Stanford Report Online

Stanford Report, Jan. 21, 2004

Note to entrepreneurs: Meet new people

BY Mary Petrusewicz

What's good advice for enhancing your creativity in business? Cut the umbilical cord to the folks around the office water cooler. Mix it up. Take a class with strangers; seek out ideas from people you don't ordinarily talk to. Do anything to get out and mingle more with folks from other professions. Broaden your social horizons, and you just might come up with the next crazy idea that sparks an industry.

Traditional studies on business innovation do not predict whether an entrepreneur will be innovative, says Martin Ruef, an assistant professor of strategic management in the Graduate School of Business. They predict instead whether an established firm or industry is likely to produce innovations. "I wanted to examine how people become innovative rather than why they reject conventional routines and adopt someone else's innovations," says Ruef, whose latest research looks at what leads people to establish organizations that employ radically new routines.

In 1999, Ruef surveyed Stanford Business School alumni who had started new businesses. He wanted to find out what got their creative juices flowing. He based his study on data from 766 entrepreneurs from a target group of 1,786, including some foreign entrepreneurs. The metrics for innovation included the introduction of new products or services; trademark or patenting activity; exploitation of a new market niche; new methods of production, distribution or marketing; and industry restructuring.

Looking at entrepreneurs' social networks and their career histories to see what the connection is to innovation, Ruef concluded that the most creative entrepreneurs spend less time than average networking with business colleagues who are friends and more time networking with a diverse group that includes acquaintances and strangers. "Contrary to common assumptions," says Ruef, "the evidence suggests that in many cases strong social ties do not provide significant new information, so it helps not to be as embedded in them."

Ruef has found that disparate information and its transmission are keys to innovation. "Weak ties -- of acquaintanceship, of colleagues who are not friends -- provide nonredundant information and contribute to innovation because they tend to serve as bridges between disconnected social groups," he says. "Weak ties allow for more experimentation in combining ideas from disparate sources and impose fewer demands for social conformity than do strong ties."

Entrepreneurs who spend more time with a diverse network of strong and weak ties -- of family, friends, business colleagues, advisers, acquaintances and complete strangers -- are three times more likely to innovate than entrepreneurs stuck within a uniform network. "Diverse networks and sources of information encourage the diffusion of nonredundant information and thus stimulate creativity," says Ruef. In terms of the entrepreneurial team itself, "the more entrepreneurs you have, the more likely you are to have innovation because people come in with different backgrounds and perspectives." Ruef cautions, though, that even if complete strangers spend a lot of time together, the ties among them soon will be the equivalent of strong ties and drown out the benefits of nonredundant information.

Ruef also has found that people tend to be more creative and innovative when they are new to an industry. "When I examined the sources of career experiences," he says, "I found strong evidence to suggest that the longer entrepreneurs have been in the industry in which they seek to make a creative contribution, the less innovative they are." Career tenure is not a bad thing necessarily, he points out, because extensive experience can contribute to more profitable business in other ways. "Veterans just don't come up with wacky or creative ideas that can really spark a new industry."

"The relevance of this study to entrepreneurs," adds Ruef, "is that it helps them identify how they can be creative and innovative, which in my mind is a goal for a lot of entrepreneurs, who often seek creativity for its own sake, independently of material gain. The value of the study to society is that it identifies patterns of socialization that may contribute to innovation and wealth creation."