart-ments, as well as media representatives suchas editors of a newspaper’s arts and entertain-ment section who were well acquainted withthe cultural businesses, served as experts. Allexperts were residents of the cities, towns orregions in which the respective cultural busi-nesses were located. Thus, along with each cul-tural entrepreneur, a member of the localdepartment for cultural affairs and an appro-priate media representative were interviewedvia telephone on the basis of a standardizedquestionnaire. In general, 81 important repre-sentatives from the different local departmentsfor cultural affairs and 86 media representa-tives were interviewed. No expert of culturalpolicy departments and no local media expertwas asked questions about more than one or amaximum of two cultural business. After thisprocedure of external evaluation, the authorwas able to include a total of 121 cultural busi-nesses in Germany. Table 1 describes the cul-tural event organizations and their spreadacross Germany. Overall, 71 organizationswere non-profit, and 50 were profit-oriented,67 event enterprises own stage locations, and afounder is still active in top management in 93

cultural event organizations. The 121 cultureevent organizations are spread over 68 citiesand communities.

Operationalization of Constructs

Dependent Variable

The construct ‘Establishment of a culturalbusiness’ is based on five reflective indicators.With the help of indicators, experts evaluatedthe different aspects of a cultural business thatwere convincing and significant with regardto the establishment of each business. Theseaspects included the degree to which a cul-tural business is known in its region, thedegree of customer approval of a certain rangeof cultural products, and the importance of acultural business for the cultural life of acertain region. The items for the differentscales were developed exclusively for thisstudy in co-operation with cultural eventsorganizations and tested with regard to theircontent. For the evaluation of the cultural busi-nesses from the point of view of their repre-sentatives and from that of the experts, thecriterion for reliability of the multi-item scalewas calculated, using Cronbach’s α-coefficient,as 0.93.

Independent Variable

The construction of the variable ‘Engaging anetworking specialist’ is based on the researchwork of the ‘relationship promoter’ by Walter(1999). Suitable items are adopted from Walter(1999) and adjusted to the research context.

Promotion ofcultural affairs

strong

poor

high

low

Degree ofcompetition

Engaging a

networking specialist

E stablishment of a

cultural businessH1

H2

H3

Figure 1. Framework of Engaging of a Network Specialist on the Establishment of a Cultural Business



Basic components of a networking specialist’stask are beneficial contributions and sources ofpower and influence (Walter, Auer & Ritter,2006). Beneficial contributions, in this case, arespecific activities of important individuals thathelp to implement groundbreaking and inno-vative decision-making processes. Sources ofpower and influence describe the importantcharacteristics and qualities of certain influen-tial players. On the basis of these sources,networking specialists make beneficial contri-butions and open up new resources, i.e., theyuse their portfolios of good personal contactsand relations with important persons such asinformants, agents, experts, decision makers,opinion leaders and reference people. In sucha network, cultural entrepreneurs regard thoseplayers as partners who, next to major custom-ers and sponsors, assist in balancing efficientlyresource deficits (e.g., a lack of subsidies orpublicity) and thus help the development ofthe business (Ibarra, 1993; Gainer, 1995).

In order to measure the construct ‘Engaginga networking specialist’ – i.e., the characteris-tics of the role of a networking specialist – twoelements of the specialist’s role were usedas points of reference. In each case, fourindicators measure the sub-constructs inter-organizational ‘connecting activities’ and ‘per-sonal portfolio of relations’ of a networkingspecialist. The items regarding the role of the

networking specialist were looked at in thecontext of a cultural business. They included inthe sub-construct ‘connecting activities’ theduties and responsibilities of a cultural entre-preneur with respect to the coordination ofinternal and external operations as well as theacquisition of financial means (public fundingand private sponsoring) and public relations(α = 0.72), and in the sub-construct ‘personalportfolio of relations’ the ties to local opinionleader in politics, cultural life, media andeconomy (α = 0.81).

Moderator Variable

The construct ‘Promotion of cultural affairs’comprises three indicators (α = 0.79) for whichthe author also calculated the arithmetic mean.The cultural events organizations were askedwhether they believed cultural activities andevents were considered important in localpolitics, whether policy makers were person-ally interested in culture, and if the local orcommunal budget for cultural events was pro-portionally high. The items were specificallydeveloped for this investigation as no meas-urement concepts have ever been designed inthis regard. The items used are conceptuallybased on the works of Throsby (2001) andBendixen (1997). In order to measure the con-struct ‘Intensity of competition’, four indica-

Table 1. Sample Description of the Cultural Event Organizations

Supraregional postal codes Germany by postal code

0 1 2 3 4 5 6 7 8 9

Spread 3 10 4 4 6 19 28 36 9 2Orientation

profit orientated 1 5 3 2 1 8 15 11 3 1non-profit orientated 2 5 1 2 5 11 13 25 6 1

Main categorymusic 1 1 1 1 7 10 12 3theatre 1 3 1 1 3 9 1dance 1 1 1 2 2cabaret and variety 2 6 2 3 3 10 13 13 5 2

Real estateown stage location 2 6 1 2 2 14 13 21 4 2no own stage location 1 4 3 2 4 5 15 15 5

Managementby founder(s) 2 7 4 3 4 15 21 31 6by CEO(s) 1 3 1 2 4 7 5 3 2(addition team

management)4 2 3 9 14 22 3 2

n = 121



tors were used as points of reference. Theyprovide further information on the competi-tive climate, the degree of competition and thecompetitive dynamics (see also Konrad, Walter& Gemünden, 2010). In measuring this con-struct, the author followed the measuringconcept of Jaworski and Kohli (1993). For thefour indicators, the calculation of Cronbach’salpha produced a value of 0.72. For a furtheranalysis, the arithmetic mean of the four indi-cators was calculated.

Results

Success of young ventures is influenced by amultitude of parameters that also apply toculture event organizations. Therefore, inorder to test the hypotheses, it makes sense tointroduce three control variables. These arefirst the age of the culture business, becauseeach organization needs time to build upestablishment and reputation (Harms et al.,2010). The other control variables are the sizeof the organization (number of employees)and the number of inhabitants in the localtown or the catchment area. It is a validassumption that these have an influence in thecontext of public funds and level of contribu-tion (Konrad & Hoegl, 2005; Söndermann,2012b). Table 2 presents the descriptive statis-tics and the correlation coefficients.

In order to test the hypotheses, a multi-levelregression analysis (using ordinary leastsquares, OLS) was conducted with thedependent variable ‘Establishment of a cul-tural business’. The author gradually factoredeach variable into the equation, beginning withthe control and moderator variables, whichwere then followed by the main effect variable

‘Engaging a networking specialist’ (Table 3,model 1) and finally by both interaction terms(Table 3, model 2). The consideration of the‘Variance inflation factors (VIF)’ for the inde-pendent variables revealed that multicollinear-ity in the author’s analysis did not pose anyproblem. For the regression equation, thelargest VIF was 1.15. The maximum conditionindex was 1.64.

The results of the moderated regressionanalysis are displayed in Table 3. The regres-sion coefficients are exclusively standardizedvalues. The data support, as expected, thatengaging a networking specialist positivelyinfluences the establishment of a cultural busi-ness (H1 is supported: p < 0.01). In the contin-gency model, one of the five control variablesshows to have a significant effect on the resultvariable ‘Establishment of a cultural business’.A high degree of competition in the surround-ings of a cultural business has a negative effectupon the establishment of the business (p <0.05). With a total of 26 per cent (adjusted R2 =21 per cent), a major part of the variance of thevariable ‘Establishment of a cultural business’is explained in the regression equation(model 2).

The interaction effect between ‘Engaging anetworking specialist’ and ‘Promotion of cul-tural affairs’ on the establishment of a culturalbusiness is, as expected, significantly negative(p < 0.05). Contrary to the author’s expecta-tions, however, the analysis does not reveal apositive interaction effect of the variables‘Establishment of a cultural business’ and‘Intensity of competition’. The results rathershow a significantly negative interaction effect(p < 0.01): in other words, an increase incompetition weakens the positive effect that a

Table 2. Descriptive Statistics and Correlations

Variables M SD 1 2 3 4 5 6 7

1. Establishment of acultural business

4.90 1.54 1.0

2. Engaging a networkingspecialist

9.31 2.15 0.23 1.0

3. Promotion of culturalaffairs

3.72 1.35 0.21 0.10 1.0

4. Intensity of competition 3.66 1.26 −0.19 0.01 −0.04 1.05. Age of cultural business 11.70 7.24 0.18 −0.09 0.05 −0.14 1.06. Number of employees 21.01 35.08 0.10 −0.13 −0.09 0.04 0.30 1.07. Number of inhabitants

(town/catchment area)325,790 713,559 −0.12 −0.08 0.01 0.23 −0.07 −0.07 1.0

Correlations > 0.17 (0.15) significant on a level of 0.05 (0.10) %.



networking specialist has on the establishmentof a cultural business. The increase in R2 isaltogether significant (ΔR2 = 0.10; p < 0.001).

For a further examination of the interactioneffects, the author conducted so-called ‘simpleslope analyses’ (Aiken & West, 1992). Figure 2shows a graphic presentation of the interactioneffect between the variables ‘Engaging a net-working specialist’ and ‘Promotion of culturalaffairs’ on the establishment of cultural busi-nesses. One can recognize that at a low level ofpromotion of cultural affairs (average value

minus one standard deviation), the increasedengagement of a networking specialist in themanagement has a strong positive effect on theestablishment of the cultural business (p <0.001). This causal direction meets the author’sexpectations. A strong promotion of culturalaffairs (average value plus one standard devia-tion) merely shows weak positive effects onthe basis of the engagement of the networkingspecialist.

Figure 3 illustrates the interaction effectbetween ‘Engaging a networking specialist’

Table 3. Results of the Regression Analysis ‘Establishment of a Cultural Business’ (standardized values)

Independent variables Model 1 Model 2

Main effect:Engaging a networking specialist .24** .23**

Interaction effect:Engaging a networking specialist ×Promotion of cultural affairs −.18*Intensity of competition −.28**

Control variables:Promotion of cultural affairs 0.19* 0.13Intensity of competition −0.15† −0.18*Age of cultural business 0.13 0.12Number of employees 0.11 0.10Number of inhabitants (town/catchment area) −0.05 −0.04

R2 (adjusted R2) 0.16 (0.11) 0.26 (0.21)ΔR2 0.05** 0.10***F 3.94** 5.54***

n = 121; *** p < 0.001; ** p < 0.01; * p < 0.05; † p < 0.10 (two-sided test).

7

6

5

4

3

2

1

Weak score of the networking specialist‘s role Strong score of the networking specialist‘s role

Establishment of a cultural business Promotionofculturalaffairs

strong

poor

Figure 2. Interaction Effect – Scoring of the Role of a Networking Specialist with Cultural Business ×Promotion of Cultural Affairs on the Establishment of the Cultural Business



and ‘Intensity of competition’ in the context ofa cultural business. It shows that in the case ofa high degree of competition, there is a slightlynegative effect from the role of the networkingspecialist on the establishment of the culturalbusiness (n.s.). In the case of a low degree ofcompetition, the networking specialist has avery positive effect on the establishment of acultural business (p < 0.001). Thus, the direc-tion of the interaction effect corresponds withthe effect postulated in hypothesis 3.

Conclusion and Discussion ofthe Findings

The study presented here investigated to whatextent individuals who hold a leading positionin a cultural business, such as CEOs or thefounders of a business (here also referred to as‘cultural entrepreneurs’), have, as networkingspecialists, a positive influence on the estab-lishment of a cultural business. ‘Establish-ment’ was defined here as a reasonabledimension for measuring the success becauseit provides a picture of how well known andintegrated a company is. Furthermore, it pro-vides information on its public image as wellas the entrepreneur’s reputation in local orregional cultural contexts (Konrad, 2013). Therole of the networking specialist represents allnetwork-specific activities of a cultural entre-preneur as well as his personal portfolio ofrelations. In accordance with the first hypoth-esis, the analysis of the research data sup-ported the view that cultural entrepreneurs

who are also operating as networking special-ists exert a considerable amount of influenceon the establishment and development of theircultural business. In this context, the resultsshow also that there are no differencesbetween profit-oriented and non-profitorganizations; the results also confirm theresults of other studies (see Konrad & Hoegl,2005; Mair & Martí, 2006; Hausmann, 2010).

The local or regional departments for thepromotion of cultural affairs exercise one ofthe most essential forms of influence on thecultural work in a certain area. The amount ofsupport for cultural enterprises includes notonly financial subsidies and their respectiveentry barriers, but also the accommodation ofcultural commissioners with regard to stra-tegic, operational, as well as political planning,decisions and measures. Another importantinfluential factor is the general competitivesituation in the local or regional cultural envi-ronment. The degree of competition regulatesthe number of artistic and cultural activitiesand organizations in a certain region.

In accordance with the second hypothesis, aweak promotion of cultural affairs constitutesan establishment barrier for the cultural enter-prise, whereby, as expected, the positive effectof the networking specialist on the establish-ment and development increases. Surpris-ingly, and contrary to the third hypothesis, thispositive effect is not increased by a highdegree of competition in the environment ofthe cultural business. Instead, the positiveeffect rather decreases, although not signifi-cantly. Thus, in the case of a low degree of

7

6

5

4

3

2

1

Weak score of the networking specialist‘s role Strong score of the networking specialist‘s role

Establishment of a cultural business Degree of competition

high

low

Figure 3. Interaction Effect – Scoring of the Role of a Networking Specialist with Cultural Business ×Promotion of Cultural Affairs on the Establishment of the Cultural Business Degree of Competition onthe Establishment of a Cultural Business



competition, the positive effect of the network-ing specialist on the establishment of the cul-tural business increases.

The findings with respect to hypotheses 1and 2 confirm the results of previous researchon networking specialists that their very exist-ence promotes not only confidence and reten-tion from the perspective of customers as wellas contractors, but also helps to achieve agood reputation on the markets (Gemünden,Salomo & Hölzle, 2007). Networking special-ists are, however, tied to a certain project,whereas the role and concept of a (cultural)gatekeeper become independent of a certainproject. This would, in particular, explain therather vague results with regard to a higherpromotion of cultural affairs in hypothesis 2.At this point, further research is needed toinvestigate how a stronger engagement affectsnetworking. If a stronger engagement aims atan increase in so-called weak ties, the engage-ment could prove to be a disadvantage for anenterprise’s reputation, as Hinz et al. (2004)discovered in the creative film industry. Thus,it can be more beneficial to have no contactsrather than a lot of weak ties that are not linkedwith other people in the social network (Jones& Behling, 2010). Another increase in engage-ment would be to deepen and intensify thealready existing strong ties. But in this case,too, long-standing and close connections donot lead to positive effects and can even haveadverse effects (Gabarro, 1978). Due to thepeculiarity of the cultural sector with its rigidand monopoly-like funding structures, a breakwith the set routines is hard to imagine(Granovetter, 2005).

The situation looks completely different,however, if a cultural business perceives orviews the poor promotion of cultural affairs asa barrier. It can be assumed that networkingspecialists show their positive effects whenthey do not feel discouraged by formal orstructural barriers in their environment but, onthe contrary, feel encouraged by them. Net-working specialists regard new issues as chal-lenges which spur them into more eagerperformances (Howell & Shea, 2006). The find-ings from hypothesis 2 with respect to a poorpromotion of cultural affairs confirm this. Inthis respect, a strong networking specialistwith commensurate contributions may verywell have a strong positive effect on the degreeof establishment. According to research onnetworking specialists, however, increasingbarrier heights leads to a decrease in thispotential. It even turns into a negative at acertain point, a fact that Gemünden et al.(2007) interpret to the effect that there is aninverted U-shaped relationship between thebarrier height and the degree of contributions

by networking specialists. This can, however,not be confirmed by the data.

The present interpretation, however, refersto the success of individual projects and enter-prises, not to the degree of establishment ingeneral. Therefore, one would either need toanalyse individual cultural enterprises or cul-tural businesses which are no longer in themarket in terms of the failures and shortfalls ofthe networking specialist. The claim that a net-working specialist is not able to compensatefor excessively high barriers through astronger involvement and engagement ratherapplies to the surprising finding of hypothesis3 with respect to the high degree or intensityof competition. This is most likely due tothe fact that cultural businesses maintainco-operative relationships for mutually benefi-cial reasons, rather than competitive ones, inorder to strengthen and support their goalsthrough mutual aid. This means that the clas-sical competitive behaviour is not relevant tothe cultural sector (Heilbrun, 1997). Insteadone rather finds an ideal, supportive andgeneral community mindset among peopleworking or engaged in the cultural sector. Atthe same time, a high degree of competitionequals a brisk cultural life, which means thatthose who live in a community have a strongerinterest in cultural events and activities. Thisin turn facilitates the establishment of a cul-tural business from the very beginning.

Another reason for this unexpected effect isthe result of the typical German interdepend-ence between reputation, establishment andgranting of public funds (Söndermann, 2012a).This circumstance applies presumably also toprivate promotion and sponsoring (Fahy,Farrelly & Quester, 2004). If the pot of publicmoney is restricted, a single company’s sharebecomes smaller in proportion to the numberof competitors. A higher input and moreintense personal investment in time andresources of activities in existing ties or in net-works off the beaten track eventually have noeffect, or a negative one. In the end, the relationof employment of resources to achievablegoals like granting a small public promotion isdisproportional (Dewey, 2005; Martin, 2007). Ahigh engagement as network specialist onlymakes sense with a low degree of competitionto obtain a bigger slice of the fund pie.

It can furthermore be noted that anextremely brisk cultural life also entails, gen-erally speaking, in most cases lower barriersfor the promotion of cultural affairs (Hagoort,2004). In such a situation, the concept of thenetworking specialist meets its limits. This iseven more evident when, in the case of a lowbarrier in terms of the degree of competition,the positive effect of a networking specialist



on the degree of establishment of a culturalbusiness turns out to be high (Swedberg,2006).

Implications for Further Researchand Practical Applications

There is a general tendency in entrepreneur-ship research to focus increasingly on individ-ual aspects of branches and business units(Harms & Grichnik, 2008). Together with thegrowing importance of the creative industries,the originally Anglo-Saxon concept of ‘culturalentrepreneurship’ undergoes its own develop-ment. Hausmann (2010) notes that in cases ofextremely difficult general conditions and con-straints, it becomes even more important toidentify every single key factor that contrib-utes to the success of cultural entrepreneur-ship and that can be influenced by the culturalentrepreneur. It seems especially important fora successful, long-term establishment of a cul-tural enterprise that the leading personnelperform their entrepreneurial functions fromwhich they also derive the main focus of theirentrepreneurial operations (Hausmann, 2010).It is especially in this regard, i.e., the entrepre-neurial focus on the reinforcing effects toovercome barriers and to support the estab-lishment by means of networking, thatthis study provides an important contribu-tion to the explanation of successful culturalentrepreneurship.

According to the approach of Shane andVenkataraman (2000), which is heavily debatedin the current entrepreneurship literature, thechances for new service offerings result froman unequal distribution of information as wellas from the different abilities of players to usepieces of information to their economic advan-tage. Both the decision to take a certain entre-preneurial chance in either a new or analready established market and the way thatchance is taken thus become subject-relatedprocesses. So far, to the author’s knowledge,empirical entrepreneurship research has notpresented any concept for successful entrepre-neurial behaviour. The present study showsthat the role of the networking specialist, asconceptualized in the context of innovationresearch, can be drawn upon in order todescribe successful entrepreneurial behaviour.

Considering the scarcity of resources in thecultural sector as well as the difficulties withrespect to the establishment of young culturalbusinesses, the systematic establishment of atrustworthy network with central players con-stitutes a reasonable approach for culturalentrepreneurs. This establishment process,which requires the conscientious development

of a basis of mutual trust, should in particularinclude the department for the promotion ofcultural affairs, which should not only beregarded as a sponsor, but also as a customerin the processes of new product development(Konrad et al., 2010). Especially in times ofcrises during the establishment process or therealization of projects, cultural businessesstrongly depend upon the favour of decisionmakers in the department of cultural affairs(DiMaggio, 1987). Trustworthy relationshipsand contacts with these people as well as withmedia representatives are thus an essentialprerequisite for the successful development ofa business (Schuster, 2006).

Innovation management research showsvery clearly that inter-organizational relation-ships have a strong influence within the inno-vation development process (Ritter & Walter,2008). In start-ups and in the development of anew business, the behaviour of relationshippromoters in creating important co-operativeties likewise are strong success factors (Walteret al., 2006), an observation that in this paper isapplied to the arts and culture sectors. Due tothe small size of cultural businesses, network-ing activities are usually carried out either byindividual entrepreneurs themselves or bysmall management teams (Escribá-Esteve,Sánchez-Peinado & Sánchez-Peinado, 2009),which function as the business’s representa-tives in a network of relationships. Therefore,it is essential for cultural entrepreneurs to con-sider networking and relationship building asone of their entrepreneurial duties – at least inGermany. That said, one must, however, alsoconsider that overcoming high barriers leadsto a high use of resources – especially withregard to the input of social capital. This studythus elucidates that engaging to a higherdegree in building relationships and contactsdoes not necessarily lead to success, and cansometimes even be counterproductive anddiscouraging. A more detailed analysis of thebarriers and the beneficial potential – espe-cially for the very complex arts and culturesectors of different countries – still needs to beconducted (Konrad, 2013; Pybus, 2013).

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Elmar D. Konrad ([email protected]) has been director of the iuh – Institut fürunternehmerisches Handeln (Institute forEntrepreneurial Acting) at the University ofApplied Science Mainz since September2010. From 2007 to 2010 he was director ofthe Department of Cultural Work and Crea-tive Industries at the Technical University inDortmund. His research focus is culturalentrepreneurship and core competences increative sectors. Prof. Dr. Konrad is alsoeditor of the Kohlhammer Book Series‘Kreativwirtschaft’ (Creative Industries).



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