Social Capital

Social capital can be thought of as the stock of social trust, networks, norms, and generally the interconnectedness and strength of relationships among individuals [Page 1947]in organizations and communities. Social capital is important since higher levels of social capital are related to the health and prosperity of individuals, organizations, and communities. Social capital might be thought of as the glue that holds members together and enables members of a community to accomplish their goals and solve their problems.

The dictionary defines capital as wealth in any form that can be used to produce more wealth. Wealth should be understood here as not just money but any asset that is valued and accumulated, including effective goal attainment, happiness, group stability, and peace, or perhaps friendship, love, and affection among members of a group.

Capital or wealth comes in various forms. We might distinguish the following forms of capital:

• Physical capital—physical tools or items that increase productivity (e.g., a computer)
• Human capital—the knowledge and skills that improve productivity (e.g., the knowledge resulting from an MBA curriculum)
• Financial capital—accumulated money that enhances opportunities (e.g., loans or savings to begin a new start-up business)
• Social capital—the stock of social trust, networks, norms, and generally the interconnectedness that enable communities to deal more effectively with common problems and issues (e.g., a quick response of volunteers to assist victims of a flood disaster)

Social capital is as old as human social grouping. Alexis de Tocqueville did not use the term but captured the essence of social capital in his famous discussion of the propensity of Americans to form civic associations. As an academic concept, social capital can be traced to early in the 20th century. However, the concept became more widely studied and popularized in the 1990s, in particular from the work of Robert Putnam, who argued through systematic empirical analysis that there has been a steady decline of social capital in the United States since the mid-1960s.

Some forms of social capital bond together members of groups or organizations. Such organizations include informal neighborhood groups, organized sports teams, recreational clubs, social clubs, professional groups, community groups, or business organizations. There are usually relatively clear expectations for behavior among members of the group, and higher levels of social capital tend to result in higher levels of enjoyment and trust for members of the groups. These kinds of groups tend to involve individuals who are generally more homogeneous. They create what has been referred to as bonding social capital. In these settings, social capital functions as the bonding agent that holds the members together.

Other forms of social capital bridge differences among groups that may be different in some respects (e.g., language, culture, religion). But members of these groups have relatively trusting relationships for purposes of achieving common community purposes. Thus, these forms of social capital have been referred to as bridging social capital. These forms of social capital are particularly important in pluralistic societies, and in these settings, social capital might be thought of more as the grease that allows differing groups to find common ground and acceptable solutions to common issues. Thus, pluralistic and democratic societies depend on bridging social capital, as do global business partnerships and global business dealings generally. These bridging forms of social capital are generally more difficult to create and maintain, but they are extremely important in terms of healthy global business environments.

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