Social Capital

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Description of Social Capital. Explanation.


Definition Social Capital. Description.

Social Capital is an umbrella term used to broadly indicate the total value to an actor (organization or person) produced by the cumulative social relationships and connections of this actor.

We can distinguish between social capital at a personal level, at the organizational level (department, business unit, entire organization), and in social networks such as Facebook, Twitter and 12manage.

The Value and Effects of of Relationships

The value of relationships lies in its ability to provide access to a range of resources, such as:

  • Information
  • Influence
  • Solidarity
  • Power
  • Social status
  • Opportunities
  • Other forms of capital

Evidence of social capital can be seen in trust relationships, in the establishment of effective personal networks, in efficient teamwork, and in an organization's exercise of Corporate Responsibility.



Social capital is certainly a durable and productive asset. But the analogy with capital is misleading to the extent that, unlike traditional forms of capital, social capital is not depleted by use, but in fact depleted by non-use. In this respect, it is similar to the concept of Human Capital.

Social capital, like intellectual and emotional capital, belongs to the Intangible Assets of an organization (or actor). It is a form of capital which can be considered an asset as it is a factor for the success of an organization (or actor).

While in human capital the value is found in attributes of the person himself or herself, in social capital the value or success is a consequence of the relationship of the human with other people. This also means that social capital is fundamentally not owned by the actor, but rather by the actors jointly.


Components of Social Capital

Key components of social capital are:

  • Trust

  • Level of cohesion

  • A sense of community and belonging

  • Unrestricted and participative communication

  • Democratic decision making

  • Sense of collective responsibility


Concepts Behind Social Capital

To appreciate the meaning of social capital, it's useful to consider 3 concepts that are underpinning it:

  1. Embeddedness: economic action and value is embedded in social relationships and cannot be explained adequately by considering individual actors separately.
  2. Appropriability: social connections of a particular type can be used for different purposes, including for those they were originally not intended (i.e. using a relation with a friend to help with finding a job or exploring a business opportunity).
  3. Reciprocity: actors do something for you because they are hoping or confident that the favor will be returned by you or even by someone else.

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Compare with: MAGIC  |  Organizational Learning  |  IC Rating  |  Balanced Scorecard  |  Intangible Assets Monitor  |  Organizational Memory  |  Knowledge Management (Collison & Parcell)  |  Edvinsson’s Skandia Navigator  |  Sveiby’s Intangible Assets Monitor  |  M'Pherson's Inclusive Value Measurement  |  IC Rating  |  Amortization  |  Tangible Assets  |  Tacit Knowledge  |  Relational Capital  |  Tertiary Sector  |  Sustainable Competitive Advantage  |  4 Dimensions of Relational Work  |  Customer Relationship Management

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