I should say a few things up front, and that is social capital is real; it has a value and that can either be enhanced or eroded by our behaviour, and in fact it can take only a moment to destroy all the social capital that we have built over many years because of either poor strategy, insincere communication, or simply letting people down at the most crucial time in their personal or business life.
What is social capital?
First and foremost from an academic point of view social capital is extremely complex and has been defined and studied from a wide range of disciplines, such as sociology, economics, and psychology.
Through these disciplines, there is a general consensus that social capital has had considerable debate however in saying this there are some generalities and some conceptual understanding that gives way to acknowledging and understanding an operational definition of social capital.
Perhaps the following definitions help us understand the meaning of social capital:
“A resource that actors derive from specific social structures and then use to pursue their interests: it is created by changes in the relationship among actors.” (Baker, 1990:619)
“Friends, colleagues, and more general contacts through whom you receive opportunities to use your financial and human capital.” (Burt, 1997b:9).
"Social capital is defined by its function. It is not a single entity, but a variety of different entities having two characteristics in common: they all consist of some aspect of social structure, and they facilitate certain actions of individuals who are within the structure.” (Coleman, 1990:302).
“The sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or social unit. Social capital thus comprises both the network and the assets that may be mobilized through that network.” (Nahapiet & Ghoshal, 1998:243).
So it can be seen the above definitions while different in their impact and direction on certain aspects of social capital, they do contain a number of central themes.
Firstly the commonalities amongst these definitions turn on the social aspects of networks as a vehicle which allows people to interact and add and obtain benefits through such interaction and experiences within the various networks they operate. Secondly, social capital is convertible into benefits.
The exchange rate or convertibility of the social capital will depend on the strength of the types of relationships that exist between the various people within the organisations and various networks.
Much of social network literature says that people are actors, and therefore their acting in terms of the behaviour they take to the networks or receive from the networks, conveys the level of thickness or dilution of the social capital in the equation between two or more people or actors.
Finally, and associated with the previous comments, is that social capital within networks, whether formal or informal, creates the brokerage that measures the social capital that exists individually and collectively within networks.
Who knows you?
There is an adage that says: “it is not what you know it's who you know!” However while such a statement may hold true to some degree, the strategy that stems from such a statement is in fact wrong. The new paradigms that centre around social capital and network developments is that it is “who knows you!”.
Let me explain. In most occupations and businesses there are many people who do similar things to yourself; for example if you go to a Chamber of Commerce function or a networking association, you will no doubt come in contact with at least one, or maybe two or more businesses providing a similar service or product offered by yourself.
Assuming this to be correct, how do you differentiate yourself in the marketplace? If you say on price or service then I think that may be somewhat naive because all of us can and do operate on that level.
It is those extra intangibles which give visible and tangible understanding and analysis that really becomes the social capital that you take to, and derive from, the various networks in which you operate.
Networks, and the role of social capital, have a number of important theory and concepts which are important to understand.
Firstly when looking at social capital is important to note that social capital is essentially based on the notion of relations in all aspects of people. That is, how people through their networks and relationships, connect.
This is very different to physical capital and human capital. In terms of networks there are a number of important points to consider.
There is considerable literature talking about using social capital in what is called ‘open networks’ where people attempt to build bridges between various networks, whether at a micro or macro level.
That is to say, the term used by Burt and his studies talks about using bridges or the concept of bridging across structural holes with weak ties.
Here, third parties bring together different people thereby building bridges to help enhance and consolidate relationships, and using the thinness or thickness of their social capital to create the level of connectivity.
Of course the flipside is the quality, or lack, of social capital in attempting to build and/or contain social capital between and among various people within and between networks.
Using Burt’s (1992) study, he says that while networks can build and enhance social capital through relationships, the same environment can also bring about what he terms "breach decay"; we are in fact attempting to build and facilitate social capital in certain networks which may in fact be detrimental.
In summary this brief article has attempted to provide some further understanding of the role and importance of social capital in our daily lives.
Social capital is critical in all walks of life, and one in which requires a very important and well thought out strategy to enrich our own personal levels of social capital within our families and in our business and community life.
The take out for us in writing this article is to allow people to really think about how and what they say and do within the various networks in which they interact. At every level relationships are dynamic and they are embedded in social relations with the level of cohesion.
This article is Part 1 of a two part series on social capital, and our next part in this series will discuss the characteristic that make up social capital, and how to improve social capital so that it becomes more useful.
Dr Jim Taggart OAM and Christina Matthews are authorised representatives at Austbrokers Financial Services at Norwest. Visit www.absyd.com.au
