Social Capital, Networks, and Economic Determination (5)

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. 

Summary: Social Capital, Networks, and Economic Determination

Social capital theory, by centralizing trust as a core sociological factor undergirding economic activity, promotes the fundamentality of the informal economy, widens the theoretical vista of classical economics, and imports a sociological dimension into transaction cost thinking. Social capital-incorporative theorizing assumes that the informal economy is a potent and pervasive economic determinant. Furthermore, richness in human capital has been empirically linked to economic growth and institutional upgrading (Glaeser et al, 2004). This latter effect cannot be understated: institutional dynamism and adaptability is (according to Rodrik et al, 2002) the most important factor in economic growth. Likewise, Grootaert (1998) proffers that inculcation of social capital could be key to addressing economic needs in LDCs.