Javier Mejia, Stanford University

"Social networks, elites, and entrepreneurship"

Abstract

Elites have been crucial in the modernization of Latin America. However, there is limited individual-level evidence regarding their involvement in modernizing activities, such as industrial entrepreneurship. This paper examines one of the most notable instances of industrialization in Latin America--Antioquia, Colombia, in the late 19th- and early 20th-century--for which I bring new archival data on the social interactions among elite members. I exploit the timing of unexpected deaths as a source of exogenous variation in individuals' network position. Based on this, I find that individuals more important as bridges in the entire network were more involved in entrepreneurship. Meanwhile, I do not find individuals with a denser local network to be more involved in entrepreneurship. Using additional quantitative and qualitative evidence, I interpret that these results must be explained by the need for complementary resources that entrepreneurship had. These resources were spread out in society and entrepreneurs could not use markets to access them. Social interactions supplemented markets. Those that could combine more easily a diverse range of resources had a comparative advantage in being entrepreneurs. Hence, this paper illustrates how members of the elite were constrained by market and social conditions; the diversity of their social capital resulted in a wide variety of disparate outcomes among them.

Contact persons: Paolo Falco and Pablo Selaya