Definition of social capital

As its name suggests, social capital is an asset/capital. It is useful – a resource people use to accomplish things. But it is perhaps best understood when compared with human capital, a much older concept (which helped economist Gary Becker win a Nobel Prize).

Human capital is comprised of the useful assets that are independently possessed by an individual: cleverness, charisma, technical skills. Social capital, on the other hand, is made up of resources available to an individual because of her/his network. They are assets the individual possesses only by virtue of the social relations that s/he develops and maintains. These relationships, of course, are often valued in themselves (friendships can provide tremendous happiness), but the focus of social capital tends to be on the ways in which social relations are a pathway to valuable assets that help people to accomplish things

 

examples of how social capital can bring benefits

Social capital can offer alternative perspectives on a problem which spark creative solutions or directions (think of Steve Jobs’ design savvy and its influence on Steve Wozniak’s technical vision, and vice-versa, in shaping the direction of early personal computing and Apple)

Social capital can offer ties to casual industry contacts which reveal job opportunities (it turns out that such weak ties, not strong ties, are remarkably valuable in job search[1])

Social capital provides access to political decision makers that speeds a stakeholder’s business plans[2]

The last example reminds us that social capital has legitimate but also illegitimate uses. How “private”or “public” the good created, however, is underexplored and deserves attention.

Social capital consists of many elements, but for simplicity, these elements fall into two categories: the structure of the network (mostly about the patterning of ties) and the quality of the relationships. One powerful theory[3] (with good empirical support) is that connections to disconnected others (bridging ties) are important to individual performance – even the performance of leaders[4].[1]



[1]Granovetter, M.S. 1973. The Strength of Weak Ties. American Journal of Sociology6 1360-1380.

[2]Financial Times, June 3rd, 2013. “What does a register of lobbyists have to do with latest scandals?” (Jim Pickard)

[3] Burt, R.S. 1992. Structural Holes: The Social Structure of Competition. Harvard University Press, Cambridge, MA.

[4] Galunic, C., G. Ertug, M. Gargiulo. 2012. The Positive Externalities of Social Capital: Benefiting from Senior Brokers. Academy of Management Journal55(5) 1213-1231.

 

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