International BusinessSocial Capital

“Social Capital”: from M*rx to Putnam (A2)

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 explain the course of human history and the essential nature of human behaviour. 

Exchange theory (Blau, 1964), not unlike Marx’s premises, neglects thorough consideration of human tendencies such as trust and mutuality. Classical exchange theory (Homans, 1958) holds that humans act as agents who perform transactions on a contract-basis, decoupling into independent entities following every isolated transaction. Exchange theory sees social interaction as functionally redundant and therefore unnecessary and absent in buy-sell behaviour, which is fundamentally a pattern of assured exchange, conducted for the purposes of reward, with mercenary outcomes assured by explicit or implicit contract, and the value and likelihood of future exchanges determined only by potential returns and costs (Thibaut and Kelley, 1959). 

Social capital (in the developed more than the primitive Marxist sense), broadens exchange theory by embracing a more humanist form of behaviourism, in which actions are not so easily reducible to rewards-based motivation. The presence of social capital permits tolerance for complexity: actors are neither anonymous groups nor singular agents; they are simultaneously diffusely-motivated and multiply-affiliated. Thus, their interactions and exchanges need no longer be constrained to the starkness of classical economics, where actors strive only to maximize private gain. Capital transactions generate humanistic value beyond that exceeds the capital or utilitarian value intrinsic to the exchange of the physical. Social capital is generated through and because of exchange behaviours, i.e. business activity.

To Schumpeterians, business success is bound to innovation; to social capital advocates, business is a socially-birthed and situated event. It is therefore incumbent on researchers to apply social capital to the subject of innovation. The empirical findings of Tsai and Ghoshal (1998) support the deduction that the innovator’s social capital is instrumental. The innovator accumulates and works within a network of persons who provide various resources of utility.

To Coleman (1988), social capital is both repository and vehicle of intangible cohesive forces that equate to a valuable materiality; and to Lin (1999), networks illuminate the mechanics of social capital by providing insight into its essential substructures.[1]


[1] Normally considered the forefathers of social capital theorizing: Putnam, Coleman, and Lin.

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