Stella Barenholz 2019-2020
MANAGING SOCIAL
CAPITAL ARTICLES +
EXAM QUESTIONS
CONTENT
Theme 1: Social Capital Theory............................................................................................................................................2
1. Nahapiet and Ghoshal (1998)......................................................................................................................................2
2. Lin (1999)............................................................................................................................................................................ 7
3. Pilai et al. (2017)............................................................................................................................................................ 12
Theme 2: Human and Social Capital................................................................................................................................16
1. Batistic and Tymon (2017)........................................................................................................................................16
2. Ng and Feldman (2010)...............................................................................................................................................19
3. McArdle et al. (2007)....................................................................................................................................................22
Theme 3: Social exchange, teams, and social capital.................................................................................................26
1. Kaše, Paauwe, & Zupan (2009).................................................................................................................................26
2. Lengnick-Hall & Lengnick-Hall (2003)..................................................................................................................31
3. Dulebohn et al. (2012).................................................................................................................................................34
Theme 4: Dynamics of social capital................................................................................................................................40
1. Fang, Duffy, & Shaw (2011).......................................................................................................................................40
2. Farh, Bartol, Shapiro, & Shin (2010)......................................................................................................................46
3. Ellwardt, Steglich, & Wittek (2012)........................................................................................................................52
Exam questions........................................................................................................................................................................55
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THEME 1: SOCIAL CAPITAL THEORY
1. Nahapiet and Ghoshal (1998)
Nahapiet, J. & Ghoshal, S. (1998). Social capital, intellectual capital, and the organizational
advantage. Academy of Management Review, 23, 242 – 266.
New theories around firms suggest that firms are social communities specializing in speed and
efficiency, in the creation and transfer of knowledge. This is different from for example transaction
cost theory, which revolves around human opportunism and market failure.
The particular capabilities of organizations for creating and sharing knowledge derive from a range
of factors, including the special facility organizations have for the creation and transfer of tacit
knowledge; the organizing principles by which individual and functional expertise are structured,
coordinated, and communicated, and through which individuals cooperate; and the nature of
organizations as social communities.
S OCIAL CAPITAL
To explain ‘organizational advantage’, the theories of social and human capital help. Social capital
revolves are relationships as a resource for social action. This article explains it in three dimensions
and explains why these facilitate knowledge. Social capital revolves around networks of strong,
crosscutting personal relationships developed over time that provide the basis for trust, cooperation,
and collective action. It is based on mutual acquaintance and recognition. Through weak ties,
members of a network can gain privileged access to information and to opportunities.
There are differences in the conceptualization of the concept. Here, social capital is seen as 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. It has three dimensions:
1. Structural: Structural embeddedness concerns the properties and network of relationships
as a whole. It describes the configuration of the linkages, who you reach and how you reach
them.
Key facets are density, connectivity, and hierarchy.
2. Relational: Relational embeddedness describes kind of personal relationships people have
developed with each other through a history of interactions. It is through these ongoing
personal relationships that people fulfill such social motives as sociability, approval, and
prestige.
Key facets are trust, norms, obligations, and identity.
3. Cognitive: These are resources providing shared representations, interpretations, and
systems of meaning among parties.
Key facets are shared languages, and narratives.
Social capital always constitutes some social structure, and facilitates the actions of individuals
within this structure. There are two distinct themes as consequences of these actions. First is
‘allocative efficiency’, social capital increases the efficiency of action and information through
minimizing redundancy. It reduces the costs of transactions.
Second, social capital aids adaptive efficiency. It encourages cooperative behavior, thereby
facilitating the development of new forms of association and innovative organization. Social capital is
not always positive and can have negative effects, such as the effect of strong norms and
identification processes.
I NTELLECTUAL CAPITAL
Organizational advantage does not only lie in social capital, but also in knowledge. In this article,
intellectual capital is used to refer to the knowledge and knowing capability of a social collectivity,
such as an organization, intellectual community, or professional practice. It is parallel to human
capital, the knowledge, skills, and capabilities that enable persons to act in new ways.
Two issues are relevant to the advantage that organizations develop when capital is higher. A first
discussion is about the types of knowledge. For example, there is a difference between practical,
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experience-based, and theoretical knowledge. The most used distinction is that between tacit and
explicit knowledge. Tacit knowledge means ‘knowing how’, considering the degree to which
knowledge can be codified or abstracted. Explicit knowledge means ‘knowing what’.
Second are the levels of analysis in knowledge and knowing. This has to do with the concept of
organizational, collective, or social knowledge and whether it actually differs from individual
knowledge of the members. Some scholars have said that t is all in the learning of the members, but
others attribute it to the firm. This article also recognizes the importance of socially and contextually
embedded forms of knowledge.
A matrix can be made with the distinctions between explicit and tacit, and individual and social
knowledge. First there is explicit individual knowledge, which is the conscious knowledge in the
form of facts, concepts and frameworks. Second is individual tacit knowledge, which is automatic
knowledge including knowing theoretical and practical knowledge and the performance of different
skills. Then the social knowledge, starting with social explicit knowledge. This is known as
objectified knowledge and includes shared knowledge about scientific facts. It is considered the
most advanced form. Fourth is social tacit knowledge, collective knowledge, which is embedded in
social practices and the experiences of the collective. It may be hidden from individuals but accessed
through interaction, such as routines in teams.
Explicit Tacit
Individual Conscious knowledge Automatic knowledge
Social Objectified knowledge Collective knowledge
Scholars argue that the two social forms are most important for organizational knowledge, and also
organizational advantage. It does limit the scope of analysis and the benefits of internal
organizational advantages can also not be researched.
All new resources such as knowledge are created through two processes. First is combination, the
foundation for economic development, entailing producing means to combine materials and forces.
New knowledge can be created through change and development from existing knowledge, and also
radical change or innovation.
Second is exchange, meaning that knowledge is combined and transferred. Applied to a firm,
teamwork is the ideal form of exchanging knowledge through shared experiences. These included
specific means and understandings which are made in interactions.
There are generally three conditions for exchange and combination to take place, and this study also
adds a fourth one.
1. Opportunity. This is determined by accessibility to the forms of social knowledge, meaning
that existing knowledge can be drawn upon. The creation of new intellectual knowledge can
also be accidental, reflecting emergent patterns of this accessibility.
2. Expectation. Parties must expect deployment to create value, and anticipate what the
processes will give them. It reflects the concept of intentionality as an influence on social
action, showing that outcomes may be different than they were expected to turn out.
3. Motivation. Parties must be motivated and have an engagement, including a willingness and
realization of the new values.
4. Combination capability. There must be a capability to combine the three other conditions,
the combination of these is also labeled ‘absorptive capacity’ and depends on the existence of
prior knowledge.
Thus intellectual capital is created through combination and exchange of resources, which are
represented in a four-celled matrix. There are four conditions that affect this deployment. The focus
is on social processes and the fact that knowledge is socially embedded.
S OCIAL CAPITAL , EXCHANGE , AND COMBINATION
Social capital lies in relationships which are created through exchange. The patterns and linkages of
the bonds are the foundations for social capital. Including this exchange and maintenance of the
capital are cooperativeness and trust. Social capital facilitates the development of intellectual capital.
Its three dimensions influence the four conditions for exchange and combination, both independently
and interrelated. Not all dimensions of social capital are reinforcing.
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The structural dimension of social capital influences the development of intellectual capital through
access to parties for exchanging knowledge. Strong ties and a dense network will promote
individuals’ motivation to engage in social interaction and exchange knowledge.
- Network ties. More ties constitute more information channels that reduce the amount of
time and investment required to gather information. These benefits occur in access
(receiving valuable information and knowing who can use it), timing (ability of personal
contacts to provide information soon enough), and referrals (providing information on
opportunities).
- Network configuration. Density, connectivity and hierarchy are associated with ease of
information exchange. It proves an efficiency of different relationship structures, meaning
that a sparse network can also be beneficial through diversity. There have been mixed
perspectives on the utility of weak ties, at they facilitate search but impede transfer when
knowledge is not codified.
- Appropriable organization. Social capital can be transferred from one social setting to
another, such as trust and development of personal relationships in business. This suggests
that organizations created for one purpose may provide a source of valuable resources for
other, different purposes. However, such organization also may inhibit such processes.
The cognitive dimension can influence intellectual capital through the knowledge of social
collectivity. Although scholars widely recognize that innovation generally occurs through combining
different knowledge and experience, this requires at least some sharing of context. This may come
through two ways of sharing. These facilitate the creation of intellectual capital especially through
their impact on combination capability.
- Shared language and codes. Language has a direct function in social relations because it is
the means by which people exchange information; the extent that people share it, influences
facilitation of information access. Moreover, language influences perception through
observing and interpreting the environment. Therefore, a shared language enhances
combination capability.
- Shared narratives. There are two modes of cognition: information or paradigmatic mode
(process of knowledge creation rooted in rational analysis and arguments), and the narrative
mode (process of knowledge creation rooted in narratives such as stories). Latter is very
useful for interpretation and facilitation of knowledge.
Whereas the structural dimension has direct impact on the accessibility, and the cognitive
dimensions on accessibility and combination capability, the relational dimension influences it in
many ways.
- Trust. Trust is the belief that someone’s actions will be appropriate, and relationships high in
trust means more social exchange and cooperation. Trust is a willingness arising from the
belief in the good intent and concern of exchange partner, the belief in their competence, the
belief in their reliability, and the belief in their perceived openness. It increases coping with
complexity and diversity. Trust lubricates cooperation, and cooperation itself breeds trust.
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