Social Capital

Social capital theorists such as Baker (1990), Coleman (1990), and Burt (1992), and Putnam (2000) claim that social capital, like physical and human capital, is a resource-generating force that can facilitate a firm's business activities. Furthermore, Yang and Wang (2011) and Wang et al (2014) claim guanxi is the Chinese cultural equivalent of social capital. Nahapiet and Ghoshal (1998) identified three dimensions of social capital: structural, (information and resources) relational, (trust, relationships, and contracts), and cognitive (shared modes of behaviour that encourage cooperation). My research revealed some modest insights into the structural and relational dimensions of social capital, but only alluded to, so did not deeply explore, the cognitive dimension.

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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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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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