Paper no Paul Manning. Social capital and Small Business Reputation

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1 Paper no Paul Manning Social capital and Small Business Reputation Research The purpose of this dissertation is to add to existing knowledge of social capital and business reputation mechanisms. The research focus will be an economic community. The core hypothesis is that reputation can be analysed within social capital theory. Thus, one way of researching and understanding business reputation is to conceptualise it as a form of social capital, which can be termed prestige social capital. The aim of the dissertation is then to develop understanding of business reputation mechanisms by applying social capital theory, while at the same time developing conceptual understanding. Furthermore, this exploratory and descriptive research will build on existing research to provide greater understanding of business reputation mechanisms, from a social capital perspective. Therefore the dissertation will apply social capital theory to conduct an empiric inquiry to develop exploratory and descriptive research into the operation of reputation mechanisms in an economic context. More specifically, this dissertation will build on previous research into social capital and reputation. This research tradition can be traced to Coleman s investigation into the New York diamond market, which sought to explain why people cooperate in a commercial setting. (1988: 20-21) Moreover, Coleman discussed the effects of network closure, considering rotating credit associations, (1988: 24 & 1990: ) and concluded that: 1

2 Reputation cannot arise in an open structure, and collective sanctions that would ensure trustworthiness cannot be applied. (1988: 28). From a social capital network perspective, Burt, (2005: : 1-36) Granovetter, (1985: 490) and Lin, (2001: ) have also considered reputation and social capital. Furthermore, the attitudinal aspects of reputation and social capital have been discussed- under different terms-by Putnam, (1999: ) and Fukuyama, (1996: ). In addition, Diani, (2004: ) Foley and Edwards (1999: ) and Woolcock (1998: & 2001: ) argue for the importance of context in understanding social capital and reputation. The research will focus on significance of the relational aspect of exchange. Prestige social capital can be understood as an intangible resource, accessible through social connections, which has economic consequences, for instance, in terms of providing economically valuable information flows in a commercial setting. Thus, the dissertation will be concerned with researching the social aspect of business; that is, the significance of social relationships and credentials in economic transactions. In a nutshell, the dissertation will investigate which aspects of social interactions are significant for prestige social capital/reputation (the mechanisms of aggregate recognition received) among social contacts in an economic community. The hypothesis then is that social capital theory offers a lens for analysing business reputation; that is, the various mechanisms that serve to impede or encourage reputation s formation, maintenance and performance. Where it is to be researched 2

3 The initial research will be conducted on a collectivity. The collectivity will be an economic community, which can be defined as a horizontal network of competing firms in the same industrial sector. The economic community can be further characterised as a network possessing a psychological affinity based on common identification around an economic activity, though the community will be too large for network actors to have face-to-face contact with all network members. The economic community being researched will be the construction industry. The unit of analysis will be a medium sized firm. Levels of domain analysis will be at the group, aggregate level, and individual level, as it is impossible to separate them for research into reputation. Prestige social capital is therefore understood as a resource for the actor and for the network, which means it is both egocentric and socio-centric. The plan is to research each of social capital s three dimensions by conducting an in-depth case study on a fast growing SME in the construction sector. However, if the data generated is insufficient additional material will be collected by conducting further case studies on SMEs. How it is to be researched The multi-dimensional nature of the concept will be researched using a case study, or case studies, as this allows for different phenomena to be captured. (Yin: 1994 & 2003) Moreover as this is exploratory, inductive theory building research, the focus will be on qualitative data, though there is scope for a limited amount of quantitative data. 3

4 Prestige social capital is modelled as a multi-dimensional, relational concept: in this instance, it can be interpreted as the human element that lubricates business activity. Moreover, this human element refers to phenomena, for individuals or groups, which are variously labelled as reputation, esteem, status attainment, social status or standing, integrity and, at a stretch, respect, integrity and trust. However, this dissertation will refer to these social resources as prestige social capital. Moreover, according to Lin: Reputation can be defined as the extent of favourable/unfavourable opinions about an individual in a collective (Lin, 2001: 244) Thus it is a network asset for the group and the individual. Moreover, it is reasonable to suggest that social ties will produce social consequences. For instance, according to Lin, reputation is an instrumental return of social capital. (2001:246). Furthermore, Burt defines reputation as; behaviour expected of you. (2005: 100) Prestige social capital will be also conceptualized as a club asset, which benefits the economic community. Therefore it is not the sole property of the individual actor, in this case a construction SME. However, as a club asset, prestige social capital will not be considered as a resource for society at large, only of the particular sector: in this instance, the construction sector. Prestige social capital will be conceptualized as having three dimensions. These dimensions have been constructed from the social capital theory. 1 Prestige social capital as a network asset; that is, its structural dimensions, with a focus on levels of closure. However, other characteristics of networks, such as levels of embeddedness, social tie strength, and bonding and bridging features will be investigated. 4

5 2 Prestige social capital s normative, attitudinal components; that is, its levels of trust and norms of reciprocity, including normative cognitive values to do with sanctions. 3 Prestige social capital s context dimensions; that is, how the environment shapes reputation, in terms of access to resources, such as power and wealth. Thus the effects of asymmetrical power relationships will be investigated. Reputation s path dependency will also be investigated. References Burt, R. S. (2005) Brokerage and Closure. Oxford University Press. Oxford. Coleman, J.S. (1988) Social Capital in the Creation of Human Capital. In Lesser, E.L. (Ed) (2000) Knowledge and Social Capital: Foundations and Applications. Butterworth and Heinemann. Oxford: Coleman, J. S. (1990) Foundations of Social Theory. Cambridge: Bellknap Press of Harvard University Press. Harvard. Diani, M. (2004) How Associations Matter: An Empirical Assessment of the Social- Capital-Trust-Voluntary Action Link: In Prakash, S. & Selle, P. (Ed) (2004) Investigating Social Capital. Comparative Perspectives on Civil Society, Participation and Government. Sage Publications. London. Foley, M. W. & Edwards. B. (1997) Is it time to disinvest in Social Capital? Journal of Public Policy. 19: Fukuyama, F. (1996) Trust: The Social Virtues and the Creation of Prosperity Simon Schuster & Press. New York. Granovetter, M. (1985) Economic Action and Social Structure: The Problem of Embeddedness. American Journal of Sociology. Vol. 91, Number 3: Lin, N. (2001) Social Capital, A Theory of Social Structure and Action. Cambridge University Press. Cambridge. Putnam, R. (2000) Bowling Alone. Simon & Schuster. New York. Woolcock, M. (1998) Social Capital and Economic Development: Towards a Theoretical Synthesis and Policy Framework. Theory and Society. Vol 27. 1:

WHITE PAPER Communities of Practice, Social Capital and Organizational Knowledge

WHITE PAPER Communities of Practice, Social Capital and Organizational Knowledge by Eric Lesser & Larry Prusak IBM Institute for Knowledge Management August 1999 INSTITUTE OF KNOWLEDGE MANAGEMENT Sponsored