Based on comparative longitudinal case analyses of six new biotechnology firms, this paper explores how the configuration, management, and evolution of entrepreneurial firms' social capital affect firm performance. Findings suggest that firms can realize performance benefits when their members repeatedly adapt the configuration of their social capital to changing resource needs, while inertia turns a firm's social capital into a liability. Our research provides a dynamic view of the conditions and processes that produce such inertia, allow firms to overcome it, and develop a firm's social capital to organizational advantage. A core theoretical contribution of our study is to identify and theorize how the internal organization of firms' management of relationships with external partners, through horizontal and vertical differentiation and integration, affects the dynamic of firms' social capital, adaptive capacity, and performance.

While most literature promotes a positive impact of social capital on various organizational performance outcomes, empirical results on the social capital—organizational performance link are not conclusive. We propose that one reason for the discordant findings is that research has largely not accounted for the mediating process steps that translate social capital into organizational performance outcomes. We suggest that organizational performance outcomes of organization members’ social capital hinge on the mediating processes of resource mobilization, assimilation, and use. An empirical study of 218 projects in the German engineering industry supports our theoretical model. Findings show that knowledge transfer (conceptualized as the mobilization, assimilation, and use of knowledge resources) mediates between organization members’ intra-organizational social capital and organizational performance outcomes of growth and innovation performance. The present study thus contributes to a deeper understanding of the value of intra-organizational social capital.

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In analysing data on the purchasing routines of 200 small and medium‐sized enterprises (SMEs), this study underscores the overall importance of dynamic capabilities as a way to understand differences in operating‐routine performance. The results suggest that dynamic capabilities have different performance effects in high‐dynamic and low‐dynamic environments. Dynamic capabilities enhance the effectiveness of operating routines under both high and low levels of environmental dynamism. Yet, when analysing the efficiency of operating routines, taking into account the costs of increased effectiveness, dynamic capabilities appear to pay off only under high levels of environmental dynamism.