Corporate Social Capital and Firm Performance

Abstract

Traditional corporate social capital formulations have been based on a firm's positioning within its network of market place alliances. This paper extends this model by incorporating firm status attributes of intellectual capital and corporate reputation into an integrated model for corporate social capital. An empirical study of some 155 firms in the global Information Technology sector was conducted, exploring the linkage between elements of corporate social capital and firm performance. A key contribution of this research is the specificity of the linkages identified between particular aspects of corporate social capital and firm performance. The results find that money matters, with financial soundness being the most predictive corporate social capital element for firm performance. Beyond financial soundness, a firm's market network centrality and human capital were significant predictors. For large or profitable firms, centrality was found to be a liability and internal capital an asset, in terms of firm performance. In contrast, for small or loss making firms the opposite is true, where centrality is an asset and internal capital a liability. Additionally, the direction of influence of centrality could change depending on which performance measure is used.

Knowledge management, intellectual capital, structural holes, economic complexity and national prosperity

“…The way in which Burt (2002) use the concept of social capital is very similar to the way in which relational capital is defined and used in parts of the intellectual capital literature (see McElroy, 2002;Pomeda et al, 2002;Roos et al, 2005). Lock Lee (2008) show a strong link between social capital and firm performance and Lock Lee and Guthrie (2011) builds social capital into intellectual capital and show how intellectual capital contributes to building firm and network performance by bridging structural holes.…”