Can social capital explain business performance in Denmark?
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Can social capital explain business performance in Denmark? Cong Wang1
· Bodo Steiner2
Received: 29 October 2015 / Accepted: 2 May 2019 © Springer-Verlag GmbH Germany, part of Springer Nature 2019
Abstract Motivated by the limited evidence on the positive link between social capital and firm performance, this paper explores this potential driver of firm performance at the firm rather than macro-level by employing a novel approach: we capture social capital at a community level rather than focus on the narrow aspect of entrepreneurs’ own social network. Using principal component analysis to aggregate various trust, norm and network-related variables to construct social capital variables with more than 150,000 firm-level observations for firm performance variables, this paper identifies an overall positive and significant effect of social capital on firm performance in Denmark. These effects are robust to firm-level social capital measures, different sampling years and alternative measures of firm performance (return on asset, current ratio, solvency ratio and profit margin) and network perspectives (Putnam and Olson). Keywords Social capital · Firm performance · Denmark · Border regions · Rural-urban divide JEL Classification E0 · D72 · Z10
Electronic supplementary material The online version of this article (https://doi.org/10.1007/s00181019-01731-3) contains supplementary material, which is available to authorized users.
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Cong Wang [email protected] Bodo Steiner [email protected] https://researchportal.helsinki.fi/en/persons/prof-bodo-steiner-phd
1
Tasmanian School of Business and Economics, University of Tasmania, Centenary Building, Sandy Bay Campus, Hobart, Australia
2
Department of Economics and Management, University of Helsinki, P.O. Box 27, 00014 Helsinki, Finland
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C. Wang, B. Steiner
1 Introduction The current literature on social networking and entrepreneurial activity has acknowledged that entrepreneurial activity can be heavily influenced by network relationships (as a form of social capital) in which resources flow directly to entrepreneurs who are somehow better “connected” (e.g., Hoang and Antoncic 2003; Aldrich and Zimmer 1986). Adler and Kown (2002) contend that social capital, or the resources that entrepreneurs may access through their personal networks, allows entrepreneurs to identify opportunities, mobilize resources and build legitimacy for their firm (see also Bhagavatula et al. 2010; Batjargal 2003; Elfring and Hulsink 2003). Despite the growing interests in this matter in the literature, consensus has not been reached about the social capital–performance link in the firm context. According to at least Maurer and Ebers (2006), Stuart and Sorensen (2007) and Stam et al. (2014), there exist conflicting perspectives regarding the specific network properties that constitute social capital. While some have focused on network structure (see, e.g., Stam 2010), others have considered the strength of entrepreneur’s network relationships or the resources held by their net
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