Researchers on social capital have long debated whether social capital is a way of establishing norms in groups and communities or is it a resource that can be accessed by organizations to sustain their competitive advantage.

In this blog, I subscribe to the resource view of social capital and present my case of how it can be leveraged to sustain competitive advantage.

Social capital is a multi-disciplinary concept, the roots of which can be traced in sociology, anthropology, and economics. Each discipline has viewed social capital differently and that has led to multiple interpretations of what social capital is all about.

Researchers, primarily led by sociologists, held the view that social capital is normative in nature and is useful in studying “patterns of development” in society. On the other hand, we have others (economists primarily!!) who view social capital as a resource and a mechanism by which individuals can “access information” from the external environment, “process and distribute” it within the organization. It is this ability of social capital to provide access to new and real time information, that has the potential to act as a strategic competitive advantage.

I define social capital as the strength of relationships that exists between the employees, in team, departments or a business unit. Social capital lies in the relationships and networks held by the employees. These relationships and networks can be internal or external to an organization. When it is internal, it helps the individuals access various teams, coordinate their activities in a cohesive manner, making available resources and information from various parts of the organization leading to a structured pursuit of organizational objectives. This makes the teams more effective and creates solutions that are comprehensive in addressing the business problems.

The same social capital, in the external context, enables individuals to tap into information from external business environment on an almost real time basis. Individuals with strong external network can access information in the form of competitor’s actions, technological developments, policies changes, regulatory expectations and prepare the organization to deal with them in a faster manner.

Accessing external information and taking organization wide decisions are particularly useful for the top management in any organization. With this, they can achieve both speed and quality by processing real-time information. Top management team having diversity in the form of external social network, provides organization, the advantage of tapping various types of information. Such information needs to be diffused within the organization in a structured manner thereby creating effective management and response to the changes in the business environment.

Many organizations have roles that are external facing, responsible for studying the market developments. This becomes an effective proposition for organizations only when such positions are staffed with individuals who have a large and wide external network. This will enable the person (and organization) to tap into a wide range of information.

The question therefore is whether we can create such social capital leading to strategic competitive advantage?

The answer, fortunately is YES, though these are still emerging practices. Few of them are listed below:

1. Connecting the ”Connectors” with ”Diffusers”

• Identifying Connectors who can access variety of ideas/ information and connect those that align with the organizations purpose can be a valuable talent. When they interact with Diffusers, the ideas from external environment are adopted and operationalized in the organization.

2. Citizenship behavior and engagement

• The informal networks of employees are based on trust and a common purpose which binds members in the network. This common bonding encourages employees to go beyond their formally defined role requirement, demonstrate citizenship behaviour and support each other in achievement of common goals.

3. Creating work practices triggering social capital

• Identifying communities with a common purpose and formalizing them leads to effective engagement of the community members. Leveraging communities in structured problem solving for organization leads to continuous improvement and faster resolution of critical issues.

4. Creation of intellectual capital

• Employee’s informal networks access the required information to achieve their goals. They are connected by a common purpose which allows them to combine and exchange the information required in a unique manner. Facilitating This combination and exchange lead to creation of intellectual capital at the team level.

How is your organization harnessing social capital as a strategic resource?

#organizationnetwork #innovation #networkanalysis #digitaltransformation #learningculture #knowledgemanagement #socialcapital

References

Burt, R. S. (2005). The social capital of structural holes. The New Economic Sociology: Developments in an Emerging Field, 148–190.

Collins, C. J., & Clark, K. D. (2003). Strategic human resource practices, top management team social networks, and firm performance: The role of human resource practices in creating organizational competitive advantage. Academy of Management Journal, 46(6), 740–751.

Nahapiet, J. (1998). Social Capital, Intellectual Capital and the organizational advantage. Academy of Management Review, 23(2), 242–266.