Department of Business
Global Economic Impact of SME Export Business Owners to Local Community: Case Junior Chamber International
International Business &
Sales Managemen
t Master’s Thesis Riku Happonen 268277 rikuhap@student.uef.fi
FOREWORD
This Master’s Thesis was created in University of Eastern Finland during spring 2016.
Personally I want to thank several people for their assistance during this process. Firstly, I want to thank my supervisor, Professor Emma Incze for her guidance, patience and understanding in the research process. Secondly I want to thank General Secretary of Junior Chamber International, Mr. Arrey Obenson for the opportunity to combine my hobby to academic research for the first time in the history of the organization and JCI Senators’ who accepted to take part of the research. Thirdly I want to thank my academic mentor, Dr. Seppo Luoto from University of Vaasa for his in-depth understanding of the topic and friendship which motivated me to go forward with the original research plan. I also wish to thank all the members and Senators of JCI Finland and JCI global network of young active citizens who have helped me during this process. Finally, I wish to thank my fellow IBS 2014 students for the time we had together in Kuopio as first ever group of International Business & Sales Management – program. Especially Anton Govorin and Dmitriy Usatiuk whose I worked with during Thesis seminars starting from autumn 2015, thank you guys for your comments of improvement.
Special thanks to my family for their financial support during the Master’s program for the past two years!
Kuopio 5th July 2016 Riku Happonen Department of Business University of Eastern Finland
ABSTRACT
UNIVERSITY OF EASTERN FINLAND
Faculty of Social Sciences and Business Studies Department of Business
International Business and Sales Management Happonen, Riku, P.:
Global Economic Impact of SME Export Business Owners to Local Community: The case of Junior Chamber International
Master's Thesis, 100 pages and 2 appendix (2 pages) Supervisor: Emma Incze Ph. D.
July 2016
Keywords: global economic impact, international entrepreneurship, Junior Chamber International, intangible capital, networking capability
Today the world has become a very competitive place for young active citizens. Towards one job opportunity there are hundreds of applicants thus we live the period of a global recession.
In order to succeed in life interpersonal networks are needed since importance is on who you know in this networked society. There is an organization where individual can develop personal skills and create networks of tomorrow.
Junior Chamber International is a global organization for 18 – 40 years old active citizens in 115 countries with 5000 local chapters and over 200 000 members. It was established in 1915 at St. Louis, the United States of America by Henry Giessenbier Jr. a local bank manager who had a vision of a civic organization creating sustainable solutions for community problems.
Junior Chamber International is the research context of this Master’s thesis as an interpersonal network creating better international entrepreneurship opportunities. Interpersonal network of JCI has never been researched in business studies earlier thus the organization and its vision, mission and values are explained as a vital part of this research.
Theories of intangible capital and networking capability are discussed in the literature review part of the thesis along with their linkage to international entrepreneurship and trust. Recent research highlight different parts of intangible capital separately instead of combination as important aspects of entrepreneurial success but lack a proper global context. The thesis addresses these research gaps. Several theories of human, social and relational capital are used in order to construct theoretical framework and design specific research questions to guide the process of multiple-case study part of the thesis. Methodology chosen for the study is thoroughly addressed in a corresponding part and decisions made by the researcher are explained. The research is based on the multiple-case studies of JCI honorary members globally who are owners of an exporting SME Company and their impact to local community. The research method is a mixed-method simple study with a semi-structured interview. Data is analyzed through individual-level logic models pointing out causal relationships.
The master’s thesis provides several interesting findings to both academics and business professionals. First, the author identifies influence and impact of interpersonal network of JCI to a global business world as well as the local community. Secondly author highlights networking capability of an individual as key element of entrepreneurial success. Finally, a new theoretical framework was created for further research and testing of interpersonal networks.
Data uncovered that set limitation was too strict thus further research is needed for selected interpersonal network of JCI to measure their global economic impact to a local community.
TIIVISTELMÄ
ITÄ-SUOMEN YLIOPISTO
Yhteiskuntatieteiden ja kauppatieteiden tiedekunta Kauppatieteiden laitos
Kansainvälinen kauppa ja myynnin johtaminen Happonen, Riku, P.:
Pk-yrityksen omistajien taloudellinen vaikuttavuus yhteiskuntaan globaalisesti:
Tapaustutkimus Junior Chamber International Pro gradu - tutkielma, 100 sivua ja 2 liitettä (2 sivua) Ohjaaja: Emma Incze Ph. D.
Heinäkuu 2016
Avainsanat: globaali taloudellinen vaikuttavuus, kansainvälinen yrittäjyys, Junior Chamber International, aineeton pääoma, yksilön verkostoitumiskyky
Maailma on tänään erittäin kilpailtu yhteisö nuorille aktiivisille osaajille. Yhtä työmahdollisuutta voi hakea satoja osaajia, joten elämme globaalia laman aikaa. Jos haluaa päästä elämässä eteenpäin, tarvitaan osaamisen lisäksi myös ammatillista ihmissuhdeverkostoa, sillä nykyajan verkostoituneessa yhteiskunnassa tärkeä kysymys on: kenet tunnet ja kuka tuntee sinut? On olemassa kansalaisjärjestö, jossa nuoret aktiiviset osaajat voivat kehittää taitojaan ja luoda tärkeitä kontakteja tulevaisuutta ajatellen.
Junior Chamber International on globaali kansalaisjärjestö 18 – 40 vuotiaille nuorille aktiivisille aikuisille. Se toimii 115 maassa, 5000 paikallisessa yhteisössä yli 200 000 jäsenen voimin.
Järjestö perustettiin St. Louisissa, Yhdysvalloissa vuonna 1915 perustajanaan paikallinen nuori pankkiiri Henry Giessenbier Jr. jolla oli visio yhteiskunnallisesta toimijasta, joka pystyy luomaan kestäviä ratkaisuja yhteiskunnan ongelmiin. JCI ja sen jäsenten ihmissuhdeverkoston luomat paremmat kansainvälisen yrittäjyyden mahdollisuudet ovat tämän tutkimuksen kohderyhmänä, koska järjestöä ei ole aikaisemmin tutkittu akateemisesti liiketaloudellisesta näkökulmasta. Organisaatio, sen visio, missio sekä arvot avataan tässä tutkimuksessa.
Kirjallisuuskatsaus keskittyy aineettomaan pääomaan sekä verkostoitumiseen ja kuinka nämä vaikuttavat kansainväliseen yrittäjyyteen ja luottamukseen. Viimeaikainen tutkimus nostaa esiin aineettoman pääoman yksittäisiä osuuksia, kuten tiedon ja taidot erikseen, mutta kokonaisuutta ei ole tutkittu ainakaan globaalissa kontekstissa. Tämä tutkimus pyrkii täyttämään nämä tieteelliset aukot. Tutkimuksessa luotu teoreettinen viitekehys keskittyy sosiaaliseen pääomaan, tietoon, taitoon sekä verkostoitumiseen, joiden pohjalta tutkimuskysymykset luotiin. Tutkimusmenetelmät, sekä tutkijan päätökset niiden käyttämisestä on dokumentoitu. Tutkimus perustuu useaan tapaustutkimukseen globaalisti, joita analysoidaan yksilökohtaisilla loogisilla malleilla. Kohderyhmänä ovat JCI:n Senaattorit, jotka omistavat vientiin panostavan Pk-yrityksen. Valittu tutkimusmenetelmä sekoittaa sekä määrällisiä että laadullisia tutkimusmenetelmiä yhteen.
Tämä Pro gradu – tutkielma nostaa esiin tärkeitä tutkimuslöytöjä niin akateemikoille kuin yrityselämällekin. JCI:n ihmissuhdeverkosto vaikuttaa niin globaalissa liiketoiminnassa kuin paikallisessa yhteisössäkin. Yksilön verkostoitumiskyky nousi tutkimustuloksissa vahvasti esiin tärkeänä osana menestyvää yritystoimintaa. Tutkimuksessa luotiin uusi teoreettinen viitekehys ihmissuhdeverkostojen jatkotutkimukseen ja testaukseen. Tutkimuslöytöjen mukaan tutkimuksen rajaus oli liian tiukka, joten jatkotutkimusta tarvitaan Junior Chamber Internationalin globaalin taloudellisen vaikuttavuuden mittaamiseen.
CONTENTS
FOREWORD ... 2
ABSTRACT ... 3
TIIVISTELMÄ ... 4
CONTENTS ... 5
1. INTRODUCTION ... 7
1.1 Background and Motives of Research ... 7
1.2 Research Gap and Research Problem ... 12
1.3 Research Objectives and Questions ... 13
1.4 Research Structure ... 14
2. INFLUENCE OF INTANGIBLE CAPITAL TO INTERNATIONAL ENTREPRENEURSIP ... 16
2.1 Social Capital ... 16
2.2 Human Capital ... 34
2.3 Relational Capital, Trust and Networking Capabilities ... 39
2.4 Influence of Intangible Capital on Internationalization Opportunities of Exporting SME 47 2.5 Theoretical Framework of Intangible Capital Iceberg ... 52
3. METHODOLOGY ... 54
3.1 Research Philosophy ... 55
3.2 Research Approach ... 57
3.3 Research Method and Chosen Strategy ... 59
3.4 Research Design ... 62
3.5 Data Gathering and Selected Analysis Tools ... 63
3.6 Testing “Kevin Bacon” Theory in Data Gathering ... 67
3.7 Selection Criteria’s on set Research Limitation ... 69
3.8 Validity and Reliability of Research ... 71
4. EMPIRICAL RESULTS AND LOGIC MODELS ... 73
4.1 Senator Europe ... 74
4.2 Senator Africa-Middle East ... 77
4.3 Senator Asian Pacific ... 79
4.4 Senator America ... 81
5. DISCUSSION ... 82
6. CONCLUSION ... 87
REFERENCES ... 92
APPENDIX 1 – CASE QUESTIONNAIRE ... 101
APPENDIX 2 – LIST OF FIGURES ... 102
1. INTRODUCTION
Idea of this introduction chapter is to provide to you as a reader an overall view of this Master Thesis in general. At first I introduce the topic with background and motives of creating this research. It will be followed by a research gap and the research problem will also be explained.
Then the set research questions and study objectives will follow. For the last chapter of this introduction the content and the structure of this research is explained.
1.1 Background and Motives of Research
The world has become a crazy place where the most important asset a person can have is his or her interpersonal networks. As we have faced several years of economic downfall globally more and more young people are in need of a job and the fight over jobs have been increased.
Towards one open job position there might be hundreds of skilled applicants so we are living the era of employers’ market. Today the professional career is only depended on who do you know and what is the level of your intangible capital and interpersonal networks.
But where and how can a young active citizen start to create those important interpersonal networks and relations that can help for a better future? There is a global network for young active citizens aged 18 – 40 years old called Junior Chamber International which is in the heart of this research as a platform. Junior Chamber International (JCI) is a non-profit organization for young active citizens. The members are engaged and committed to create a sustainable impact in their own communities. JCI gathers active citizens from all the sectors of the society and they do it globally. Aim is to develop leadership skills, knowledge and understanding to make informed decisions and take action in own community whether it is at work or at school.
As all members are globally minded young people they all have rights, responsibilities and shared goals. JCI members find targeted solutions to local issues benefiting the communities, the world and future of every person on earth. JCI members embrace new ideas, collaboration and diversity with passion and courage to address the critical challenges of our time. JCI as an organization differs from other non-profit organizations due to its purpose to solve local challenges globally. They do not focus just only on charity or service but to create a sustainable impact. It takes only one active citizen to change the world and JCI aims to fulfill that focus.
Main philosophy behind the leadership training of the organization is that you have one year to lead in every position. Practically defined you can hold your administrative position only once in each level of the organization.
JCI as an organization operates in four levels which are local, regional (state), national and international level. All the positions are the same in each level of the organization but leadership challenges grow larger depending on the position and level.
Even the highest position of the organization, the World President, is elected yearly as it states you have one year to lead. Currently JCI global network consists of 200 000+ members in more than 115 countries and 5000 local chapters. In JCI members can practice and develop their leadership skills to become leaders of tomorrow so JCI is a learning by doing type organization.
JCI has divided the world into four areas which are America, Europe, Asian-Pacific and Africa- Middle East. (www.jci.cc)
JCI movement was established and founded in St. Louis, Missouri, the United States of America in 1915 by one man with a vision. This man was a local banker called Henry Giessenbier Jr.
JCI founder Henry Giessenbier Jr. was able to put his dream to reality of forming an organization to study civic and business problems and provide opportunity to participate in civic community activities. JCI has inspired young active citizens to become better through participation of something which you cannot learn in school. Some of the famous alumni members of the JCI are: 7th Secretary-General of the United Nations Kofi Annan, Presidents of United States of America Bill Clinton, Richard Nixon, Gerald Ford and John Fitzgerald Kennedy along with Prince of Monaco Albert, Founder of Microsoft Corporation Bill Gates, Prime Minister of Japan Taro Aso, and President of France Jacques Chirac. (www.jci.cc) JFK famously stated that “Harvard gave me an education but Junior Chamber gave me an education for life.” From 1915 to 1944 it operated mainly as US based organization called United States Junior Chamber before it was re-established as an international organization of Junior Chamber International by participating members and creators of first JCI national organizations in Costa Rica, Guatemala, Mexico, Panama, El Salvador, Honduras, Nicaragua and the United States of America in a historic meeting taking place in Mexico City 1944. The first World Congress was held in Panama City in 1946 and it has been held ever since across the globe. Last year 2015 was the 100th operational year of JCI and the World Congress was held in Kanazawa, Japan. This year 2016 it will be held in Québec City, Canada. (www.jci.cc)
Senate of Junior Chamber International
One of the important aspect in this Master Thesis is the formation of the JCI Senate. It was established in the 7th World Congress in Melbourne, Australia in 1952. Senate was established through the efforts of 7th World President Philip T. R. Pugsley, a Canadian born active member of JCI network. Idea in order to form a Senate was through the travels of World President Pugsley where he noted active members were awarded in local chapters and started to figure out reasons for awarding outstanding members of the organization globally. There came an idea where outstanding members would receive an honor of being a Senator which recognizes achievements of the individual with a lifetime membership to the JCI organization. There was also another idea behind the honorary membership as that way those outstanding members could be in touch with the organization even after their normal membership has ended at the age of 40-years-old. Therefore knowledge transfer from one JCI generation to the next became easier and young active citizens of today can learn from the tacit knowledge of the older JCI generation (www.jci.cc).
JCI Vision, Mission and Values
Vision of the Junior Chamber International is to be the leading global network of young active citizens. Its mission is to provide development opportunities that empower young people to create a positive change. It is up to individual to make his or her career in the network by attending and learning from internal election processes of the leadership positions on different levels of the organization. The values of the organization or the “JCI Creed” as it stated internally was created by Past President of JCI Ohio and the National Vice President of the JCI USA C. William Brownfield during the national convention of the JCI USA in 1946. He noticed there was no commonly agreed values between the members of the organization so it was through his contribution that led the creation of JCI Creed as it is known even today. The process of creation happened during a 75 minute ride from his home to the coal mine he owned.
In 1946 JCI Creed was created as follows: “the brotherhood of man transcends the sovereignty of nations. Economic justice can best be won by free men through free enterprise. Government should be of law rather than of men. Earth’s greatest treasure lies in human personality and service to humanity is the best work of life.” In 1950 another line was added to the JCI Creed as the first line stating as follows: “We believe that faith in God gives meaning and purpose to human life” (www.jci.cc).
Since it was written all JCI members globally recite the JCI Creed in local, regional, national and international meetings
There have been in early times and even today a debate on the interpretation of the Creed. The author C. William Brownfield noted that “each member is free to interpret the Creed in the light of his own conscience”. In order to understand the values how they are supposed to I will examine each value deeper according to how the author understood them and how the organization of JCI network operates peacefully around the globe. The first sentence refers to believing and it is required by every person to believe in some ideal, philosophy or principle.
The term of God does not refer to any specific religious God but something supreme omnipotence. It is required for a member to believe in something no matter what your God is.
C. William Brownfield interpreted the Creed as follows: “The Junior Chamber membership, drawn from many religious backgrounds, is united by a common bond of faith; that man lives by the will of (his/her) God, that God's will for man is good; and that the life worthwhile is lived in harmony with His eternal plan."
Second line in the Creed focus on the brotherhood of man transcending the sovereignty of nations. It is about breaking all the boundaries which have been imagined by humans. The core is that every men and women are equal respecting the alignment of country but hints a person being citizen of the world. Author defined this value as: “Man-made boundaries have been drawn and redrawn, separating the human race into many nations. But across these unnatural divisions there has been an intercourse in art, science, commerce and religion; evidence of man's universal brotherhood; proof that man himself, not his territorial divisions, is of basic worth."
Third value states economic justice can be best won by free men through free enterprise.
Operative words here are “can be best won” as members believe everyone should be free to use his or her skills and abilities to the limit in order to improve his or her economy. As stated by the author: “where economic improvement has been greatest, man has been free to follow his dream of making a personal fortune by doing something never done before, or by doing it better.
The system of self-development through private enterprise could be adapted with variations to suit local conditions in many parts of the world.”
Fourth sentence states government should be of laws rather than of men. This paragraph is based on that nobody should be above the law and the law should be the same for every person no matter the status they have in their society. The government should be based on the constitutive law accepted and ratified by majority of the people and the right to change the law
or elect new governments should remain with the people. 16th President of United States of America, Abraham Lincoln, spoke of a government “of the people, for the people and by the people” which crystalize this paragraph of JCI Creed as it should be in a free society.
The fifth paragraph refers that we are all unique individuals and personalities which is the richness to the world since it cannot be duplicated. Brownfield justified this statement as: “True treasure lies in the hearts of men. There is about us a vast field of opportunity for cultivation of the human personality. It is not the quantity nor the length of life that gives it zest, but the quality of living, the achievement we make in terms of human progress.” Finally the service of humanity is the best work for life as it will be for those who believe in the JCI Creed.
Interpretation of Brownfield is "The life lived unselfishly grows richer, deeper and fuller. Joy is more enduring and peace of mind, more certain. The world looks at the contribution such a life has made and marks the one who lived it as a benefactor of the race; yet he knows in truth the greater benefit has been his own." There have been debate of the content of the JCI Creed to be changed in some parts but it has kept the organization solid globally and many current and alumni members have taken the JCI Creed as their guide in life (Cheung 2013).
Organization has created their own methodology in order to impact to local community and it is called as “Active Citizen Framework” (ACF). Every planned project within the global network should be done according to the ACF as it provides sustainable solution to the challenges communities face around the world. Aim is to identify the root causes of problems so that solution is not like a “bandage to the wound”.
Figure 1 JCI Active Citizen Framework (www.jci.cc)
1.2 Research Gap and Research Problem
Even though JCI is an organization with history more than one hundred years it is still relatively unknown especially to the academic world. So far in business and social sciences the organization have been cited in different studies over the years briefly through their activities to the community but there is not a single study done of the organization until now. Reasons for this research gap is that usually members of the organization are past the cycle of life where a person goes to university to learn important skills and knowledge on the field of interest. They have starter their professional career and then they might hear from the organization. Mostly in the academic world there are not so many members of the organization and thus the level of understanding the richness of the organization in the academic world is fairly untouched.
As stated there is no previous in-depth research done concerning the global network of JCI there is no data nor specific literature that could be referenced in this research. As the researcher is a member of the organization the included literature review of the selected topics influencing the operations of the organization are chosen by researcher based on the learnings and personal opinion. This research is done in a co-operation with the office of Junior Chamber International and the contact person has been Secretary General of the JCI, Mr. Arrey Obenson. The research problem is that there is no primary data available on the economic impact of the organization to the world not even in the archives of the organization. From that perspective a research plan was made in order to measure global economic impact of JCI to the local community. Local community is defined as 5000 chapters locally in more than 115 countries where JCI impacts to the community in a global perspective. This research will not cover all 5000 chapters and their economic impact but limit the research only on carefully selected chapters and individuals that represent the organization and their area.
Research problem guiding this research process forward is: Global Economic Impact of SME Export Business Owners to Local Community. Definition of global economic impact is that private sector creates the opportunities and income for public sector for example to free education in Finland through collected tax. In this research the aim is to find how global economic impact can be described within the selected interpersonal network and the global economic impact of that network to our local communities globally. So this research aim for results not just within Finland or Europe but from different continents and areas of the world.
1.3 Research Objectives and Questions
Global Economic Impact of SME Export Business Owners to Local Community in four areas of the world according to JCI network is the main objective of this research. Each representative was carefully selected after their agreement to participate in this research. Criteria for selection was that each participant had to be honorary member called Senator of JCI network and they had to be owners of the exporting SME Company. There was no limitation set whether it was products or services that were exported. The research problem of the study will be addressed by concentrating on the following research questions:
(RQ1) How being a member of a global JCI network can contribute to better international entrepreneurship opportunities?
(RQ2) How increased social, human and relational capital (networks) of JCI members impact the local community?
These research questions guide the whole process from the selected literature to chosen methodology and the data collection. These questions were created within six months from the beginning of the research process as the selected interpersonal network of JCI there is no previous academic research done at all. It was up to me as a member of the network to do reverse engineering from our local, regional, national and international operations on what kind of academic theories and literature could be applied on the practical aspect the interpersonal network of JCI. I chose to focus on intangible capital and networking capability and how those effect within the selected interpersonal network on better international entrepreneurship opportunities as it is part of this study. There have been some earlier research on the influence of intangible capital on international entrepreneurship as described more explicit on chapter 2.4 thus from the theoretical point of view this is not a complete new research. This research combines the earlier separate findings of human, social and relational capital from the context of international entrepreneurship and relates those towards the research site which is interpersonal network of JCI. This is still a new research as the influence of selected interpersonal network on global economic impact has not been researched before. One of my goals is to determine how active personally the selected JCI Senators are and what kind of intangible capital they have gained by being a member of the global organization that help them not just their own business but also the communities they serve in order to make a sustainable positive impact by sharing knowledge and giving back to those who need it more.
1.4 Research Structure
Introduction chapter gives an overall picture of this research covering the background and motives with focusing on the understanding of interpersonal network of Junior Chamber International (JCI) in general. Research gap and research problem is defined and explained as they guide this thesis process in both theoretical framework and empirical research. Finally the whole structure of this research is provided.
Literature review follows the introduction providing a perspective to intangible capitals of social, human and relational and how they influence to international exporting entrepreneurship in general. The chapter 2.1 focus on social capital and how it is researched over the years in different academic fields. It is followed by chapter 2.2 on human capital on definition of the form of capital and what is included into it. Chapter 2.3 mainly focuses on relational capital in a form of network capability and trust. Chapter 2.4 combines featured intangible capital and links them to international entrepreneurship literature. In chapter 2.5 the theoretical framework of this research is revealed and explained since this research is a forerunner in business and social sciences research in this topic.
Chapter 3 is about chosen methodology of this research. In chapter 3.1 I reveal what is my philosophical standpoint on research and how it effects on the whole research process. Research approach is defined in chapter 3.2. I explain what were the options for research approach and why did I chose some of them instead of others. Chapter 3.3 is about research methods and chosen strategy. Here I explain what kind of methods I will use in the research and most importantly why those methods serve as best options concerning the topic and the empirical part of this study. Chapter 3.4 explains and combines the chosen research design that have been discussed in previous chapters. Chapter 3.5 is about data gathering. I explain step by step how did the data gathering process go and what decisions I had to make in order to collect exact empirical data and from whom. Some might consider chapter 3.6 as irrelevant for this research process but I consider it as one of the most important aspects since there was no idea in the beginning of the process who should I interview and where do they come from. This chapter explains and test specific theoretical frame in practice in order to identify individuals participating to this research. Chapter 3.7 informs you as a reader what were the limitations of this study and chapter 3.8 answers the questions on validity and reliability concerning chosen research methods.
Chapter 4 is about empirical results delivered by chosen methodology of multiple-case studies and the analysis of results through individual-level logic models (Yin 2009). Each participating individual has been given personal logic model which includes all the collected data and how that is linked with the set research questions. Chapter 4.1 is for a Senator representing Europe.
Chapter 4.2 is for a Senator representing Africa-Middle East and chapter 4.3 for Senator of Asian-Pacific. Chapter 4.4 explains the challenges that researcher faced in order to identify individual to represent the continent of America and what were the findings.
Chapter 5 is for discussion where the challenges of the research process are revealed with more analysis of the empirical findings with the key questions used in questionnaire (APPENDIX 1).
Chapter 6 is for conclusion of the findings of this research and suggestions for further or future research on the topic.
2. INFLUENCE OF INTANGIBLE CAPITAL TO INTERNATIONAL ENTREPRENEURSIP
2.1 Social Capital
The founder of the term of social capital in academic literature might be J.L Hanifan (1916, p 130) who argued on the differences of social capital compared to usual term of “capital” which can be described as tangible like financial resources for example cash. Hanifan (1916) described social capital by an example where a person makes a contact to their neighbor and they together contact the next neighbor so they pose accumulation of social capital which can satisfy the social need of an individual. Together they bear a social potentiality which can lead to the substantial improvement of living conditions in the community they are members at. After Hanifan there have been many researches who have tried to define and measure social capital.
Which gets support from the Organization for Economic Co-operation and Development (OECD, 2001) stated “that much of what is relevant to the concept of social capital is tacit and relational and therefore defies easy measurement or codification.”
There have been researchers from nine different academic fields over the past century trying to define social capital. These fields are families and youth behavior; schooling and education;
community life both virtual and civic; work and organizations; democracy and governance;
public health and environment; crime and violence; collective action; and economic development. (Wallis, Killerby & Dollery 2004) Since my field of research is on economics I prefer to focus the literature review on earlier research in economic development, community (civic) life as referred to sociological research and work & organizations. I combine the findings from the social, human and relational capital into a context of international entrepreneurship research.
Jackson et al., (2015) links together two growing literatures, social capital and economic freedom. They argue whether economic freedom contributes to social capital. According to their research there is no evidence that better economic freedom would lead to more or less social capital. Research of Weigi et al., (2015) highlight the influence of social capital in the financial performance of the firm in the hospitality sector in China. Their findings highlight importance of both internal and external social capital for the positive financial result. What I find very interesting research is Lisbeth et al., (2015) whose research look for linkage of social capital and cultural adjustment of the individuals in Non-Governmental Organizations (NGO) on international assignments. Their main argument is that support networks matter when
adjusting to the host country both on work and off work activities. Richards & Reed (2015) evaluated the role of social capital in the development of volunteer led cooperation. Their research is based on the case of one social enterprise of a third sector organization volunteer food industry operating in United Kingdom since 2007. They divide social capital to three categories which are bonds, bridges and linkages and describe how these categories keep the community together. Findings review the relations between key stakeholder groups of the cooperative; customers, volunteers and institutions and is the impact of three social capital categories positive or negative to key stakeholders relations. Importance of their research is that social capital can also have negative impact on relations since many other researcher focus only on the positive side of social capital in the company.
Tandardini & Kroll (2015) research organizational social capital in the context of performance management. Their theoretical frame of social interaction, trust and common goals is based on research of Nahapiet & Ghoshal (1998) who created the three dimensions of social capital as structural, cognitive and relational. Tandardini & Kroll (2015) do not provide any practical aspect on the topic which sounded really interesting research. They focus only on the earlier research done in the field and try to fill the theoretical gap by linking social capital to context of performance management. Their paper is like a combination of what has happened in their academic field and the results of the research they prefer not to reveal. They want to bridge the performance management to a broader organizational science research so they use the term of social capital to get there by renaming the social capital as “organizational social capital”.
Alguezaui & Filieri (2010) takes social capital to the academic field of innovation performance.
Their research investigates the role of social capital in innovation. They start by analyzing the origin of social capital theory and how it contributes to organization and management studies.
Later they argue the importance of social capital as a facilitator to knowledge search and knowledge sharing activities which they value as important factor on creating new innovations.
Finally they focus on structural dimension of Nahapiet & Ghoshal (1998) by focusing on contribution of two different configurations and effect on innovation networks: sparse vs cohesive. Paper of Alguezaui & Filieri (2010) is very theoretical and combination of the field like the research of Tandardini & Kroll (2015). Alguezaui & Filieri (201) provide only few real solutions in the conclusion such as innovation happens elsewhere than R&D laboratories and in order to innovate new products company should include all possible actors of their networks to innovation process. These actors according to their innovation model can be suppliers, customers, universities and research teams (Alguezaui & Filieri 2010).
In the end they describe how social capital and innovation research are aligned by highlighting few earlier research such as benefits of social networks to company (Ahuja 2000).
Many of the recent research papers of social capital are based on the earlier definitions and interpretations of Bourdieu (1986), Coleman (1988), Putnam (1995), Nahapiet & Ghoshal (1998), and Adler & Kwon (2002). As these can be stated as the main theories of social capital I will use their research as a base of literature review starting from the earliest research of Bourdieu (1986) and Coleman (1988). After Coleman I introduce the thoughts of Putnam (1995) on social capital before going deeper to Nahapiet & Ghoshal (1998) theoretical model of three dimensional social capital. Final chapter concerning social capital will come from the findings of Adler & Kwon (2002).
The main argument of Bourdieu (1986) was that capital can be measured in different types of forms within a social world. Originally the forms of different capital was introduced by Reinhard Kreckel (1983) in article made in German “Ökonomisches Kapital, kulturelles Kapital, soziales Kapital” published in Soziale Ungleichheiten (Soziale Welt, Sonderheft 2, 183-198) and the article has been translated earlier by Richard Nice. Bourdieu criticize economic theorist of the time for lacking imagination of other types of capital which can be intangible instead of just tangible like money. According to argument of Bourdieu (1986) capital can present itself in three forms depending on the context and can all be convertible on economic capital. These three forms are economic capital which can be measured with money or property rights. It can be a cultural capital which could be converted in specific conditions to economic capital as well like measured with educational qualifications which I understand Bourdieu to refer on professional position and salary. Capital can also be a social capital which is referred to connections between people or as “social obligations” that can be measured in economical form of a symbolic title (Bourdieu 1986). As an example of cultural capital Bourdieu refers cultural capital converted to economic capital in the form of paintings or writings of maestros’ which has certain set financial value and can be therefore sold to other collectors who want to purchase desired paintings or writings for themselves as symbols of success.
On social capital Bourdieu (1986) argues it to be an actual or potential resource which are linked between relationships of individuals in possession of a specific network. It can be a membership in a group which owns a collectivity owned capital of knowledge that members can use. These relationships might exists just on practical form but can include material or symbolic exchanges
between members in order to maintain the relations. Other form of social capital may be a socially instituted like being combined under a specific name or a brand like a family name (Trump) or a tribe (IBS students) or even a political party (Democrats). The power of the social capital in specific network is depending on the size of connections by the individual and what he or she is able to mobilize with the volume of the capital (economic, cultural or symbolic) within those connections (Bourdieu 1986). So the assumption is that social capital cannot be completely independent of the bearer since it requires exchange to happen between the members of the network. This allows network to create possible profit in a solidarity among its members if that is the goal of the specific network but there are those networks too which do not aim for profit in economical perspective since the relations itself can be the symbolic profit for a member in a network like to be part of something rare which is desired by many (Bourdieu 1986).
According to Bourdieu (1986) in order to gain access to specific network is not easy since those important connections are not handed out naturally or socially even among members. It is the end product of continuous effort of an individual to connect among people and would require to pass certain criteria’s or social rites along the way. Bourdieu argues it is up to the investment strategy of an individual as a term which can open up to desired relations for the member of specific network. That selected investment strategy can transform connections to people as closer relations between same people. Exchange between both parties of a relationship encourages and produces mutual knowledge with social recognition. When a new member is selected to become part of the network he or she could modify the group if there is no set rules or criteria that new member needs to follow in order to be accepted as part of the society (Bourdieu 1986). Every moment that new member is selected the identity, values and limits of the network are put in test and exposed to possible redefinition. Since attempts of being accepted as a member require resources like time it can be measured directly or indirectly as economic capital. The gain of specific competences or knowledge of combined social capital within a network can be seen as an investment and therefore spent resources could pay off in future if the created relations can help individual to reach a higher level in personal or professional life (Bourdieu 1986).
Coleman (1988) argues there are two major intellectual streams describing and explaining social action. Sociologic stream is defined by an ability to describe behavior in a social context by explaining how action is shaped within the context. Other stream is more economic since it is defined by economists. In sociologic stream the main argument is that environment where individual operates matter and define their action. On contrary in economical stream argument is based on the social context such as norms, networks, social organization, interpersonal trust that individual have which are important factors for operation of society but also for economy.
Coleman states that both of the streams have some flaws and many researchers have tried to mix the streams in order to find the universal definition. In the economics one researcher defined a term called “f-connection” (look Yoram Ben-Porath, 1980 for more). The f- connection is defined by families, friends and firms since he consider those to affect in the economic exchange.
What Coleman means by the flaws of the intellectual streams of that time is that he has a better solution of combining elements from both economic and sociologic stream without discarding one or other. He called his model as a social capital. He argues that social capital is defined by its functions since it is not a single entity but collection of several entities which have a certain structure and the structure facilitate actions of actors within. These actors can be individuals or companies. Social capital compared to other forms of capital can make some achievements possible which could not be done if the social capital is missing since it is based on the relations of individuals for example sharing information that would not be otherwise available. There are different forms in social capital and it can be conceptualized as action of personal aid that can lead to different solution for the individual. Like a concept of a smartphone which can be in many sizes, colors, forms and manufactured by different companies but it is still a smartphone.
Form of social capital in the view of Coleman includes obligations, expectations and trustworthiness to structures. Expectations and obligations can be defined if person X does something for person Y for example lend certain amount of money and trust person Y to pay back in time. This puts person X in the expectation and person Y to obligation role. It comes down to trust and trustworthiness between persons X and Y. If person X knows person Y and trust he/she will pay back then there is lower risk of losing the lent money. Nevertheless there is always a risk of bad debt if person Y breaks the trust and does not pay back so the trust of person X was misplaced. According to Coleman that depends on the trustworthiness of social environment and structure where individuals perform and the norms of that environment.
If there is a norm that obligations must be repaid, then individuals in that environment should do so otherwise losing the credibility among other members of the social structure and getting some other sanctions because of his/her bad behavior (Coleman 1988). In order for Coleman definition of social capital to be accurate it requires that the structure of social capital is a closure. If the social structure would be without closure then the members of the structure would be in different positions even as person X and person Y would be in the same network with persons Z and W but these two might be totally strangers to X and Y since they would not have any relation with any of them. In this example person Y would not lost his/her credibility among the other members’ Z and W of the social structure since they are not aware of the agreement between X and Y and person Y could continue lending money creating new expectations in the environment without ever paying the obligations back. Only then persons Z and W will figure out the lack of trust to person Y when they have had similar situation as person X. When the social structure is closed all these four members have relations with each other and persons Z and W would know how the agreement between members X and Y and how did it unfold.
Closure of social structure have many benefits for its members since they can combine forces to constrain the actions of a member of the community who have not followed the agreed norms in this case person Y. Coleman (1988) argues that trustworthiness is a key element for social structures which are in closure and highlights the importance of a voluntary organizations where members of the group can co-operate by providing their professional human capital in the use of their community. In time this professional human capital transforms as part of social capital of their structured community. In Coleman’s example there were group of people building houses during Second World War and they lack resources and faced several physical problems due to poor construction. They founded knowledge from the society and addressed needed help to join them. After the houses were rebuild the quality of life improved in the community and members of knew where they would get the help they needed (Coleman 1988). Max Gluckman (1967) debated that there is a distinction between simplex and multiplex relations which can proof the example given by Coleman. Multiplex relation is that individuals within the community are linked with more than one context. They can be co-workers, neighbors, part of same voluntary association, play in a same bowling team etc. while simplex relation individuals could be only co-workers or just neighbors or playing in a same bowling team. The importance of this difference is that multiplex relations can be helpful to create sustainable impact to community together but can be also appropriated for use of others as well which can be seen as a negative side of social capital usage (Gluckman 1967).
We do bowl alone in Finland or we like to bowl online. Putnam (1995) in his article “Bowling Alone: America’s Declining Social Capital” argues the differences in the American society where people usually went bowling together and took some beer in a group but during mid 1990’s situation changed. People tend to go and bowl alone and the financial resources spent on beer diminished dramatically. Putnam refers to early 1930’s when people tend to be part of many civic and communal groups but not that much anymore. The same dilemma has been founded on several other fields of academic research such as education, urban poverty, unemployment, control of crime and abuse, and even in health. Researchers have all come to solution that difference between success and not being so successful came down to social capital. Putnam (1995) wants to make clear difference between the terms of human capital and social capital since some think those are the same. Individual productivity can be measured with human capital such as tools and training but social capital refers to social organization such as networks, norms, values and trust which facilitate cooperation and coordination of mutual benefits.
The article gives examples of different civic engagement activities which have been declining during 1990’s compared to earlier decades. These activities are all community groups which have seen the radical change in amount of active citizens’ at their ranks. Examples come from religious groups where people tend not to visit the church on Sundays which is very typical in the American culture. There have been drop in the membership of labor unions in four decades in late 1950’s to 1990’s. People tend to not vote on the political elections either. Putnam argues the reason could be the lack of trust on politics and governments since there were many scandals since 1960’s like Watergate, Vietnam war, political assassinations and so on. (Putnam 1995) One of the major issue was lack of participation on volunteering on civic and NGO. American people seem to have focused on something else during 1970’s to 1990’s since many organization such as Boy Scouts lost 26 % of their members during those few decades. (Putnam 1995) Why the term bowling alone? Since people do not bowl in groups as much as they did earlier the entrepreneur running the bowling alley loose income as lone bowlers do not spent money on other offered additional services such as food and drinks. Earlier there were groups of people playing in the organized leagues and cash came in on additional services too but since there are fewer organized bowling communities the amount of money spent on beer and pizza after bowling have been diminished. There have been change in the organizations and other civic or communal groups have replaced the old ones.
For example the American Association of Retired Persons (AARP) had 400 000 members in 1960’s but in 1993 the amount of members had reach to 33 million becoming the largest private organization in the world that time right after the Catholic Church. (Putnam 1995)
I feel like we have faced the same situation in Finland today as America faced on decades 1960 to 1990. It could be defined by a theory of butterfly effect which was created according to Ponder & Lewis-Ferrell (2009) by mathematician and meteorologist Edward Lorenz referring to a notion that a single flapping of the wings of a butterfly creates changes in the atmosphere which can impact on weather conditions globally. It could be also defined as a minor change in the process which can lead to a chain of events that can cause large-scale alterations to the system. (Ponder & Lewis-Ferrell 2009)
In the recent years in Finland we have faced the butterfly effect of the America as there have been many scandals in the political field which have led to lack of trust on politics and government. Today everywhere you go there are people using the smart phones as part of daily communication instead of meeting friends in a cafeteria or a pub. The way of communication between people has changed dramatically and it has both good and not so good consequences.
The world has become smaller due to advanced technical solutions which has helped firms to reduce financial resources spent on travels but has also made people too depended on technology. I know that since I can open my laptop in the morning and hang on Facebook the whole day since I have it as an application on my smartphone too. Whatever happens in my personal network I will be instantly noticed. So the community has transformed from the meeting friends in a pub to meeting friends online. How this is related to research of Putnam?
Since we spent more time online than in real life people become lazy since there is no need to spend your financial resources to meet a friend. Just open your laptop and they are all there in your social network which have actually led to a lack of the feeling of belonging to a community and having conversation face to face. People might be part of a civic organization by paying their annual membership fees and reading couple of monthly newsletters but they are more passive citizens than active citizens in a civic association. This causes problems to local business owners everywhere in Finland and the world as customers do not come in for a coffee or a beer but instead they stay at home chatting online after work. Of course there are always individuals that are active citizens despite of advanced communication technology we have today.
Main argument of Nahapiet & Ghoshal (1998) is that social capital is in close relation with intellectual capital. Earlier research of social capital theory in different academic fields have come to conclusion of significance of relationships as a resource for social action (see Bourdieu 1986, Coleman 1988, Putnam 1995). Nahapiet & Ghoshal argue to integrate all of the earlier findings under of their three dimensional model and describe how these dimensions generate knowledge creation within a firm while arguing how firms can develop high levels of social capital using their three dimensional model. Main focus is the relations of social capital and intellectual capital within a firm (Nahapiet & Ghoshal 1998).
The three dimensions of social capital in the theoretical model are structural, relational and cognitive (Nahapiet & Ghoshal 1998). According to authors the features of these dimensions are highly interrelated with the earlier findings. In order to make a distinction between structural and the relational dimension of social capital Nahapiet & Ghoshal use the findings of Granovetter (1992) on structural and relational embeddedness. Structural embeddedness is defined as an overall pattern of connections between individuals such as who you can reach and how you can reach them (Burt 1992). Relational embeddedness relates on the history of interactions between individuals and focus is on certain relations individuals have like friendship and respect which might influence their behavior (Granovetter 1992). Through ongoing personal relationships individuals fulfill their social motives like sociability, prestige and approval (Nahapiet & Ghoshal 1998). An example is given in the article where two individuals in a company might make completely different choices even having the equivalent positions depending on their relations with their co-workers. One might leave the firm in order for better position and more lucrative salary in the competing firm as a career move but other could stay because of the close relations to co-workers.
According to authors the structural dimension is having a huge influence on the development of relational and cognitive dimensions of social capital. The structural dimension includes sub topics such as network ties, network configuration and appropriable organizations while cognitive dimension is divided to shared code and language with shared narratives. Relational dimension is based on trust, norms, obligations & expectations and identification. I am going deeper to these dimensions by examining those.
Structural Dimension of Social Capital
Network ties are the fundamental element of social capital theory since network provides access to resources which an individual lacks. In the literature the key resource of generation of social capital is information benefits to individual like who you know and what you know (Nahapiet
& Ghoshal 1998). Coleman on other hand noted information as a basis of action but it is costly to gather (Coleman 1988). Even though gathering information can be costly but it gives the individual an information channel to be used in future which could reduce time and other resources on other topics. Burt (1992) argues that information benefits are divided to three forms: access, timing and referrals. The first form “access” is defined by receiving key information and having direct contacts to other members in the network that can benefit individual in the professional life. It creates a bond between individual giving away the information and individual receiving important information. The second form “timing” is referring to the ability of networked individuals to give away and receive information earlier before it is released as a public information. This kind of early timing can have both positive and negative perspectives in the corporate world. For example an individual could receive information in advance concerning a job opening before job-hunting is published but in the same time it could be seen having a negative impact if the work contract is given internally to other member of the same firm and job-hunting never comes public. The third form “referrals”
is defined as individual can borrow his or her lacking credibility on new opportunities from more experienced and more reputable individuals of the network if they agree on being a referral. Same situation can be seen in every firm when an individual working on sales makes a contact with potential partner or customer by borrowing the reputation of the firm. Higher the reputation the firm has more likely potential customer will listen the sales pitch. This employee uses the brand of the firm as a referral to achieve his or her goal (Nahapiet & Ghoshal 1998).
Second sub category of structural dimension is called network configuration. Whereas network ties offer channels of information flow between individuals’ network configuration determine the strength of those ties. Nahapiet & Ghoshal (1998) argue there are three properties in network structure which are density, connectivity and hierarchy inside the network. Burt (1992) state that an individual with network rich in information benefits has created contacts to places where sometimes sensitive but useful information are likely to come up and who can he/she trust to provide that information to and from those places. Trust between individuals is seen as a crucial element in the selection process of contact person but Burt (1992) notes more attention to be put on the importance of the size of the information providers.
He argues that sometimes a sparse network with few contacts provide more information benefits compared to wide network on which might provide less diverse information on same cost compared to sparse network. Though the wider network obtains diversity of information and lowers the cost of accessing information which can be seen as a benefit for wider network (Burt 1992).
Third category of structural dimension is named as appropriable organization. The context is based on the argument where gathered social capital such as network ties and trust on one context could be transferred from one community to another (Nahapiet & Ghoshal 1998). An individual could for example transfer the gained trust from personal relations or civic association to business exchanges (Coleman 1990). This suggests that some organizations created for certain purpose can provide additional value for other purposes. This kind of social organization with dual purpose possibilities can have both positive and negative impact on the individuals. It can give access to resources and knowledge of other individuals but in the same time constraining groups instead of enabling learning opportunities (Nahapiet & Ghoshal 1998).
Cognitive Dimension of Social Capital
Authors debate that key part of social exchange is sharing between individuals and it is done by two ways. At first individuals share through common language and vocabulary while secondly through a collective narratives (Nahapiet & Ghoshal 1998). With common language individuals can discuss and exchange information, ask questions and conduct business negotiations. When people share common language it is easier to collect social capital since both parties understand each other well. If individuals do not share a common language or their codes of life are different then co-operation is harder as they are apart from each other (Nahapiet
& Ghoshal 1998). When group of people share language the co-operation, creating new ideas and business opportunities from tacit knowledge to explicit knowhow (see Nonaka & Takeuchi 1995 for more). Besides common language and codes individuals in a community share myth, stories and metaphors according to researchers in order to create, exchange and preserve important values of society (Nahapiet & Ghoshal 1998). Bruner (1990) debated of two different modes of cognition: “the information or paradigmatic mode and the narrative mode” By first authors refer to process of knowledge creation by rational analysis and arguments and the latter as a synthetic narrative such as legends, myths, fairy tales and metaphors (Nahapiet & Ghoshal 1998).
Relational Dimension of Social Capital
Relation dimension is seen as an important factor in between of social capital and intellectual capital. Earlier research have founded out that there lies an important barrier within a firm when best practices are shared that depends on the existing burdensome relation between the source of information and the recipient of that information (Szulanski 1996). Authors argued the importance of structural dimension as a primary direct impact on accessibility while cognitive dimension has impact through influence on accessibility and combination capability (Nahapiet
& Ghoshal 1998).
Trust is highlighted by many researchers (for example Putnam 1993) as important element of relations where individuals have trust each other they are more willing to commit in social exchange and cooperation. Authors point out on their research that there lies a two-way interaction between trust and cooperation where trust lubricates cooperation while cooperation nourish the trust (Nahapiet & Ghoshal 1998).
Coleman (1990) argued that a norm exits when actions of an individual are controlled not by him/her but other members of the community which represents commonly agreed degree of consensus in the social system. When cooperating individuals have norms as a base of their relations they can together create new knowledge by sharing their social capital. These norms can be for example openness, teamwork, respect of diversity in opinions, openness for criticism and tolerance of failure (Leonard-Barton 1995). Nahapiet & Ghoshal use the example provided by Coleman (1990) to describe obligations and expectations since they do not have their own opinion on the matter. Final aspect of relational dimension is called identification. It is a process where individuals see itself as part of a group with others. Depending on the norms of the group they could have a membership fee or it could be free to join for everyone. For example Junior Chamber International (JCI) can be seen as an example of former and a student organization of like-minded individuals of entrepreneurial thinkers as a latter one. Therefore identification influences additional value that could be achieved in a cooperation and exchanging knowledge while also affecting the motivation of the grouped individuals (Nahapiet & Ghoshal 1998).
I have now explained the concept of Nahapiet & Ghoshal three dimensions of social capital but I have left out the parts of intellectual capital which can be related to the term Coleman (1990) used as a human capital since the content of the terms are interrelated. On the next page I will review the findings of Adler & Kwon (2002) on social capital theory and how they have combined a table of earlier findings of social capital theory and alignment of researchers.
Adler & Kwon (2002) wrote an article where they state that there have been lot of academic discussions in many fields about the concept and definition of social capital. They combine what has been written by other researchers during past millennium since every researcher in their field have come across with social capital. Adler & Kwon (2002) define social capital as
“goodwill” which they call what others could have towards an individual is a valuable resource.
Goodwill consist of trust, sympathy and forgiveness. Authors argue that if goodwill is a substance for social capital then it flows through shared information, influence and solidarity (Adler & Kwon 2002). Social capital does not come without a cost and a risk. The core of social capital in practice is within the social relations of an individual in those networks and locations where they act depending on their position. Adler & Kwon (2002) argue the social capital is present within at least three different types of relations such as market relations where two agents exchange financial and physical assets with each other. Social capital is also present in the hierarchical relations like within a company where depending on the position of the individual one is in the management position and other one have to follow the manager as he/she has authority over him/her. Third type of relation is social relation which can be for example a friendship where gifts and favors are exchanged in hope that other will pay back in future. This three type of relations can be called as an “economic exchange or social exchange” (see Blau 1964, Homans 1974) or as a social structure (Adler & Kwon 2002).
Over the years the social scientists have offered many definitions for social capital. Even Adler
& Kwon (2002) admit it is very difficult to find one universal definition for social capital. They have divided earlier research into internal, external or mixed social capital. According to authors these two differ very little but can be differentiated that internal relations are more bonding and external relations bridging (Adler & Kwon 2002). These terms differ also by their focus which can be either focusing on substance, the sources or the effects of social capital.
Secondly they differ by methods whether they focus on 1) relations of an individual to other individuals, 2) the structure of relations within individuals as whole or 3) both types of relations (Adler & Kwon 2002). In the view of bridging social capital can be seen as a resource for an individual or for a firm gaining competitive edge and success within the social network among other members of the particular network. The view of bonding social capital is more internally collective within a group or a team inside a firm trying to reach their common goals. Third type of mixed relation where social capital is both internal and external at same time is a matter of perspective. For individuals as employees of a firm social capital is external but internal for the firm as a juridical unit (Adler & Kwon 2002).
Authors base the most of their academic paper to define the social relation and have created a sub categories for it. These sub categories according to authors have to be present for social capital to be beneficial for an individual. Sub categories are opportunity, ability and motivation.
Opportunity has been defined by the actions that individuals social network creates different opportunities to take advantage of. Bonded relations allow individual to benefit other relations of the members within the network. By the term “network” Adler & Kwon (2002) mean face to face interaction with individuals or membership to social clubs and civic associations. Much depends on the structure of social network of an individual. In order to analyze the structure of network focus needs to be on the quality of the relations and are those relations direct or indirect.
Adler & Kwon (2002) prefer to focus two earlier researchers work by justifying their own opinions. These two are Coleman (1988) and Burt (1992) who argue that direct and indirect relations provide access to both the donor of the assistance and to his/her own network that can have influence on the required support. Both Burt and Coleman have completely different perspective for social capital and what is the best situation. Coleman (1988) points out that in order for network to be strengthening social capital among individuals it should be a closed community where trust and commonly agreed norms among the individuals of the network are followed. If the network would be more open as a structure there would be more violations of commonly agreed norms and some of them might go unnoticed or even unpunished which leads that individuals of the network might not trust each other that much and in the end would weaken the social capital. Burt (1992) is on different side of the coin compared to Coleman (1988) by arguing the loose network with few rules would be better structure for individuals so that information would flow within instead of between the members of the network providing more opportunities for everyone to benefit social capital. Theoretical frame of Burt prefers more on internal relations compared to Coleman focusing on external relations which can be seen from the figure 2 describing how researchers see social capital being internal relation, external relation or mixed relation.
Concerning motivation as part of the needed element of beneficial social capital there are also two point of views to consider by authors. Portes (1998) ask key question on motivation; what motivates individual to give assistance to one asking for help since there is no certainty of return on “investment”? We all would love to gain something which takes us forward to our goal out of just goodwill of the others. Putnam (1993) argues that it is the trust and norms of the relation that make social capital instead of just the group of people called by the term network. Putnam points out that it is the fellowship among the individuals that matter.
