Achieving success through social capital
What is social capital, and why should you care about it?
Social capital: the resources available in and through personal and business networks
Information
Ideas
Leads
Business opportunities
Financial capital
Power and influence
Emotional support
Goodwill
Trust
Cooperation
These resources reside in networks of relationships.
Ingredients of success:
Natural talent
Intelligence
Education
Effort
Luck
Success is social all the above ingredients are found in networks. In other words, without
networks, there wouldn’t be any talent, education, effort, etc.
Examples of use of business networks:
Networking to get a job
Getting paid better and promoted faster and younger due to a rich social capital
Influence because of one’s position in networks of workflow, communication, and
friendship
Acquisition of venture capital through social networks of capital seekers and
investors
Organizational learning via informal interactions
Word-of-mouth marketing, diffusion of products and services through social
networks
Use, performance and success of strategic alliances are influenced by social capital
Mergers and acquisitions – good social capital enables executives to successfully
resist takeover attempts
Democracy can exist because of social and business networks (networks of
cooperation, norms of civic engagement, spirit of trust)
Social capital influences the quality of life:
, Developing social networks leads to happiness, growth, satisfaction, and a
meaningful life
People with good networks enjoy better mental and physical health
People with good networks live longer
Ethics
Many people incorrectly interpret social capital as blatant manipulation: building
and using relationships for self-serving and instrumental goals
In fact, we have to manage our social networks
o Marriage, divorce
o Personnel decisions
Thus, we can’t avoid deliberate decisions about our networks of relationships
It’s not the management of relationships that is unethical. It’s what we do with our
knowledge that makes our practices ethical or not
The ethics of social capital require that we all recognize our moral duty to
consciously manage relationships. No one can evade this duty – not managing
relationships is also a way to manage them.
Network paradigm
About the shift from a ‘group’ to a ‘network’ organization of life
Members of little-box societies deal only with fellow members of the few groups to
which they belong (home, neighborhood, work, etc.). All of these appear to be
bodies with precise boundaries
However, although people often view the world in groups, the in fact function in
networks
In networked societies, boundaries are permeable, interactions occur with diverse
others, linkages switch between multiple networks, and hierarchies are flatter and
more recursive.
Research on IORs (Stern, Mitsuhashi, Oliver)
There is no such thing as a unified theory of IORs. Rather, this field of research is inter-
disciplinary, involving diversity and complexity of both theoretical views and research
methods.
In the paper, it is suggested that the assumption of equilibrium, or intended balance in
exchange relations, underlies the variety of IOR perspectives in the field.
Different definitions of IORs exist. The paper uses: relationships between or among
organizations that involve the concrete exchange of products, services and resources.
IOR research has been grounded in two theoretical or analytical approaches:
IOR as a dependent variable
o Why, when, and how do organizations form linkages with other
organizations?
o Three groups within this approach
, A group that used a dichotomous (dummy) variable of IOR formation
and investigates why organizations establish linkages with some
organizations and what determines their selection of exchange
partners
A group that aims at providing qualitative evidence of the processes
of establishment, development, and management of IORs
A group (less prevalent than the others) that uses types or forms of
IORs as the dependent variable.
IOR as an independent variable
o Two groups within this approach
The first group focuses upon the effects of IORs on organizational
behavior or actions
The second group examines whether, why, and how IORs determine
organizational performance
In short, one of the crucial characteristics of this field of research is its diversity and
fragmentation.
Research themes in the field, defined by the authors of the paper:
1. Bureaucracy and IORs
2. The exchange approach
3. Interdependence and coordination
4. Conflict
5. Resource dependence and power
6. Emergence, development, and dynamics of interorganizational networks
7. Emergence and development of dyadic interorganizational linkages
8. Interorganizational organizations
9. Interlocking and corporate governance
10. Embeddedness, trust, and path-dependency of IORs
11. Diffusion and IORs
12. IORs and organizational performance
Reasons for the fragmentation:
Studies in this field might be less likely to be replicated, so research orientations
become more diversified and less cumulative
Empirical studies have examined different types of IORs and employed different
analytical schemes without addressing generalization of findings across the different
types
Boundary-work involves drawing lines in theoretical space to delineate what is and is
not IOR research
The unit of analysis is a broad category in IOR theory and research because it
incorporates both vertical and horizontal relations, and is addressed at multiple
levels of analysis
Theoretical growth in the field has been characterized by lack of replacement. This
has enabled older programs to survive as newer ones emerge, and creates
fragmentation in the field
, Equilibrium
Almost all of the major influential studies in this field rest on the premise of
equilibrium
Equilibrium is defined as intended movement toward balance or equivalence of
inputs between parties
Equivalent contributions are assumed to be a necessary condition for forming and
maintaining exchange relations IORs
Determinants of IORs: integration and future directions (Oliver, 1990)
This article integrates the literature on interorganizational relationships into six
generalizable determinants of relationship formation, applies these determinants to the
prediction of six types of interorganizational relations, and proposes hypotheses for future
research that specify the conditions under which each determinant will be more likely to
predict different types of relations. These determinants provide the basis for a general
theory of interorganizational relationships and suggest that alternative theoretical
perspectives on relationship formation provide important but only partial insights into why
organizations enter into relationships with one another.
Six critical contingencies of a relationship formation are proposed as generalizable
determinants of IORs across organizations, settings and linkages. Two assumptions
underlie the proposed contingencies:
Organizations are assumed to make conscious, intentional decisions to establish an
IOR for explicitly formulated purposes
The contingencies explain why organizations enter into relations from an
organizational (top-management) perspective, even though IORs many occur
between the subunits of two organizations or between individuals at lower
hierarchical levels.
The six contingencies:
Necessity: an organization often establishes linkages or exchanges with other
organizations in order to meet necessary legal or regulatory requirements
Asymmetry: IORs prompted by the potential to exercise power or control over
another organization or its resources
Reciprocity: IORs occur for the purpose of pursuing common or mutually beneficial
goals or interests
Efficiency: IORs prompted by an organization’s attempt to improve its internal
input/output ratio
Stability/predictability: formation of IORs as an adaptive response to environmental
uncertainty
Legitimacy: formation of IORs for purposes of increasing legitimacy (Institutional
Theory)
Although each of the determinants may be a separate and sufficient cause of relationship
formation, the decision to initiate relations with another organization is commonly based
on multiple contingencies.
