Burt (1992) argued that networks benefit from having structural hole-spanning members. Diverse resources can flow through such actors into the network. The presence of structural hole-spanning members can therefore offset the hazards of network insularity.
Two closed networks (or clusters) exist, A and B. No members of either population interact. A structural hole (the blue floor area) separates them from each other and from any other networks.
In the influential theorizing of Putnam (2000) and Coleman (1988), the term has undergone elision and is nowadays suggestive more of informal social interconnectedness than the former Marxist definition of social capital as the complement of fiscal capital. The Marxist interpretation is embedded in Marx’s underlying assumptions – that society is stratified according to placement within the productive schema and material dialectics explains the course of human history and the essential nature of human behaviour.
In contrast to the first generation of Austrian school economists, Schumpeter proffered that the course of the ceaseless evolution that characterizes economic machination is cyclic in nature. In Schumpeter’s view, the cycle is one of creative-destruction resulting primarily from smaller firms acquiring advantage through innovative practices and eclipsing larger firms. The innovator is made entrepreneur by his/her capacity to propel this cycle by generating and/or manipulating the resources that lubricate and fuel ever-renewing industry. And, since it is innovation that underpins industrial power, the entrepreneur is chief actor. On this premise, entrepreneurialism becomes itself an essential – if not the most essential – resource.
Determination of Social Capital and Networks on Economic Geography and Innovation Trajectory
On the foregoing, it is reasonable to aver that economic advantages will accrue in societies whose structures support social capital and effective network creation (Porter, 1990).Studies (such as that by Saxenian, 1991, 1994) demonstrate high-technology-led economic growth occurs around areas featuring dense clusters of productive networks. Social capital is therefore correlative with economic geography (Porter, 1998).
Innovations and entrepreneurial activities evolve beyond incubation and their trajectories are shaped by social capital. As an enterprise matures, know-how accumulates, the reservoir of social capital deepens, and capabilities expand. The concept of bricolage has been identified as explanatory (Andersen, 2008): innovation/enterprise evolution takes form according to the nature of the knowledge at hand, embedded in the informal network of the enterprise.