Social capital and entrepreneur resilience: Entrepreneur performance during violent protests in Togo

Research Summary This study explores how entrepreneurs' social capital affects their resilience to localized shocks. Using a unique longitudinal survey of entrepreneurs during a surge of violent protests in Togo during 2017 and 2018, I explore how different kinds of relationships affect entrepreneurs' performance. Results show that proximity to violent protests caused entrepreneurs' profits to drop by 20%. This decrease, however, was mitigated by entrepreneurs' ties to their local communities and by their non-colocated advice relationships, which were ties to geographically distant advisers. In contrast, colocated advisers, those who were spatially proximate, were harmful to their performance. These findings show that social capital can have conflicting effects on entrepreneurs' resilience, depending on the kinds of relationships they consist of and how those relationships are exposed to the shock. Managerial Summary Relationships are critical to entrepreneurs' performance. Yet, during local crises, such as violent protests, it can be difficult to know which relationships to rely on. Studying entrepreneurs in Togo during a sudden surge of violent protests, I found that two kinds of relationships reduced the negative impact of the localized shock: ties to local communities and advisers located outside the crisis area. In contrast, advisers located nearby, who were also affected by the crisis, amplified the protests' negative effects. These findings suggest that entrepreneurs who can afford to build stronger ties to their local communities and have more distant advisers may be better positioned to minimize losses during localized shocks.

Automated summary

This study found that during local crises, such as violent protests, entrepreneurs can reduce the negative impact by building relationships with local communities and advisers located outside the crisis area. In contrast, advisers located nearby, who are also affected by the crisis, can amplify the negative effects.