Social Capital, Networks, and Economic Determination (2)

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]

Because networks are sociologically complex, culturally embedded, and multiple factor-dependent, a simplified system of classifying an individual’s connections would be informative. Dichotomizing an ego’s contacts into two types – “bonds” and “bridges” (a concept formalized by Putnam, 2000) – is a starting point.

Bonds

From the egocentric perspective, bonds are the closest ties. Typically, bonds will occupy the ego’s most immediate psychosocial and physical environment. Thus, ego and bond will likely share familial, occupational, educational, and aspirational commonality, and maintain each other’s societal positions. Bonds can demonstrate diversity but (by Putnam’s classical definition) are restricted in their upward-reaching potential.

In other words, a bond is a friend or member of family and therefore roughly equivalent to the ego in terms of privileges and social strata. Bonds can rarely act as intermediaries between the ego and higher social cleavages.

Bonds are strong ties. They tend to be enduring, and in the case of familial relations, as permanent as a human relationship can be. Generalized trust, along with lack of conditionality, between ego and bond is likely the foundation of the cohesion that characterizes the closest networks.

Bridges

Whereas bonds are individuals with whom the ego has a familial or peer relationship, bridges are characterized by their utilitarian or facilitating nature. Typically, bridges are individuals capable of providing novel information, opportunities, and connections otherwise unobtainable by the ego, by dint of absence from his/her bond network. The value of bridges is critical to the innovative ego, since equipped with the relevant bridges, the ego becomes capable of acquiring high-value, exclusive expertise and valuable informational, material, and fiscal resources. Furthermore, bridges are capable of providing connectivity to other powerful individuals to whom the ego would otherwise lack access (empirical support for this comes from Granovetter’s 1973 study of job hunters).[2]

Bridges are weak ties. Unlike bonds, bridges are unlikely to be personally committed to the relationship with the ego, and bridge provisions will have a higher degree of conditionality. In some instances, the nature of the relationship between the ego and bridge might be utilitarian to the degree that it is in closer conceptual proximity to the relationship dynamic defined by classical exchange theory than to the modern notion of social capital. The trust shared by ego and bridge is particularized. That is, trust will be exclusive to facilitation of the raison d’être of the ego-bridge union.

The necessity of connection diversity

Following Putnam, the consensus of the literature strongly implies that bond connections provide expressive resources, and bridge connections provide instrumental. According to Granovetter (1973), the ambitious ego requires a high number of weak ties (bridges). Ideally, a network that contains both strong and weak ties represents an advantageous combination (empirically supported by Capaldo, 2006). Singly, neither type of connection can provide the ego with benefits that offset the disadvantage represented by deficit in the other. Each type reflects differing dimensions of the ego’s psychosocial and resource requirements.[3]

The resources available through bridges represent mechanisms through which the entrepreneurial ego can materialize designs and ambitions, but the presence of bonds and the security they provide is of profounder implication to the ego’s general wellbeing. By definition, bonds are intimate and provide intangible personal quality; bridges are less personal but project-instrumental. Moreover, bonds are generalist and persist despite changes in the ego’s course; bridges are relative and their permanence determined by the ego’s intentions. However, bridges are vital as they alone can bring capability-enhancing capital heterogeneity (Foss, 1996).

Diversity as antidote to the hazards of strong ties

Burt (1992) and Baum et al (2000) observed that the density and size of company networks can impair functionality. Too many ties to too few actors insulate the network and limit the availability of non-redundant knowledge. In other words, external, upward reaching is made difficult if strong ties are numerous. Network diversity exposes actors to new learning and competency potentials (Grant and Baden-Fuller, 2004), countering the disadvantages of strong ties, which in turn elevates a firm’s absorptive capacity and innovation capability (Cohen and Levinthal, 1990). A network’s reachability is dependent on whether it features diverse players who can span structural holes and thereby link the network externally to influential individuals and/or other networks (Burt, 1992).

Structural hole theory

Burt’s “structural hole” theory (1992) accounts for the omission of links between groups (“cliques” or “clusters”). Absence of connections constitutes a “hole”, which is bridged or spanned by key individuals, to whom various benefits accrue, and who act as conduits of heterogeneous resources (Wooldridge, 2002). Structural holes act as ports through which contact with external actors (who are likely to be influential – Tushman and Scanlan, 1981) can be achieved. Empirical support for the benefits of structural holes comes from Gargiulo and Bernassi (2000), who found structural hole deficits correlated with coordination failures.

[1] Networks can be characterized by six basic traits: size, density, diversity, reachability, openness, and stability. See A.3.

[2] See A.7.

[3] See A.10. for a basic critique of the bond/bridge dichotomy.