Managing Social Capital
Lecture 1 – Theme 1: Social Capital Theory
Lin, 1999
Why we should care (1)?
There are always two sides of the story: one side is the practioner-based or what you see on
the internet. The internet is overflown by articles highlighting that social capital is really
important. Not only for us, bur for the society too. Highlights why and how you should build
social capital, because in the end if you have a very good social capital it’s expected to benefit
a lot of outcomes like careers.
Why we should care (2)?
There is always a second part of the story and that’s more an academic view of why social
capital is important. Research from the past has been posted, so if you look at this graft that is
taken by one of the articles. The last few years the research is really searching. So, there are a
lot of articles that are trying to explore social capital.
Why we should care (3)?
So, why is social capital very important from the academic point of view? The premise is
very simple: you as individual are not alone in the world, you are connected in a web of
relationships. You are by the fault a social being and success is usually embedded in these
social relationships. So, having a good social capital has been linked with the various
outcomes you have here.
Success is social: it depends on our relationships with others. All the ingredients of
success that we customarily think of as individual – natural talent, intelligence,
education, effort, and luck – are intricately intertwined with networks.
o Getting a job
o Pay and promotions
o Influence and effectiveness
o Venture Capital and financing
o Organizational learning – and doing
o Word-of-mouth marketing
o Strategic alliances
1
,So, as you can see, there is a lot of benefit in having a good web of relationship in your
network.
Different forms of capitals (1)
What is actual capital? There are various definitions and forms of capital.
Capital (the classical theory) – the capital is kind of a surplus between the investments
and what you get out. Well-known nowadays, but especially advocated in the past.
o Social relations: exploitation by the capitalists (bourgeoise) of the proletariat
a) Part of surplus value between the use value (in consumption market) and the
exchange value (in production-labor market) of the commodity.
b) Investment in the production and circulation of commodities
Human capital – more about the individual itself, and what the individual has, or the
surplus invested by the laborer; your skills, abilities and knowledge that you have that
are interesting for the organization.
o Accumulation of surplus value by laborer
o Investment in technical skills and knowledge
Different forms of capital (2)
Cultural capital – embedded in the meanings that we have. Embedded in our context;
community/society.
o Reproduction of dominant embedded in meanings (values)
o Internalization or misrecognition of dominant values
Other forms of capital?
o E.g. Psychological capital
What is social capital?
Social capital vs. human capital
There is no single social capital theory. Provides embedded resources. Deals with three
distinct concepts:
1) Resource – can be anything that allows someone to get something done. Can be a
thing, person, software etc.
2) Topology – structure of the network. Your social network exists of people and their
relationships. The size of your network depends primarily on you, your preferences
and your ability to build one. Both size and types of acquaintances and friends
determine the quality, diversity and amount of resources you can access.
3) Nature of the relationship between you and others in your network – the quality in
your network determine how much of the potential resources embedded in someone’s
network he/she can actually realize. You may be friends with some of the people in
your network and you may have respect for others, or you may not like others in your
network. Relationships can involve trust and trustworthiness; norms, obligations,
expectations or feelings of closeness.
Social capital the definition – the premise
Short one (Lin, 1999, p.30)
o Investment in social relations with expected returns.
Longer one (Inkpen & Tsang, 2005, p. 151)
o The aggregate of resources embedded within, available through, and derived
from, the network of relationships possessed by an individual or organization.
2
,Key processes of social capital
Basically, building the results depends on the relationships with other people around you. The
question is how actually this can be achieved (promotion)? Why you get the promotion? Why
are you a better performer than others? And there are basically three vary distinct processes
that allows to get the desired outcome.
Individuals engage in interactions and networking in order to produce profits.
Generally, three explanations can be offered as to why embedded resources in social
networks will enhance the outcomes of actions:
o Better flow of information – the first one is: your networks allow you to get
better flow information; you get the information you need, when you need
them. E.g. searching for a job – contacting your friends, family etc.
o Exert influence (e.g. putting in a word) – the second process is exerting
influence. So, you try to convince other people that what you are doing is
actually better. E.g. when you are innovative you need to be able to convince
people that the product is good.
o Social credentials (e.g. standing behind) – the last process is social credentials.
So, you stand behind people that you vouch. So, you vouch for your friends
which basically says: I know this person and this person can be a very good
person for your company.
Benefits of social capital
It is not only related to individual, but also to the group. So, think about knowledge,
knowledge variation and knowledge variance. So, the sum of the knowledge of the group is
never the same as the simply the sum of the knowledge of each individual. So, it’s more
because it happens in the combination of the knowledge with the group, which gives an
advantage over simple individual knowledge. But it’s also true if you look at the benefits of
the individual some people could argue that it’s actually about the human capital. But that is
not true, because there are two important differences that differentiate the social capital
benefit over the individual level vs. the human capital. The first one is when we are talking
about social capital, we are talking about the individual investment in the social relationship.
Whereas the human capital more or less is how you invest in yourself in order to be more
competitive. And second, basically the profit that individuals yield is captured by the
embedded resources. So, these resources than generate returns.
Two perspectives can be identified relative to the level at which returns, or profit is
conceived – whether the profit is accrued:
o For the group or
o For the individuals (similar to the human capital).
However, is different from human capita because:
It focuses on how individuals invest in social relations.
It focuses on how individuals capture the embedded resources in the
relations to generate a return.
3
, Key problems, and misconceptions of social capital (1)
We potentially could have a lot of theoretical problems and in Lin’s article there is a table that
tries to summarize these problems. The first problem is the issue regarding the collective and
individual: Is social capital an individual asset or a collective asset? Think about trust norms;
is this an individual asset or a group asset? Lin states that trust norms are actually resources;
it’s kind of a capital. The next point is about the structure of the network. So, closure of open
networks. So, should be the case that groups are close and dense, because this is usually the
best way to achieve the results (e.g. friendship networks). Actually no, it really doesn’t matter
or should not matter if your group is close or dense, because research has shown that actually
weak and strong ties or structural holes are also very important. So, you usually rely to weak
ties, not your friends or family to get information about work. Because they provide you with
more similar information, so you have redundancy for information. Whereas weak ties there is
a very high change that they provide you with information that’s new, and not embedded in
your network.
Key problems, and misconceptions of social capital (2)
The next problem is the functional view. Which basically is saying that your input and output
are the same. So, you have the same process, the same theory suggesting that. And that is
4
Lecture 1 – Theme 1: Social Capital Theory
Lin, 1999
Why we should care (1)?
There are always two sides of the story: one side is the practioner-based or what you see on
the internet. The internet is overflown by articles highlighting that social capital is really
important. Not only for us, bur for the society too. Highlights why and how you should build
social capital, because in the end if you have a very good social capital it’s expected to benefit
a lot of outcomes like careers.
Why we should care (2)?
There is always a second part of the story and that’s more an academic view of why social
capital is important. Research from the past has been posted, so if you look at this graft that is
taken by one of the articles. The last few years the research is really searching. So, there are a
lot of articles that are trying to explore social capital.
Why we should care (3)?
So, why is social capital very important from the academic point of view? The premise is
very simple: you as individual are not alone in the world, you are connected in a web of
relationships. You are by the fault a social being and success is usually embedded in these
social relationships. So, having a good social capital has been linked with the various
outcomes you have here.
Success is social: it depends on our relationships with others. All the ingredients of
success that we customarily think of as individual – natural talent, intelligence,
education, effort, and luck – are intricately intertwined with networks.
o Getting a job
o Pay and promotions
o Influence and effectiveness
o Venture Capital and financing
o Organizational learning – and doing
o Word-of-mouth marketing
o Strategic alliances
1
,So, as you can see, there is a lot of benefit in having a good web of relationship in your
network.
Different forms of capitals (1)
What is actual capital? There are various definitions and forms of capital.
Capital (the classical theory) – the capital is kind of a surplus between the investments
and what you get out. Well-known nowadays, but especially advocated in the past.
o Social relations: exploitation by the capitalists (bourgeoise) of the proletariat
a) Part of surplus value between the use value (in consumption market) and the
exchange value (in production-labor market) of the commodity.
b) Investment in the production and circulation of commodities
Human capital – more about the individual itself, and what the individual has, or the
surplus invested by the laborer; your skills, abilities and knowledge that you have that
are interesting for the organization.
o Accumulation of surplus value by laborer
o Investment in technical skills and knowledge
Different forms of capital (2)
Cultural capital – embedded in the meanings that we have. Embedded in our context;
community/society.
o Reproduction of dominant embedded in meanings (values)
o Internalization or misrecognition of dominant values
Other forms of capital?
o E.g. Psychological capital
What is social capital?
Social capital vs. human capital
There is no single social capital theory. Provides embedded resources. Deals with three
distinct concepts:
1) Resource – can be anything that allows someone to get something done. Can be a
thing, person, software etc.
2) Topology – structure of the network. Your social network exists of people and their
relationships. The size of your network depends primarily on you, your preferences
and your ability to build one. Both size and types of acquaintances and friends
determine the quality, diversity and amount of resources you can access.
3) Nature of the relationship between you and others in your network – the quality in
your network determine how much of the potential resources embedded in someone’s
network he/she can actually realize. You may be friends with some of the people in
your network and you may have respect for others, or you may not like others in your
network. Relationships can involve trust and trustworthiness; norms, obligations,
expectations or feelings of closeness.
Social capital the definition – the premise
Short one (Lin, 1999, p.30)
o Investment in social relations with expected returns.
Longer one (Inkpen & Tsang, 2005, p. 151)
o The aggregate of resources embedded within, available through, and derived
from, the network of relationships possessed by an individual or organization.
2
,Key processes of social capital
Basically, building the results depends on the relationships with other people around you. The
question is how actually this can be achieved (promotion)? Why you get the promotion? Why
are you a better performer than others? And there are basically three vary distinct processes
that allows to get the desired outcome.
Individuals engage in interactions and networking in order to produce profits.
Generally, three explanations can be offered as to why embedded resources in social
networks will enhance the outcomes of actions:
o Better flow of information – the first one is: your networks allow you to get
better flow information; you get the information you need, when you need
them. E.g. searching for a job – contacting your friends, family etc.
o Exert influence (e.g. putting in a word) – the second process is exerting
influence. So, you try to convince other people that what you are doing is
actually better. E.g. when you are innovative you need to be able to convince
people that the product is good.
o Social credentials (e.g. standing behind) – the last process is social credentials.
So, you stand behind people that you vouch. So, you vouch for your friends
which basically says: I know this person and this person can be a very good
person for your company.
Benefits of social capital
It is not only related to individual, but also to the group. So, think about knowledge,
knowledge variation and knowledge variance. So, the sum of the knowledge of the group is
never the same as the simply the sum of the knowledge of each individual. So, it’s more
because it happens in the combination of the knowledge with the group, which gives an
advantage over simple individual knowledge. But it’s also true if you look at the benefits of
the individual some people could argue that it’s actually about the human capital. But that is
not true, because there are two important differences that differentiate the social capital
benefit over the individual level vs. the human capital. The first one is when we are talking
about social capital, we are talking about the individual investment in the social relationship.
Whereas the human capital more or less is how you invest in yourself in order to be more
competitive. And second, basically the profit that individuals yield is captured by the
embedded resources. So, these resources than generate returns.
Two perspectives can be identified relative to the level at which returns, or profit is
conceived – whether the profit is accrued:
o For the group or
o For the individuals (similar to the human capital).
However, is different from human capita because:
It focuses on how individuals invest in social relations.
It focuses on how individuals capture the embedded resources in the
relations to generate a return.
3
, Key problems, and misconceptions of social capital (1)
We potentially could have a lot of theoretical problems and in Lin’s article there is a table that
tries to summarize these problems. The first problem is the issue regarding the collective and
individual: Is social capital an individual asset or a collective asset? Think about trust norms;
is this an individual asset or a group asset? Lin states that trust norms are actually resources;
it’s kind of a capital. The next point is about the structure of the network. So, closure of open
networks. So, should be the case that groups are close and dense, because this is usually the
best way to achieve the results (e.g. friendship networks). Actually no, it really doesn’t matter
or should not matter if your group is close or dense, because research has shown that actually
weak and strong ties or structural holes are also very important. So, you usually rely to weak
ties, not your friends or family to get information about work. Because they provide you with
more similar information, so you have redundancy for information. Whereas weak ties there is
a very high change that they provide you with information that’s new, and not embedded in
your network.
Key problems, and misconceptions of social capital (2)
The next problem is the functional view. Which basically is saying that your input and output
are the same. So, you have the same process, the same theory suggesting that. And that is
4
