International Business

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. 

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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.

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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. 

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Determination of Social Capital and Networks on Social Structure and Innovation

The simplified bond/bridge dichotomy offers a polarized snapshot of social structure. The positive aspects of bonds are generalized trust, familiarity, identity, and emotional solidarity; the negative aspects are homogeneity, isomorphism, attitudinal compounding, insipidness, and potentially hermetic tendencies (where networks are closed). Bridges are upward-reaching, provide heterogeneity, novelty, and access to resources that are esteemed and diverse; negative aspects are Machiavellianism, exploitation, and general Kantian ethical issues. However, networks (even by Putnam’s dichotomized delineation) might be considered intrinsic social strata-straddling mechanisms, since the ego acts as a point of convergence between differing social strata and bidirectional spillover is conceivable.

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Influence of Bridges and Bonds on Enterprise Gestation

Many entrepreneurs report inadequate support in the early stages of their business development (Westlund and Bolton, 2001). Furthermore, there is little research into how social capital influences the course of new firms (Suseno & Rattan, 2007). From a bonds and bridges perspective, the value of bridges seems obvious, however, in the gestation phase, bonds may be peculiarly advantageous.

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Network Theory

Central to the concept of social capital is the notion that networks host and engender value (Putnam, 2000), and studies such as that by Granovetter (1973) describe the importance of individuals having weak and strong ties. Social capital builds on the concept of tie strength, which informs social capital theorizing by introducing the role of different ties and the various resources they can supply. Academia’s acknowledgement of social capital and the current popularity of network utilization leads some theorists (such as Castells, 2000) to posit that networks are pivotal economic entities, and that they act as ladders to elites and expertise (Woolcock, 1998). That networks are the greenhouses or toolsheds of technological innovation is also claimed (e.g. Law and Callon, 1992). However, it is rational to assume that not all networks are equal and that it is the network’s nature that determines what it can yield.[1]

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This is where my PhD started. This report received a shockingly high mark (from possibly the best lecturer I have ever had: Dr Robert Lee of the Royal Holloway university, one of Britain's foremost researchers of social capital and entrepreneurship). Anyway, what followed from this was an MSc dissertation on Chinese networks. What followed from that was a PhD thesis: "Risk Management in Chinese Supply".

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In electronics, Porter’s “Five Forces” are powerful. Logistics represent a means by which economies can be achieved through efficiency improvements. Such improvements can translate into better service, which provides differentiation. Resultant cost savings can benefit the customer, who can pay lower prices.

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