Social Capital, Innovation and Growth: Evidence from Europe

Abstract

This paper investigates the interplay between social capital, innovation and economic growth in the European Union. We identify innovation as an important mechanism that transforms social capital into economic growth. In an empirical investigation of 102 European regions in the period 1990-2002, we show that higher innovation performance is conducive to economic growth and that social capital affects growth indirectly by fostering innovation. Our estimates suggest that there is only a limited role for a direct effect of social capital on economic growth.

Social capital and growth: causal evidence from Italian municipalities

“…One reason why we look at growth as outcome is that, in our main theoretical frame, social capital affects non-measurable or hardly-measurable "intermediate" outcomes such as trade uncertainty and free-riding behaviour making the production activity more efficient (Routledge and van Amsberg, 2003). Yet, in a different theoretical frame such as a model by Akçomak and ter Weel (2009), social capital affects growth by increasing innovation. Future research may test this hypothesis by using specific measures of innovation at municipality level as dependent variables, corroborating the existing evidence on firm-level outcomes (Laursen et al, 2012).…”

“…Zak and Knack (2001) show that, in a context of moral hazard where more resources are allocated to inspection and monitoring, both the return to physical capital investment and the rate of investment decrease. Akçomak and ter Weel (2009) argue that the willingness to invest in innovation is higher when social capital is higher. Dasgupta (2011) shows that an increase in trust among members of a group will manifest itself in a total factor productivity growth.…”

Social trust and patterns of growth

“…Finally, a few more recent studies suggest that social trust mainly affects overall factor productivity instead of the rate of accumulation of production factors (Akçomak & Müller‐Zick, 2018; Akçomak & ter Weel, 2009; Bjørnskov & Méon, 2015). A similarly diverse set of theories applies to the association between trust and productivity development.…”

“…The approach in this paper is new in the literature although it is arguably necessary to shed more light on how social trust “works.” The problem at hand is that the evidence in the existing research is mixed with studies finding indications of both types of growth patterns (Akçomak & ter Weel, 2009; Bjørnskov & Méon, 2015; Dearmon & Grier, 2011; Zak & Knack, 2001). In addition, as noted by Bjørnskov (2012), it also remains an open question if trust affects economic performance directly, or if the effect is mainly indirect through the association between trust and the characteristics and performance of formal institutions.…”

Does Social Capital Matter? A Study of Hit-and-Run in US Counties

“…6 Regarding social capital, in the literature there are different approaches to its measurement, as social capital is a multifaceted concept (Dasgupta and Serageldin, 2000;Paldam, 2000;Christoforou, 2013). Conceptually, social capital has been associated, for instance, with trust towards other people and institutions, and firm performance (Fukuyama, 1995;Glaeser et al, 2000;Guiso et al, 2008;Akçomak and Ter Weel, 2009;Lins et al, 2017;Stiglitz et al 2018, Chapter 10); membership in groups, networks and voluntary associations (Putnam et al, 1994;Alesina and La Ferrara, 2002;Sobel, 2002); membership and trust (Lochner et al 2003;Vincens et al, 2018); membership, trust, and norms of reciprocity (Putnam, 2000;Bigoni et al, 2016). Operationally, higher voter turnout and association density are hypothesised to capture civic involvement and participation in community decision making, while voluntary donations capture the strength of intermediate social structures (e.g., Putnam et al, 1994;Putnam, 2000;Cartocci, 2007;Buonanno et al, 2009).…”