Social Capital

Conceptual Overview

The term social capital appeared initially in community studies, highlighting the central importance for the survival and functioning of city neighborhoods of the networks of strong, crosscutting personal relationships developed over time that provide the basis for trust, cooperation, and collective action in such [Page 1424]communities. Within organization studies, social capital is often viewed as a complement to human capital in explaining actors' relative performance. Proponents of social capital argue that success is primarily social and depends more on relationships with others than on individual attributes. This is because these relationships can provide access to a wide range of important resources such as information, power and influence, social status and support, market opportunities, as well as other forms of capital. Like these other forms of capital, social capital is regarded as a relatively durable and productive asset, making possible the achievement of goals that would not be attainable in its absence or could only be achieved at extra cost. Moreover, social capital can be used as a substitute for and complement to other resources. For example, an actor's influential social connections may sometimes compensate for a lack of financial capital. However, unlike many forms of capital, social capital is fundamentally relational, owned jointly by the parties in a relationship. Thus no one player has or is capable of having exclusive ownership rights. It should be noted that the effects of social capital are not always positive and connections that may be useful for facilitating certain actions may be useless or harmful for others.

Three concepts underpin an understanding of social capital—embeddedness, appropriability, and reciprocity. The former came to prominence through the influential work of Mark Granovetter, who argued that economic action is socially situated and cannot be explained adequately by either individual motives or institutional arrangements. Rather, action is embedded in ongoing systems of social relations that exert a significant influence on behavior and performance. People in organizations and as representatives of organizations tend to enter exchange relationships with people they know, such as family, friends, and acquaintances, rather than with complete strangers. Granovetter distinguished between two important aspects of these social relations—the concrete personal relations that exist between specific people and the structures of these relations—and analyzed the consequences of both for the production of trust in economic life.

Appropriability, discussed by James S. Coleman and widely regarded as a recurring feature of social life, expresses the idea that social connections of one type often can be used for different purposes. For example, friends, or even the friends of friends, may provide timely information about job opportunities, and long-term client relationships may lead to valuable referrals for new contracts. The significance of appropriability is that it suggests the boundless opportunities available through social networks and hence their potential value as a resource.

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