Theme 1: social capital theory
Lecture Article 1 Nahapiet, J. & Ghoshal, S. (1998). Social capital, intellectual capital,
and the organizational advantage.
This article:
1) incorporates different aspects of social capital to identify three common dimensions;
2) explains the role of each dimension in the process of creating and exchanging knowledge;
3) maintains the belief that organizations are capable of creating extraordinary amounts of
social capital on all three dimensions. Additionally, the relationship between social capital
and intellectual capital is explored, as is the impact of this relationship upon a firm's
perceived organizational advantage.
People started looking at organizational advantages occurring from particular capabilities
organizations have for creating knowledge, instead of looking for reasons for market failure.
This article helps doing this by using the following arguments:
1. Social capital facilitates the creation of new intellectual capital
2. Organizations, as institutional settings are conductive to the development of high
levels of social capital
3. It is because of the denser social capital that firms within certain limits have an
advantage over markets in creating and sharing intellectual capital.
New theory says that a firm is more of a social community specializing in speed and
efficiency in the creation and transfer of tacit knowledge. Whereas before, the cost theory
was grounded on the assumption of human opportunism and the resulting conditions of
market failure. This article fills the gap between the two insights based on organizational
advantage rooted in social capital.
The focus is on relationship between social and intellectual capital.
1. Social capital theory= networks of relationship constitute a valuable resource for the
conduct of social affairs, providing their members with “the collectivity-owned
capital”. Social capital can also be negative because it limits openness to others,
information and new ways, while forming mutual ideas and norms with the people in
a group.
Social capital is the sum of the actual and potential resources embedded within,
available through and derived from the network of relationships possessed by an
individual or social unit.
Structural embeddedness= concerns the properties of the social system and of the network
of relations as a whole. The overall pattern of connections between actors that is, who you
reach and how you reach them.
,Relational embeddedness= the kind of personal relationships people have developed with
each other through a history of interactions. The particular relations people have, such as
respect and friendship, that influence their behavior.
Cognitive dimension= refers to those resources providing shared representations,
interpretations and systems of meaning among parties.
These three forms have in common that they constitute some aspect of the social structure
and they facilitate the actions of individuals within the structure.
2. Intellectual capital= refers to knowledge and knowing capability of a social
collectivity such as an organization intellectual community or professional practice.
Dimensions of intellectual capital: Types of knowledge
o Tacit= the extent to which knowledge can be codified and abstracted. Vs.
explicit= written down
o Practical, experience based. Vs. Theoretical
o Know how: well-practiced skills and routines. Vs. Procedural: development of
facts and propositions.
Levels of analysis in knowledge and knowing:
o Learning of the members vs. ingesting new members who have new
knowledge.
- Individual explicit= conscious knowledge: typically, available to the individual in the
form of facts, concepts, and frameworks.
- Individual tacit= automatic knowledge: theoretical and practical knowledge of people
and the performance of different kinds of skill.
- Social explicit= objectified knowledge: the shared corpus of knowledge by for
example a scientific community.
- Social tacit= collective knowledge: knowledge that is fundamentally embedded in the
forms of social and institutional practice. This knowledge occurs frequently at
experienced teams.
Creation of intellectual capital
Through generic processes, a combination and exchange. Combination is the process
viewed as the foundation for economic development.
- First, new knowledge can be created through incremental change and development
from existing knowledge. Second, innovation is a more radical change. Innovation is
, double loop learning. However, there is consensus that both types of creation
involve; making new combinations. To make combinations you need exchange
between parties with different forms of information. Mostly this is exchange of
explicit knowledge either in groups or individually, but this can also happen via
internet.
Conditions for exchange and combination
conditions that must be satisfied before exchange and combination of resources actually
take place:
Opportunity exists to make combination or exchange. This is determined by
accessibility to the collective forms of social knowledge.
In order for parties involved to avail themselves of the opportunities that may exist
to combine or exchange resources, value expectancy theorists suggest that those
parties must expect such deployment to create value. People must anticipate that
interaction, exchange and combination will prove worthwhile, even if they remain
uncertain of what will be produced or how.
Importance of motivation, even when opportunities for exchange exist and people
anticipate that value may be created through exchange and combination will be
worth their while.
Combination capability. Even when all the above is there, the capability to combine
information or experience must exist. = absorptive capacity
Which main theories/models are used/discussed in this research?
The central proposition of social capital theory is that networks of relationships constitute a
valuable resource for the conduct of social affairs.
Collaboration and collective learning increases knowledge and innovation. This increase in
knowledge not only causes the productive opportunity of a firm to change but also
contributes to the "uniqueness" of the opportunity of each individual firm
Toward a theory of the creation of intellectual capital
Step 1= new intellectual capital is created through combination and exchange of
existing intellectual resources which may exist in explicit or tacit form.
Step 2= there are four conditions that affect the deployment of intellectual resources
and engagement in knowing activity involving combination and exchange.
Step 3= combination and exchange are complex social processes. Social capital
indirectly influences combination through exchange.
, Exchange, combination and the structural dimension of social capital
Network ties: fundamental proposition of social capital theory is that network ties provide
access to resources. Information is a basis for action but is costly to gather, social relations
make this easier. These information benefits occur in three forms:
- Access= receiving a valuable piece of information and knowing who can use it, and it
identifies the role of networks in providing an efficient information screening and
distribution process for members of those networks.
- Timing= ability of personal contact to provide information sooner than it becomes
available to people without such contacts.
- Referrals= those processes providing information on available opportunities to
people or actors in the network hence influencing the opportunity to combine and
exchange knowledge.
Network configuration: ties provide channels for information transmission, but the overall
configuration of these ties constitutes an important facet of social capital that may impact
the development of intellectual capital. E.g. three properties of network structure are
density, connectivity and hierarchy, all features associated with flexibility and ease of
information exchange though their impact on the level of contact or accessibility.
Appropriable organization: social capital developed in one context can be transferred from
one social string to another.
Exchange, combination and the cognitive dimension of social capital
At least some sharing of context between parties must exist. The sharing may come about in
two main ways;
- Via shared language= it has a direct influence on relations because it increases
abilities to gain access to people and information. Besides it influences our
perception. Third, shared language increases combination capabilities.
- Share narratives= myths, stories and metaphors also provide powerful means in
communities for creating and exchanging.
