280210_developing social capital via online social networking
TRANSCRIPT
Developing Social Capital through Online Social Networks: Framework for
Strategic Business Networks.
Submitted by
Kilonzo Daniel Muthama
To Strathmore University as a project dissertation in partial fulfillment of the
requirements of the degree of Master of Science in Information Technology
(MSc.IT)
February 2010
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Table of Contents
List of Abbreviations ............................................................................................................................ 4
List of Figures ........................................................................................................................................ 5
List of Tables ......................................................................................................................................... 6
Declaration............................................................................................................................................. 7
Abstract .................................................................................................................................................. 8
Acknowledgment ................................................................................................................................... 9
Chapter 1: Introduction ..................................................................................................................... 10
1.1. Background ........................................................................................................................... 10
1.1.1. An overview of Facebook ............................................................................................. 12
1.2. Problem statement ................................................................................................................. 15
1.3. Purpose of study .................................................................................................................... 16
1.4. Research Objectives .............................................................................................................. 16
1.5. Research Questions ............................................................................................................... 16
1.6. Hypothesis............................................................................................................................. 17
1.7. Project Justification ............................................................................................................... 17
1.8. Project Scope and Limitations .............................................................................................. 17
1.8.1. Scope ................................................................................................................................. 17
1.8.2. Limitations ........................................................................................................................ 18
Chapter 2: Literature Review ............................................................................................................ 19
2.1 Social capital ......................................................................................................................... 19
2.2 Existing Research on Online Social Networks, the Internet and Social Capital ................... 20
2.3 Social Network Analysis ....................................................................................................... 22
Chapter 3: Aims and Objectives ........................................................................................................ 25
3.1 Limitations and boundaries of the paper ............................................................................... 25
Chapter 4: Design and Methodology ................................................................................................. 27
4. 1 Design ........................................................................................................................................ 27
4.2 Population ................................................................................................................................... 27
4.3 Sampling Design ......................................................................................................................... 27
4.4 Data Collection Methods ............................................................................................................ 28
4.5 Data Analysis Methods ............................................................................................................... 29
Chapter 5: Findings ............................................................................................................................ 30
5.1 Overview ..................................................................................................................................... 30
5.2 Survey Findings .......................................................................................................................... 31
5.3 What Do Kenyans Do Online?.................................................................................................... 33
Chapter 6: Data Presentation and Analysis ..................................................................................... 42
6.1 Introduction ................................................................................................................................. 42
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6.2 Qualitative Methods that Contribute to the Study of Social Capital ........................................... 42
6.3 Comparative advantage of qualitative and quantitative approaches ........................................... 44
Chapter 7: Discussion ........................................................................................................................ 48
Developing Social Capital through Online Social Networks ........................................................... 48
7.1 Social Capital ........................................................................................................................ 48
7.1.1 Social Capital Background ............................................................................................ 48
7.1.2 Analyzing Social Capital .............................................................................................. 49
7.1.3 Benefits of Social Capital ............................................................................................. 51
7.2 Social Networking ................................................................................................................ 52
7.2.1 Online Social Networking Background ........................................................................ 52
7.2.2 Online Social Networking Analysis .............................................................................. 53
7.2.3 Benefits of Online Social Networking .......................................................................... 54
7.3 How Online Social Networking affects Social Capital ......................................................... 55
7.3.1 Does Online Social Networking Increase Social Capital? ............................................ 56
7.3.2 Does Online Social Networking Decrease Social Capital? ........................................... 57
7.3.3 Does the Internet Supplement Social Capital? .............................................................. 59
7.4 Enterprise-related social capital ............................................................................................ 60
7.4.1 The enterprise‘s internal social capital .......................................................................... 61
7.4.2 The firm‘s production-related social capital ................................................................. 64
7.4.3 The firm‘s environment-related social capital .............................................................. 65
7.4.4 Market-related social capital ......................................................................................... 68
7.5 Business implications of ―third sector‖ activities ................................................................. 69
7.6 Social capital in the knowledge economy ............................................................................. 84
7.7 A Framework for Strategic Business Networks. ................................................................... 88
Putting it all together ...................................................................................................................... 89
Chapter 8: Recommendation and Conclusion .................................................................................. 91
Appendices ........................................................................................................................................... 94
Appendix 1: Survey Questionnaire ................................................................................................... 94
Bibliography ........................................................................................................................................ 99
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List of Abbreviations
BBS - Bulletin Board System
ICT - Information Communication & Technology
ISP – Internet Service Provider
P2P- Peer to Peer
PC – Personal Computer
PDA – Personal Device Assistant
SNP - Social Networking Potential
TLD – Top Level Domain
MOO – MUD, Object Oriented
MUD - Multi-User Dungeon
SQL –Structured Query Language
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List of Figures
1. Figure 5.2.1: Findings Overview
2. Figure 5.2.2: Internet Users Age Groups
3. Figure 5.3.1: Percentage of users across social networks
4. Figure 5.3.2: Males Vs. females on social network sites
5. Figure 5.3.3: Kenya‘s Ranking
6. Figure 5.3.4: Internet Use
7. Figure 5.3.5: What Kenyans do Online
8. Figure 5.3.6: Personal Information
9. Figure 5.3.7: Online and Offline life comparison,
10. Figure 7.2.1: Social network analysis
11. Figure 7.5.1: Schematic depiction of juridical forms of society's production according to
degree
12. Figure 7.3: Distribution of Sweden's approximately 600 000 business firms 1996.
13. Figure 7.7.1: A Framework for Strategic Business Networks
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List of Tables
1. Table 5.2.1: An overview of the Kenyan Population
2. Table 5.2.2: Internet Users Age Groups
3. Table 5.3.1: Kenyan Internet Stats
4. Table 5.3.2: Internet Use
5. Table 5.3.4: Personal Information
6. Table 5.3.5: Online and Offline life comparison,
7. Table 7.4.1: Social capital of the enterprise broken down into different component parts
8. Table 7.6.1: Key attributes of the knowledge and industrial societies and of the mercantilist
era
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Declaration
I certify that this dissertation is my original work and all material in this dissertation which is not my
own work has been identified. I further certify that no material has previous been submitted and
approved for the award of a degree by this or any other University.
This dissertation is available for Library use on the understanding that it‘s a copyright material and
that no quotation or implementation of the system from the dissertation may be developed or
published without acknowledgment.
SIGNED………………………………………. DATE……………………………
Kilonzo Daniel Muthama
MSc.IT/050 691
This project report has been submitted for examination with my approval as the University
Supervisor.
SIGNED …………………………………….... ...DATE…………………………..
Dr. Freddie Acosta
Lecturer – Faculty of Information Technology
Strathmore University
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Abstract
When a computer network connects people or organizations, it is a social network. Yet the study of
such computer-supported social networks has not received as much attention as studies of online
person-to-person interaction and computer-supported communication within organizations. This
research is about the usefulness of an online social network approach to business. By reviewing some
concepts of online social network and its utility, this study aims to guide organizations on how to
harness the knowledge management power of networks be it in computer-supported cooperative work,
human resources, marketing or in more diffuse interactions over less bounded systems such as the
Internet so as to achieve a strong business network strategy through increasing its social capital.
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Acknowledgment
My graduate degree experience at Strathmore University was splendid. It was splendid because of the
many people who were there for me every step of the way and for that I would like to express the
deepest appreciation. Without these people‘s guidance and persistent help this venture would not have
been possible.
First to my lecturer, Dr. Freddie Acosta, who has the outlook and the essence of an intellect.
Through his continued support throughout and persuasive spirit of venture in regard to IT, and
an enthusiasm in regard to his teaching I was encouraged to go out there and do my best no
matter what.
Next I would like to thank my family who have encouraged and helped me to believe in
myself and this has helped me gain the energy needed to accomplish the undertaking.
In addition I thank my work colleagues for their support, help and patience during the
undertaking.
I can‘t forget my fellow Strathmore University students who not only made the experience a
thrill but also gave me something to look forward to everyday when I lacked morale during
the undertaking.
My absolute gratitude to God for giving me the strength and aptitude to undertake this venture
and successfully complete it without any major obstacles.
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Chapter 1: Introduction
1.1. Background
Social capital is a sociological concept used in business, economics, organizational behavior,
political science, public health and the social sciences in general to refer to connections
within and between social networks. Though there are a variety of related definitions, which
have been described as "something of a cure-all" for the problems of modern society, they
tend to share the core idea "that social networks have value. Just as a screwdriver (physical
capital) or a college education (human capital) can increase productivity (both individual and
collective), so do social contacts affect the productivity of individuals and groups".
(Wikipedia, Social Capital 2010)
A social network on the other hand, is a social structure made of individuals (or organizations)
called "nodes," which are tied (connected) by one or more specific types of interdependency, such as
friendship, kinship, financial exchange, dislike, sexual relationships, or relationships of beliefs,
knowledge or prestige. (Wikipedia, Social Network 2010)
In both professional and personal life, human beings naturally form groups on affinities and
expertise. We gravitate to others with whom we share interest. Most of us belong to real
world networks that formed organically. Not surprisingly, these networks are rapidly
migrating to the online world. An online social network is a description on a social structure
between actors, mostly individuals or organizations. It indicates the ways in which people are
connected through various social familiarities ranging from professional, casual acquaintance
to close familiar bonds. (Walther, et al. 2008)
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Online social networking has been around in various forms for nearly a decade, and has begun to
achieve wide notice in the past few years. Online Social Networks take many forms, and are created
for many reasons. Despite their differences, Online Social Networks do however, commonly exhibit
the following concepts:
Profiles – Each member in a network has an online profile that serves as the individual‘s
identity in the network. In the professional context, profiles often contain information
regarding the individual‘s experience, education, interests and affiliations, as well as
information about the individual‘s skills and resources.
Connections – Online Social Networks typically enable individuals to make connections with
others in the network. In some cases, these connections are implicit, and derived from past
actions (such as sending an email to another member of the network). In other cases, the
connections are explicit, and are set up and created by the members themselves.
Deceptively simple, Online Social Networks contain greater power. They change the online space
from one of static web pages and stale marketing messages to alive, vibrant network of connected
individuals who share their abilities, expertise and interests. Ask any senior executive, politician,
community leader or successful salesperson which one skill or habit helped them excel in their career
– an overwhelming majority will respond with one simple word, Networking.
Networking is the single most powerful business tactic to accelerate and sustain success for any
individual or organization. It is about making connections and building enduring, mutually beneficial
relationships. It also serves as the catalyst to ensure you meet the‖ right‖ people to include in your
network an d expand your sphere of influence. Ultimately it‘s not about who you know, but who
knows you that will ensure your success because people do business with people they like and trust.
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Personal relationships enable you to stand out and rise above the noise and networking provides the
most productive, most proficient and most enduring tactic to build relationships, because to succeed
you must continually meet new people. Build relationships and leverage your network. (Acquisti and
Gross 2006, June)
1.1.1. An overview of Facebook
Facebook, MySpace, Orkut, Cyworld, Bebo and other social network sites are, perhaps the best
examples of O‘Reilly‘s (2005) Web 2.0 environment, where audiences have become co-authors on
interactive websites. In a similar fashion as blogs, Online Social Networks allow individuals to
present themselves to other users using a variety of formats, including text and video. Just like chat
services, Online Social Networks incorporate a list of other users with whom individuals share a
connection. But unlike any other web service, Online Social Networks allow individuals to make
visible their list of connections to others and to transverse their social networks. (Boyd and Rahn
1997)
Created in 2004, by 2007 Facebook was reported to have more than 21 million registered members
generating 1.6 billion page views each day. The site is tightly integrated into the daily media practices
of its users: The typical user spends about 20 minutes a day on the site, and two-thirds of users log in
at least once a day. Capitalizing on its success among college students, Facebook launched a high
school version in early September 2005. In 2006, the company introduced communities for
commercial organizations; as of November 2006, almost 22,000 organizations had Facebook
directories. In 2006, Facebook was used at over 2,000 United States colleges and was the seventh
most popular site on the World Wide Web with respect to total page views. (The Benefits of
Facebook "Friends:" Social Capital and College Students' Use of Online Social Network Sites 2007)
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Much of the existing academic research on Facebook has focused on identity presentation and privacy
concerns. Looking at the amount of information Facebook participants provide about themselves, the
relatively open nature of the information, and the lack of privacy controls enacted by the users, Gross
and Acquisti argue that users may be putting themselves at risk both offline (e.g., stalking) and online
(e.g., identify theft). Other recent Facebook research examines student perceptions of instructor
presence and self-disclosure, temporal patterns of use, and the relationship between profile structure
and friendship articulation. (The Benefits of Facebook "Friends:" Social Capital and College Students'
Use of Online Social Network Sites 2007)
1.1.2 Facebook Quick Facts and Statistics
Company Figures
More than 400 million active users
50% of our active users log on to Facebook in any given day
More than 35 million users update their status each day
More than 60 million status updates posted each day
More than 3 billion photos uploaded to the site each month
More than 5 billion pieces of content (web links, news stories, blog posts, notes, photo
albums, etc.) shared each week
More than 3.5 million events created each month
More than 3 million active Pages on Facebook
More than 1.5 million local businesses have active Pages on Facebook
More than 20 million people become fans of Pages each day
Pages have created more than 5.3 billion fans (Facebook 2010)
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Average User Figures
Average user has 130 friends on the site
Average user sends 8 friend requests per month
Average user spends more than 55 minutes per day on Facebook
Average user clicks the Like button on 9 pieces of content each month
Average user writes 25 comments on Facebook content each month
Average user becomes a fan of 4 Pages each month
Average user is invited to 3 events per month
Average user is a member of 13 groups (Facebook 2010)
International Growth
More than 70 translations available on the site
About 70% of Facebook users are outside the United States
Over 300,000 users helped translate the site through the translations application
Platform
More than one million developers and entrepreneurs from more than 180 countries
Every month, more than 70% of Facebook users engage with Platform applications
More than 500,000 active applications currently on Facebook Platform
More than 250 applications have more than one million monthly active users
More than 80,000 websites have implemented Facebook Connect since its general availability
in December 2008
More than 60 million Facebook users engage with Facebook Connect on external websites
every month
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Two-thirds of comScore‘s U.S. Top 100 websites and half of comScore‘s Global Top 100
websites have implemented Facebook Connect (Facebook 2010)
Mobile
There are more than 100 million active users currently accessing Facebook through their
mobile devices.
People that use Facebook on their mobile devices are twice more active on Facebook than
non-mobile users.
There are more than 200 mobile operators in 60 countries working to deploy and promote
Facebook mobile products (Facebook 2010)
1.2. Problem statement
Many chief executives are becoming hot under the collar as they perceive employees spend more time
―cyberslacking‖ than working. This ―Skeptism and Hysteria‖ is the result of misplaced or uninformed
concerns about the effects of online social networking in the workplace. Many organizations today are
unaware of the potential benefits of Online Social Networks to business, like developing social capital
and knowledge recourses for tapping into new and existing talent, marketing, customer support and
expert project collaboration.
With the advent of web 2.0 the need to use Online Social Networks to develop a social capital is fast
becoming a critical factor in helping organizations harness the internet‘s potential to achieve agility
and competitiveness in today‘s market. This requires a framework to help select suitable online social
computing tools, establish usage and accountability policies, create monitoring and moderation
processes and develop evaluation mechanisms to gauge the growth against the usefulness of Online
Social Networks.
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1.3. Purpose of study
The research project is geared to developing an online social network framework that:
Will help unravel the misconceptions on Online Social Networks and reveal the potential of
in propelling business
Will help organizations harness social capital in their development
Will help organizations strengthen their business strategy networks and bring about
realization of the various application areas of Online Social Networks in business
Will contribute to the evolution of Online Social Networks for business application
1.4. Research Objectives
Select suitable social computing tools based on the types of users, their capability and needs.
Identify possible risks on productivity and behavior, security, corporate liability, corporate
reputation, employee privacy, data loss and system adoption.
Establish usage and accountability policies.
Create monitoring and moderation processes and procedures
Develop an education program and communications plan
1.5. Research Questions
To what extent is social capital being developed in organizations?
What added value do social networks bring into the firms?
What part do social networks play in corporate agility?
What capabilities of social networks will be most valuable?
What are the possible risks associated with social networking?
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What Policies, Processes and Education Programs are required to successfully incorporate the
use of social networks in firms?
1.6. Hypothesis
H1: The use of Online Social Networks in firms will have a positive socio-economic effect on
business.
1.7. Project Justification
The purpose of this study is to evaluate the effectiveness of Online Social Networks as a tool to
develop organizations in the following areas:
Learning dynamics within your industry i.e. new trends
Facilitating win-win relationship between the clients and business e.g. customer support
Establishing business contacts
Finding subject matter experts and mobilizing colleagues to contribute to projects
Develop knowledge resources
Embarking on a specific project
Marketing products/launching a new product
Need to cultivate a social capital within organizations
1.8. Project Scope and Limitations
1.8.1. Scope
The researcher will develop a Facebook Business Application and engage in participant-observation
over a two month period. The researcher will typically observe the usage of Facebook Business
Application tool, its usage, growth and statistics. The researcher will not schedule structured
interviews, but will interview team members informally, as needed to clarify and provide insight to
specific conversations. The researcher will administer an online questionnaire to the stakeholders of
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the system to gauge user satisfaction, appreciation, system utilization and capability requirements
after the research period.
1.8.2. Limitations
Time constraints of the semester require less time than may be ideal for an in depth study. Being an
outsider may also limit what is revealed to the researcher and the motives of the research may be
viewed with suspicion. The team members may be guarded in their conversations around me,
especially in my initial observation.
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Chapter 2: Literature Review
2.1 Social capital
There seems to be a consensus that social capital is an important feature of healthy, effective
organization.(Putnam and Goss, 2002) But what exactly is social capital? A cursory review of the
literature on the subject shows that it involves associations, volunteering, confidence in political
participation, membership in groups and associations, volunteering, confidence in political
institutions, life satisfaction and a variety of other concepts. (Bourdieu, 1983) It may also be defined
as the ability of actors to secure benefits by virtue of membership in social networks or other social
structures‘. (Portes 1998)
The substantial disagreements on how to define, operationalize and measure social capital have led
some researchers to discard the concept all together and work with more manageable variables. An
alternative path is to recognize that social capital is a multidimensional concept. The challenge, in
this case, is to integrate the different dimensions of the concepts into a single, yet flexible theoretical
framework. One such effort was conducted by Scheufele and Shah, who were inspired by Putnam‘s
(1993: 1995a; 1995b) conceptualization of social capital as ―elements of social life as networks.
Norms, and trust that provide the means for organization stakeholders to resolve collective action
problems.‖ (Scheufele and Shah 2000) These authors distinguished three dimensions of social capital:
intrapersonal, interpersonal and behavioral. The intrapersonal dimension is related to stakeholders‘
life satisfaction and personal well-being. The interpersonal dimension refers to trust among
stakeholders, also called social or generalized trust in others. The behavioral dimension incorporates
stakeholders‘ active participation in the business, civic and political arenas. (Howard and Gilbert
2008)
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Social capital theorists suggest that Online Social Networks facilitates associative behavior, which
fosters a strong business network strategy, which makes individuals and organizations more
responsive, all of which is translated into success. Fukuyama went even further. In his view, ―an
organization‘s well-being, as well as its ability to complete, is conditioned by a single, pervasive
characteristic: its network.‖ (Fukuyama 1995)
2.2 Existing Research on Online Social Networks, the Internet and Social
Capital
In their in-depth review of scholarship n social network sites, Boyd and Ellison noted that ―the bulk
of Online Social Networks research has focused on impression management and friendship
performance, networks and network structure, [bridging] online [and] offline connections, and privacy
issues.‖ Of concern here is the potential of Online Social Networks to bridge (or create a gap)
between online and offline connections – a key component of social capital theory.(Boyd & Ellison
2007)
Donath and Boyd were among the first to hypothesize the Online Social Networks may not increase
the number of ―strong ties‖ (i.e., long-term, sustained interactions) a person may have, but may
increase the ―weak ties‖ (i.e., infrequent, casual interactions) a person could form because the
technology is suited to maintain these ties cheaply and easily. (Donath & Boyd. 2004) This
proposition was empirically tested by Ellison, Stenfield and Lampe using survey data from a small
sample of firms in U.S. Applying Putnam‘s framework of ―bridging‖ and ―bonding‖ social capital,
Ellison and her colleagues found that use of Facebook had a strong association to maintaining or
solidifying existing offline relationships, as opposed to meeting new people. (Ellison, Stenfield and
Lampe 2007)
Social networks sites can foster users‘ well-being and social capital does not mean that they always
do. Survey research by Nyland, Marvez, and Beck found that heavy users of MySpace felt less
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socially involved with the community around them than light users. (Nyland, Marvez and Beck 2007,
February) Furthermore, a substantial proportion of respondents were using this social network for
entertainment, as opposed to maintaining or strengthening offline business relationships. This line of
research echoes one of the most pervasive criticisms against Online Social Networks, which is that
they lead to users‘ isolation (e.g., Hodgkinson 2008)
Several methodological problems may explain the contradictory findings of previous studies,
including the use of purposive samples and asking about different platforms. The mixed evidence
about the impact of social network sites on users‘ attitudes, however, reflects the larger issue of ―the
Internet paradox.‖ (Kraut, et al.2002) On one hand, there are studies that support a ―rich get richer‖
perspective, where those that are psychologically better-of (e.g., have high self-esteem and life
satisfaction, have more offline contacts, are more popular, etc.) gain more from using Internet services
(e.g., Tian, 2003). On the other hand, there is research that a‖ poor get richer‖ perspective, where
those that are less better-off gain more from the Internet than those who are better-off. (Stern and
Dillman 2006)
Certainly, this paradox is related to the diffusion of Internet. Early adopters differ significantly from
late adopters and thus the effects of using the Internet services are confounded with differences across
segments of the population. In this regard, focusing on a population with total Internet access, as this
study does, can help uncover the true impact of social media.
Beyond social sites, Internet use in general has been linked both to increases and decreases in social
capital. Echoing Putnam‘s ―time displacement hypothesis‖ Nie argued that Internet use detracted
individuals from face-to-face interactions, which might diminish their social capital. (Nie 2001)
However, later research has found that online communication has a positive role on individuals‘
participation in community life, fostering norms of trust and reciprocity. (Best and Dautrich 2003)
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The evidence is far from conclusive, but it is clear that the positive or negative effects of the Internet
and specifically Online Social Networks on social capital are contingent upon the way this medium is
used. (Ji-Young 2006)
In this study, we adopt the framework suggested by Scheufele and Shah to test the impact of
Facebook on users‘ collaboration and social trust in business participation and operations. (Scheufele
and Shah 2000)
2.3 Social Network Analysis
Social network analysis has emerged as a key technique in modern sociology. It has also gained a
significant following in anthropology, biology, communication studies, economics, geography,
information science, organizational studies, social psychology, and sociolinguistics, and has become a
popular topic of speculation and study. (Wikipedia, Social Network 2010)
People have used the idea of "social network" loosely for over a century to connote complex sets of
relationships between members of social systems at all scales, from interpersonal to international. In
1954, J. A. Barnes started using the term systematically to denote patterns of ties, encompassing
concepts traditionally used by the public and those used by social scientists: bounded groups (e.g.,
tribes, families) and social categories (e.g., gender, ethnicity). Scholars such as S.D. Berkowitz,
Stephen Borgatti, Ronald Burt, Kathleen Carley, Martin Everett, Katherine Faust, Linton Freeman,
Mark Granovetter, David Knoke, David Krackhardt, Peter Marsden, Nicholas Mullins, Anatol
Rapoport, Stanley Wasserman, Barry Wellman, Douglas R. White, and Harrison White expanded the
use of systematic social network analysis. (Wikipedia, Social Network 2010)
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Social network analysis has now moved from being a suggestive metaphor to an analytic approach to
a paradigm, with its own theoretical statements, methods, social network analysis software, and
researchers. Analysts reason from whole to part; from structure to relation to individual; from
behavior to attitude. They typically either study whole networks (also known as complete networks),
all of the ties containing specified relations in a defined population, or personal networks (also known
as egocentric networks), the ties that specified people have, such as their "personal communities".
The distinction between whole/complete networks and personal/egocentric networks has depended
largely on how analysts were able to gather data. That is, for groups such as companies, schools, or
membership societies, the analyst was expected to have complete information about who was in the
network, all participants being both potential egos and alters. Personal/egocentric studies were
typically conducted when identities of egos were known, but not their alters. These studies rely on the
egos to provide information about the identities of alters and there is no expectation that the various
egos or sets of alters will be tied to each other.
A snowball network refers to the idea that the alters identified in an egocentric survey then become
egos themselves and are able in turn to nominate additional alters. While there are severe logistic
limits to conducting snowball network studies, a method for examining hybrid networks has recently
been developed in which egos in complete networks can nominate alters otherwise not listed who are
then available for all subsequent egos to see. The hybrid network may be valuable for examining
whole/complete networks that are expected to include important players beyond those who are
formally identified. For example, employees of a company often work with non-company consultants
who may be part of a network that cannot fully be defined prior to data collection.
Precursors of social networks in the late 1800s include Émile Durkheim and Ferdinand Tönnies.
Tönnies argued that social groups can exist as personal and direct social ties that either link
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individuals who share values and belief (gemeinschaft) or impersonal, formal, and instrumental social
links (gesellschaft). Durkheim gave a non-individualistic explanation of social facts arguing that
social phenomena arise when interacting individuals constitute a reality that can no longer be
accounted for in terms of the properties of individual actors. He distinguished between a traditional
society – "mechanical solidarity" – which prevails if individual differences are minimized, and the
modern society – "organic solidarity" – that develops out of cooperation between differentiated
individuals with independent roles.
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Chapter 3: Aims and Objectives
Apart from the objectives outlined at the beginning, this study of analyzing how to develop Social
Capital using the Online Social Network also aimed at:
Recognizing components of social capital associated organizational outcomes.
Recognizing employees‘ attitude towards Social Capital and the topic itself.
Finding the association between social capital and both transaction costs and organizational
outcomes.
3.1 Limitations and boundaries of the paper
A lot of the research looks at the form of the networks more than their substance, you have an
image of a network, but it is hard to know what to make of it
Social relationships can be seen in isolation from the physical environment, economy and
other factors – as if social relationships were the only influence on development
The starting point of seeing social relationships as the basis for development can mean
researchers underplay unsupportive or destructive social ties
Relationships can be seen in an unrealistically rational way that we wouldn‘t recognize in
relation to our own relationships – as if people make and maintain connections purely for
practical personal benefits, leaving out emotional reasons
Literacy: Not many people are literate enough to use a computer let alone join an online
community in Kenya.
Efforts: A lot of input is required both from the researcher and the interviewee and in Kenya
most people ‗mind their own businesses and don‘t like to be disturbed with questionnaires
and the like.
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The internet use in Africa is still relatively young and most of the information available in
books, online and other sources is reflecting the Western Social traits which might not be the
case here in Africa.
The terms social capital and social network analysis are pretty ‗dry‘ or hard to a non-expert
and this caused a lot of stir trying to explain what the research is all about and how it can help
the organization.
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Chapter 4: Design and Methodology
4. 1 Design
The research design chosen for this study will be the descriptive research and to be more specific the
cross-sectional research design will be used whereby data will be collected from respondents only
once. The researcher wishes to investigate developing social capital through Online Social Networks:
1. Descriptive: the study will explore a deeper understanding of Online Social Networks
for knowledge management and Social Capital development.
2. Formulative: the researcher will propose a framework that if adopted, will educate
and help develop Social Capital within organizations.
4.2 Population
The population of interest consists of the stakeholders of two organizations but from different
industries namely, Mr. Price Clothing Company and Hidalgo Stock Brokers Company. The main
reasons for restricting this study of these institutions is:
1. Guaranteed co-operation and availability of resources (Little or no red tape)
2. Most users are familiar with online social utilities and this will cut back on time needed to
train and educate users.
4.3 Sampling Design
The population will be sampled using the quota sampling whereby judgment is used to select the
subjects or units from each segment based on a specified proportion. In this case those who will be
most helpful. A stratified approach will also be used to divide the population into strata in terms of the
type of stakeholders i.e.
28
a) By business function (e.g. sales, research)
b) By region
c) By business unit
d) By relationship to your company (e.g. employees, customers)
e) Proportions of each stratum will then be calculated and sample determined.
4.4 Data Collection Methods
To collect data both questionnaire and interview schedules will be used. Online questionnaires will be
administered to employees using the Facebook Business Application with the aim of gathering data
on their capability in using the system, their needs and requirements for the system, their attitudes
towards online social networks. Frequent informal interviews will be carried out from time to time.
To ensure the pilot study, data will be gathered and analyzed, the research instruments will be
standardized on the basis of the findings from the pilot study. The study will use the internal
consistency method to test reliability. The split-half method will be used o establish the consistency of
the instruments. This involves splitting the statement (items) into two halves (odd and even) items. In
this study all odd numbered items will be placed in one subset while the even numbered items will be
placed in another subset. Each of the subsets will be treated separately and scored accordingly. The
two subsets will then be correlated using Pearsons‘s product moment correlation coefficient, which is
taken to be the estimate of reliability. Other data collection methods that will be employed in this
study include:
Website hits statistics
Membership statistics (Entrants and Leavers from the group)
Blogs and discussion board monitoring and growth
Network growth monitoring
29
4.5 Data Analysis Methods
This study will combine quantitative and qualitative data. After data has been collected it will be
checked and coded and analyzed using SPSS statistical package. This data will be analyzed,
summarized and presented in tables using totals, ratios frequencies, and percentages. In regard to each
issue, textual comments will be made with direct reference to the statistical data provided in tables.
In analyzing data, descriptive statistics will be employed. This statistical tool will be used to condense
and summarize description of units regard to innumerable or measurable characteristics. Descriptive
statistics will be used in this study to create percentages, frequency tables and graphs charts.
An algorithm known as the Social Networking Potential (SNP) will also be used to analyze the data.
Social Networking Potential is a numeric coefficient, derived through algorithms to represent both the
size of an individual‘s social network and their ability to influence that network. A close synonym is
the Alpha User, a person with high SNP. SNP coefficients have two primary functions i.e. the
classification of individuals based on their Social Network Potential, and the weighting of respondents
in quantitative market research studies,
30
Chapter 5: Findings
5.1 Overview
The Internet first became available in Kenya during 1993. Full Internet access was established in
1995. The African Regional Centre for Computing (ARCC), an NGO based in Nairobi, Kenya,
became the first provider of web-based Internet service. The first commercial ISP, Formnet began
operating in 1995. Soon competition increased with the entry of three other ISPs. All the ISPs would
lease analogue or digital data lines from Kenya to the US to access the Internet backbone.
In 2000, there were about 200,000 Internet users in Kenya, with an estimated monthly growth of 300
new subscribers each month. The main users of the Internet in Kenya are Multinational corporations,
international organizations and NGOs. All the government‘s ministries are now accessible via the
internet. (Internet World Stats 2009)
The latest estimate of Internet users for Kenya from the ITU is 1,054,900 people, corresponding to a
penetration rate of 3.1%. At present there are 72 licensed ISPs of which about half are operational.
Currently the Communications Commission of Kenya (CCK) is considering conducting a
comprehensive Internet Usage Study to confirm the real number of users in Kenya.
Since many people in Kenya do not have fixed phone lines, computers, or electricity, internet shops,
known as cyber cafes, provide access to internet and email, mainly in the major towns. A major factor
that may have influenced the use of ICT positively in Kenya is the use of the English language.
English is the official language in Kenya, and Information Technology (IT) services are largely based
in English, so this has been an advantage. (Internet World Stats 2009)
31
5.2 Survey Findings
The questionnaire used for data collection ran online for a period of three weeks since 25th January
2010 till 19th January 2010. A total of 364 people participated, 161 men and 203 females, and this
section is an overview of the findings.
Figure 5.2.1: Findings Overview
Table 5.2.1: An overview of the Kenyan Population
Latest Population Estimate:
39,002,772 population for 2009, (US Census Bureau. http://www.census.gov/)
Gross National Income:
GNI per capita is US$ 770 ('08) (World Bank. http://www.worldbank.org)
Country Area:
580,367 sq km
The heaviest users of the Internet can be said to be between the ages of 20 to 30 years. The table and
bar graph below show the responders age brackets.
44%
56%
Findings Overview
Male Female
32
Table 5.2.2: Internet Users Age Groups
Age Male Female
Under 18 9 15
18 - 20 22 37
21 - 25 65 77
26 - 30 37 41
31 - 40 15 20
41 - 50 11 8
51 - 65 2 4
Above 66 0 1
Figure 5.2.2: Internet Users Age Groups
Most of these users were Kenyans (at least 89%) while a few (6%) were from various countries
across the globe and others ignored the question. At least 12% said they were interested in
Science/Technology, 26% Business Disciplines, 14% Arts & Humanities, 40% Social Sciences while
8% Other.
MySpace users amounted to 5%, Facebook 67%, Orkut 3% and 30% other social sites. Some had
created profiles in only one social network (5%), others two (7%) while the largest number (87%)
had more than two. Of all these responders at least 87% said that Facebook was their primary social
networking site.
0
10
20
30
40
50
60
70
80
Male
Female
33
5.3 What Do Kenyans Do Online?
We all know that the Internet has evolved tremendously in the past decade; with commerce,
communication and networking taking up the bulk of most people's time online. Figure 5.3.1 shows
the percentage of users across social networks while Figure 5.3.2 compares male versus female on
these social networks. What do people do while they're on the Web? Specifically what do Kenyans do
online?
Figure 5.3.1: Percentage of users across social networks
SOURCE: Social bookmarking statistics (2008)
34
Figure 5.3.2: Males Vs. females on social network sites
Some new research by Synovate indicates that Kenya has more than 3.5 million monthly internet
users with over two million using Facebook (Facebook clicks a threat to Kenyan TV stations and
Radio, Really? n.d.). Some of the key activities Kenyans involve in are:
Dating: Using web tools and services that are designed to find people online.
Downloading: Downloading free movies, e-books, audio tapes e.t.c.
Online Booking and Shopping: Booking air ticket, exams or shopping for various items across
several web-malls.
Socializing/Networking: Using Online Social Platforms like Facebook.
35
Looking for Jobs: Job seekers login to various site to upload their CVs and look for potential
employers
The tables below summarize the Internet statistics in Kenya and show Internet Usage respectively.
Kenya‘s Internet usage is growing at a high rate. The diagram below shows the ranking of Kenya among other
African countries:
Figure 5.3.3: Kenya’s Ranking
Table 5.3.1: Kenyan Internet Stats
Country code .ke
Hosts 27,376
International Internet bandwidth > Mbps 105 Mbps
Internet Service Providers 65
ISP 65
Live-journal users 46
Price basket for Internet > US$ per month 75.93 $/month
Secure Internet servers 17
TLD .ke
36
Users 3,000,000
SOURCE : ITU (2009)
Table 5.3.2: Internet Use
Internet Use
Internet Activities Male Female Total
Send/Receive Email 127 172 299
Take Part in Mailing Lists 56 121 177
Access Digital Libraries, Newspapers, Magazines 20 89 109
Take Online College Courses 72 126 198
Purchase Products or Services 112 197 309
Surf the Web 147 165 312
Participate in Usenet Newsgroups 150 76 226
Engage in Chats 100 212 312
Visit MUDs, MOOs, Other Multiuser Environments 111 201 312
Play Multiuser Games 153 50 203
37
Figure 5.3.4: Internet Use
The survey contained 31 items where participants reported different aspects of their Internet use. For
each item, participants could answer: "1. Rarely," "2. Monthly," "3. Weekly," "4. A Few Times a
Week," and "5. Daily". Factor analysis of these ten items revealed two distinct profiles of Internet use:
synchronous and asynchronous (Table 5.2.2). Most Kenyans use the Internet for Networking
purposes. Most (at least 67%) of those who use social site said that they use the sites to keep track of
their friends‘ status.
Asked why they joined the social networks, the respondents had differing reasons. This question had
seven (7) options ranging from one (1 - Strongly Disagree) to seven (7 - Strongly Agree), four (4)
being Neutral. The following figure shows the results of this survey question:
0
50
100
150
200
250
Male
Female
38
Figure 5.3.5: What Kenyans do Online
Internet usage in Kenya, as Figure 5.3.2 would suggest, is often on social basis. Most people feel the
need to go online to keep track of their old friends using various Online Social Platforms. Asked how
public the respondent‘s profile on their preferred social site was, at least 81% said they only allowed
only friends, 9% to anyone while the rest were not sure.
Responding to the survey question that asked the respondents how they communicated on the social
site, 37% said they posted messages to a friend's page, space or wall, 11% send a bulletin or group
message to all of your friends, 41% send private messages to a friend within the social networking
system and 11% post comments to a friend's blog.
Many people are still afraid of giving too much information online as cases of Internet fraud have hit
a high in the recent past. The survey showed that most people, at least 98% give their first name but
hesitate to give out other personal details all too quickly. Figure 5.3.3 shows what information people
are willing to share publicly on their profile.
39
Table 5.3.4: Personal Information
Information % that sgree to share
First Name 98%
Last Name 80%
Photos of friends 55%
Photos of yourself 61%
City or town 44%
Link to your blog 57%
University name 69%
IM screen name 41%
Email address 43%
Stream audio or MP3 files 37%
Videos 21%
Cell phone numbers 12%
Figure 5.3.6: Personal Information
The survey showed that many people, at least 77%, don‘t want to share personal information with
people they‘ve just met online. At least 47% of the respondents said they provide some false
information about themselves in their profiles. Most respondents, 71%, said they ignore requests from
strangers while 21% try to find out more about the person requesting them. Only 8% said they
respond to ask the person to leave them alone.
40
A whopping 91% admitted they use their online social network to seek information on new/existing
products. Most of the respondents, at least 56% have had an online social network profile for two to
three years while 33% said they had the profile for about an year. As Figure 5.2.3 indicated, most
Internet users are college/university students between the age of 21-25. Most of them, at least 87%,
use PDAs, mobile phones and wireless laptops to access their social network websites.
Online social networks have helped many keep track of long lost friends and also make new friends.
Life online and offline are two completely different tales as told by Figure 5.3.4 below. The
respondents were asked how many friends they keep track of online and offline.
Table 5.3.5: Online and Offline life comparison,
Offline Online
1 - 4 119 23
5 - 9 88 31
10 - 14 61 45
15 - 19 43 53
21 - 30 25 87
Above 30 11 121
Figure 5.3.7: Online and Offline life comparison,
0
20
40
60
80
100
120
140
1 - 4 5 - 9 10 - 14 15 - 19 21 - 30 Above 30
Offline
Online
41
Keeping track of friends online or even creating a social network online is as easy as clicking a
button. And that is why keeping up with 120 plus friends status offline is a problem but online is easy.
Online Social Networks do not only provide a networking platform but also bring groups with
common interest or point of view together. Be it in politics, religion, philosophy, personal hobbies,
music, movies, games, social events and so on, a user finds comfort in joining one or more of these
groups because of that feeling of belonging.
This survey showed that Internet usage in Kenya is on the increase and social sites are getting more
and more popular. This means that organizations can really take advantage of this and build their
social capital among other cooperate things like their brand using these social sites. The following
chapters expound more on this and present a framework that corporations can use as a model to build
their social capital.
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Chapter 6: Data Presentation and Analysis
6.1 Introduction
Data presentation covered in the discussion chapter, covers the analysis and scrutiny of the findings
and is presented in order to answer the study objectives. The data herein is presented in a simple and
clear way. Only the most important and relevant data is presented
Most collected data is presented as follows:
Raw numbers
Measures of central tendency
Percentage
Tables
Graphic Presentations
6.2 Qualitative Methods that Contribute to the Study of Social Capital
This chapter covers concrete suggestions for using qualitative methods to explore six sometimes
overlapping dimensions of social capital used in data presentation and analysis:
(i) Groups and networks,
(ii) Trust and solidarity,
(iii) Collective action and cooperation,
(iv) Information and communication,
(v) Social cohesion and inclusion, and
(vi) Empowerment and political action.
43
These dimensions reflect two different ways of thinking about social capital. The first focuses on how
social relationships act as a means through which individuals, households, or small groups secure (or
are denied) access to resources.3 From this standpoint, individuals, households, or small groups who
have access to important resources, or who occupy key strategic positions in a network, are said to
have ―more‖ social capital than others, because their social relationships and position in these
networks give them better access to and control over valued resources. Implicit in this approach is the
recognition that the distribution of social capital within any given community is unequal and often
stratified, meaning that social capital can function as a mechanism of exclusion as well as inclusion.
Resources themselves, of course, can be used for a variety of constructive or destructive purposes.
Most social science researchers acknowledge the importance of using a range of methods to assess
given phenomena. In practice, however, the distinctive skill sets associated with each approach, plus
limited time and resources, mean that only one approach tends to be adopted for a specific study. This
practice is especially unfortunate in development, since the issues under investigation are typically
very complex. In order to adequately understand development issues and establish a firm basis on
which to draw project and policy recommendations, data that offers both context-specific ―depth‖
(usually obtained via qualitative methods) and generalizable ―breadth‖ (usually obtained via
quantitative methods) is required (Bamberger 2000; Rao and Woolcock 2003).
―Social capital‖ is one such complex issue that benefits from the coherent integration of qualitative
and quantitative approaches. Researchers in the field are thus encouraged to adopt the combination of
qualitative and quantitative methods that best correspond to the specific nature of the issues under
investigation. While strongly supportive of integrated research methods, this guide focuses
specifically on qualitative approaches.
44
6.3 Comparative advantage of qualitative and quantitative approaches
The case for qualitative research rests on the unique and important insights that it brings in its own
right and, secondarily, on its capacity to address the weaknesses of quantitative approaches. Indeed,
the respective strengths and weaknesses of qualitative and quantitative approaches are largely
complementary—that is, the weaknesses of one approach can be compensated for by the strengths of
the other.
Quantitative methods characteristically refer to standardized questionnaires that are administered to
individuals or households, which are identified through various forms of sampling (usually random
sampling). Sampling allows the results to be considered representative, comparable, and generalizable
to a wider population. Given a set of identifying conditions, quantitative data can help establish
correlations between given variables and outcomes. Such data should allow others to validate original
findings by independently replicating the analysis. By remaining several steps removed from the
individuals from whom the data is obtained, and by collecting and analyzing the data in numerical
form, quantitative methods are intended to uphold empirically rigorous, impartial, and objective
research standards.
The strengths of quantitative research can, however, also be weaknesses. Many important
characteristics of people and communities (both rich and poor)—for example, identities, perceptions,
and beliefs—cannot be meaningfully reduced to numbers or adequately understood without reference
to the local context in which people live. In addition, most surveys are designed far from the places
where they will be administered and thus tend to reflect the preconceptions and biases of the
researcher. Because ―outsiders‖ (i.e., foreign researchers) set the parameters of research, they are
unlikely to be exposed to new discoveries and/or unexpected findings. Although good surveys
undergo several rounds of rigorous pre-testing, the questions used in such surveys are not usually
developed on the basis of insights from the field. Thus, while pre-testing can identify and correct
45
questions that are clearly ill suited to a given research objective, the limitations of context remain.
These limitations can be mitigated by qualitative methods that incorporate insights from the field and
leave room for unexpected findings.
Effective quantitative research usually requires a large sample size (sometimes several thousand
households). However, lack of resources sometimes makes large-scale research of this kind
impossible. In many settings—particularly developing countries—interested parties (e.g.,
governments, nongovernmental organizations, public service providers) may lack the skills and
especially the resources needed to conduct a thorough quantitative evaluation. In such cases,
qualitative methods can be used with smaller samples to provide insights into a development question.
Alternatively, interested parties might engage external researchers with little or no familiarity with a
country (let alone a region or municipality) to analyze data from context-specific household surveys.
Although such efforts may yield broad policy recommendations, they rarely provide results that are
useful to local program officials or project beneficiaries. Qualitative research can provide a context
for such quantitative findings, making them more relevant and specific.
Qualitative methods typically refer to a range of data collection and analysis techniques that use
purposive sampling and semi-structured, open-ended interviews. These techniques, which both
produce and analyze textual data, allow for more in-depth analysis of social, political, and economic
processes (Krishna and Shrader 2000, Hentschel 1999).
Qualitative methods both value and incorporate experiential knowledge into the analysis of
development successes and failures. Studying poverty and other issues from the outside tends to favor
technical expertise, which may or may not include an appreciation of the context of various local
situations. As Chambers (1997, 32) points out, ―power hinders learning.‖ Qualitative methods and
open-ended responses tilt the balance of power and expertise away from the researcher toward
46
respondents and community members. Such methods are vital for examining complex issues of
causality, process, and context. Open-ended questioning and focus group discussions are, in fact,
designed to allow respondents to identify and articulate their priorities and concerns free from
researchers‘ restrictions and assumptions.
One issue of qualitative research is the question of whose voice is being heard, and amplified, by the
research (Narayan 1995, Chambers 1997, Estrella and Gaventa 1997). Exploring issues from the
perspective of different groups thus becomes important. Various groups within a community may
have overlapping or very different experiences of social norms and networks. Qualitative methods
that allow researchers to explore the views of homogenous as well as diverse groups of people help
unpack these differing perspectives within a community. Because social capital is relational—it exists
between people—asking a group of people to respond together to certain questions and hypothetical
situations may yield information that is more nuanced than data derived from surveys.
Qualitative methods such as focus groups, institution mapping, and priority rankings are particularly
suitable for social capital research because social capital comes into play and can be observed during
these exercises. In some cases, social capital can even be used and enhanced through focus group
work.6 The processes involved in qualitative data collection and analysis can also build shared
ownership of research and its results between researchers and the community, which ceases to be
simply the subject or respondent, but a driver of the process.
In circumstances where a quantitative survey may be difficult to administer, qualitative methods can
also be useful. Certain marginalized communities are small in number (e.g., the disabled, widows) or
difficult for outsiders to access (e.g., sex workers, victims of domestic abuse), meaning that their
views and experiences are unlikely to be captured in a survey based on random sampling. In situations
where governments are highly suspicious of quantitative surveys, qualitative work may be the only
research option available for assessing social capital issues. And although small samples are more
47
frequent in qualitative research, it is possible to conduct larger-scale, cross-country qualitative
research (Narayan and Shah 1999).
Just as quantitative approaches have their limitations, so, too, do qualitative methods. Because the
samples tend to be small and not selected randomly, it is relatively more difficult to extrapolate
qualitative findings to the wider population. Second, because groups may be selected in an
idiosyncratic manner (e.g., by decision of the lead investigator) or on the recommendation of other
participants (as in ―snowball‖ sampling procedures, in which one respondent agrees to provide access
to another respondent), it can be difficult to replicate, and thus independently verify, the results of
qualitative research.
Third, analysis of qualitative data demands interpretation of the research, and two researchers looking
at the same data may arrive at somewhat different conclusions. Fourth, because qualitative data
cannot control for other mitigating factors or establish the counterfactual, it is hard (but again, not
impossible) to make compelling claims regarding causality on the basis of qualitative data alone.8
Using quantitative approaches can compensate for some of these weaknesses; others simply require
researchers to acknowledge the limits of the research design and make a good-faith effort to minimize
them.
To conclude, the limitations of both qualitative methods and quantitative methods are mitigated by
triangulation. In the same way that quantitative data benefits from comparisons with qualitative data,
it is vital that qualitative data be cross-checked against quantitative findings.
48
Chapter 7: Discussion
Developing Social Capital through Online Social Networks
7.1 Social Capital
Social capital as defined earlier is a sociological concept used in business, economics,
organizational behavior, political science, public health and the social sciences in general to
refer to connections within and between social networks. (Wikipedia, 2010)
7.1.1 Social Capital Background
L.J. Hanifan's 1916 article regarding local support for rural schools is one of the first occurrences of
the term "social capital" in reference to social cohesion and personal investment in the community. In
defining the concept, Hanifan contrasts social capital with material goods by defining it as:
"I do not refer to real estate, or to personal property or to cold cash, but rather to that in life which
tends to make these tangible substances count for most in the daily lives of people, namely, goodwill,
fellowship, mutual sympathy and social intercourse among a group of individuals and families who
make up a social unit… If he may come into contact with his neighbor, and they with other neighbors,
there will be an accumulation of social capital, which may immediately satisfy his social needs and
which may bear a social potentiality sufficient to the substantial improvement of living conditions in
the whole community. The community as a whole will benefit by the cooperation of all its parts, while
the individual will find in his associations the advantages of the help, the sympathy, and the
fellowship of his neighbors.‖ (Hanifan, L. J. (1916)
49
While various aspects of the concept have been approached by all social science fields, some trace the
modern usage of the term to Jane Jacobs in the 1960s. However, she did not explicitly define a term
social capital but used it in an article with a reference to the value of networks.(Wikipedia, 2010)
Political scientist Robert Salisbury advanced the term as a critical component of interest group
formation in his 1969 article "An Exchange Theory of Interest Groups" in the Midwest Journal of
Political Science. Sociologist Pierre Bourdieu used the term in 1972 in his Outline of a Theory of
Practice, and clarified the term some years later in contrast to cultural, economic, and symbolic
capital. (Bourdieu, P. 1972) Sociologists James Coleman, Barry Wellman and Scot Wortley adopted
Glenn Loury's 1977 definition in developing and popularizing the concept. (Coleman, J. 1988). In
the late 1990s the concept gained popularity, serving as the focus of a World Bank research
programme and the main subject of several mainstream books, including and Lewis Feldstein's book
"Better Together". (Foley, M. W. & Edwards, B. 1997).
The concept that underlies social capital has a much longer history; thinkers exploring the relation
between associational life and democracy were using similar concepts regularly by the 19th century,
drawing on the work of earlier writers such as James Madison (The Federalist Papers) and Alexis de
Tocqueville (Democracy in America) to integrate concepts of social cohesion and connectedness into
the pluralist tradition in American political science. John Dewey may have made the first direct
mainstream use of "social capital" in The School and Society in 1899, though he did not offer a
definition.
7.1.2 Analyzing Social Capital
Though Bourdieu might agree with Coleman that social capital in the abstract is a neutral resource, his
work tends to show how it can be used practically to produce or reproduce inequality, demonstrating
for instance how people gain access to powerful positions through the direct and indirect employment
50
of social connections/networks.(Wikipedia, 2010) Putnam has used the concept in a much more
positive light: Though he was at first careful to argue that social capital was a neutral term, stating
―whether or not [the] shared are praiseworthy is, of course, entirely another matter‖, his work on
American society tends to frame social capital as a producer of "civic engagement" and also a broad
societal measure of communal health.(Alessandrini, M. 2002). He also transforms social capital
from a resource possessed by individuals to an attribute of collectives, focusing on norms and trust as
producers of social capital to the exclusion of networks.
Mahyar Arefi identifies consensus building as a direct positive indicator of social capital. Consensus
implies ―shared interest‖ and agreement among various actors and stakeholders to induce collective
action. Collective action is thus an indicator of increased social capital. (Arefi, M. 2003. pg.384)
Edwards and Foley, as editors of a special edition of the American Behavioural Scientist on "Social
Capital, Civil Society and Contemporary Democracy," raised two key issues in the study of social
capital. First, social capital is not equally available to all, in much the same way that other forms of
capital are differently available. Geographic and social isolation limit access to this resource. Second,
not all social capital is created equally. The value of a specific source of social capital depends in no
small part on the socio-economic position of the source with society. On top of this, Portes has
identified four negative consequences of social capital: exclusion of outsiders; excess claims on group
members; restrictions on individual freedom; and downward leveling norms. (Wikipedia. 2010) Here
it is important to note the distinction between "bonding" and "bridging". There is currently no
research which identifies the negative consequences of "bridging" social capital when in balance with
its necessary antecedent, "bonding".
How the Internet affects social capital is neither a trivial nor an obscure question. Robert Putnam has
documented a long-term decline since the 1960s in American civic involvement. This decline includes
51
the lessened ability of citizens to articulate and organize requests for good government, the movement
away from community life, and increased psychological alienation. Putnam‘s evidence encompasses
two forms of social capital:
a) Network Capital: Relations with friends, neighbors, relatives, and workmates that
significantly provide companionship, emotional aid, goods and services, information, and a
sense of belonging.
b) Participatory Capital: Involvement in politics and voluntary organizations that afford
opportunities for people to bond, create joint accomplishments, and aggregate and articulate
their demands and desires (a concept enshrined in the American heritage by Tocqueville,
1835). (Wellman, et al. 2001)
A third dimension has since been added to this discussion which is:
c) Community Commitment: Social capital consists of more than going through the
motions of interpersonal interaction and organizational involvement. When people
have a strong attitude toward community – have a motivated, responsible sense of
belonging – they will mobilize their social capital more willingly and effectively.
(Wellman, et al. 2001)
Finally, social capital is often linked to the success of democracy and political involvement. Robert
Putnam, in his book Bowling Alone makes the argument that social capital is linked to the recent
decline in American political participation.
7.1.3 Benefits of Social Capital
Social capital is charged with a range of potential beneficial effects including: facilitation of higher
levels of, and growth in, gross domestic product (GDP); facilitation of more efficient functioning of
labor markets; lower levels of crime; and improvements in the effectiveness of institutions of
52
government. Social capital is an important variable in educational attainment, public health,
community governance, and economic problems, and is also an important element in production.
Economic and business performance at both the national and sub-national level is also affected by
social capital. Some authors have emphasized the importance of social capital for problem solving and
how only certain types of social capital contribute to this. (Claridge. 2004).
Requena suggested that the importance of social capital lies in that it brings together several important
sociological concepts such as social support, integration and social cohesion. This view is supported
by Rothstein who stated that the real strength of social capital theory is the combination of macro-
sociological historical structures with micro-level causal mechanisms, a rare feature in the social
sciences. The literature recognizes social capital as important to the efficient functioning of modern
economies, and stable liberal democracy . (Claridge. 2004).
7.2 Social Networking
A Social Network is a social structure made of individuals (or organizations) called "nodes," which
are tied (connected) by one or more specific types of interdependency, such as friendship, kinship,
financial exchange, dislike, sexual relationships, or relationships of beliefs, knowledge or prestige.
(Wikipedia. 2010)
7.2.1 Online Social Networking Background
Social Networks have been around for several decades, way before even the PC. Before the PC and
before the Internet presence was felt people made business contacts and friends slowly unlike today
where one can meet almost fifty ―friends‖ or business associates in a day online. Long before the
Internet became accessible to the general public, people were hosting BBS systems, many of them
focused on an interest group or local community. One particularly prescient invention was FidoNet, a
53
network for BBSes that allowed systems to transfer data (messages, files, etc.) in bucket-brigade
fashion to sites around the world. It grew to, at one point, cover much of the world, and was an
entirely community-based effort. (The GigaOM Network. 2008)
The Internet has revolutionized Social Networks and at this rate it‘s even hard to predict what the
future holds in regard to Online Social Networks. Social Networking has been made easier by the
Internet and this has inevitably changed the development of social capital.
7.2.2 Online Social Networking Analysis
Social network analysis views social relationships in terms of network theory consisting of nodes and
ties. Nodes are the individual actors within the networks, and ties are the relationships between the
actors. The resulting graph-based structures are often very complex. There can be many kinds of ties
between the nodes. Research in a number of academic fields has shown that social networks operate
on many levels, from families up to the level of nations, and play a critical role in determining the
way problems are solved, organizations are run, and the degree to which individuals succeed in
achieving their goals. (Wikipedia 2010)
In its simplest form, a social network is a map of all of the relevant nodes between all the nodes being
studied. The network can also be used to measure social capital -- the value that an individual gets
from the social network. These concepts are often displayed in a social network diagram, where nodes
are the points and ties are the lines. (Wikipedia, Social Network 2010)
54
Figure 7.2.1: Social network analysis
Note: An example of a social network diagram. The node with the highest betweenness centrality is marked in
yellow. SOURCE: Wikipedia, ―Social Network‖ (2010) http://en.wikipedia.org/wiki/Social_network
7.2.3 Benefits of Online Social Networking
Social Networking of course is in its infancy, at least to web site traffic generators, so what are the so
far under-penetrated benefits of social networking? (Mize 2007)
a) Lower Costs
It is significantly cheaper to employ online social networking strategies than to pay for advertising.
When you social network, you can prescreen potential customers. You learn what your prospects like
and what they don‘t. That personal relationship you gain when you connect with your potential
customer is more valuable than what you would get had you advertised. Advertising is impersonal:
the ―one size fits all‖ concept does not seem to work anymore. (Mize 2007)
b) Credibility and Trust
Connecting with prospects on a personal level builds trust and credibility. A general rule of thumb is
to offer your services, expertise or help before you ask for it. It is acceptable to promote your services
55
when asked. If you‘re not careful, your attempts could be considered spam. Instead, wait for the
opportunities to present themselves instead of forcing a situation. (Mize 2007)
c) It’s Who You Know
When you socialize, you meet others who know others. How are you going to meet the president of a
large corporation? You start by talking to his friends. You ask your associates if they know someone
who is connected with him and on and on.
d) Branding and marketing
Corporations and major brands do successfully use the more purely "social" networking sites,
however, to market themselves. Most major brands have "fan" pages on the sites like Facebook, and
other social platforms like Twitter are being used as an effective way to vitally market products
through "buzz" campaigns. In some cases, companies are finding that their own customers are taking
the initiative and starting the Facebook "fan" pages. (Fraser and Dutta July/August 2009)
7.3 How Online Social Networking affects Social Capital
How does the Internet affect social capital? Do the communication possibilities of the Internet
increase, decrease, or supplement interpersonal contact, participation, and community
commitment?
This evidence comes from a 1998 survey of 39,211 visitors to the National Geographic Society
Website, one of the first large-scale Web surveys. The authors find that people's
interaction online
supplements their face-to-face and telephone communication without increasing or decreasing it.
(Wellman, et al. 2001)
However, heavy Internet use is associated with increased participation
in voluntary organizations and
politics. Further support for
this effect is the positive association between offline and online
participation in voluntary organizations and politics. However, the effects of the Internet are not only
positive: The heaviest users of the Internet are the least committed to
online community. Taken
56
together, this evidence suggests that the Internet is becoming normalized as it is incorporated into
the
routine practices of everyday life. (Wellman, et al. 2001)
7.3.1 Does Online Social Networking Increase Social Capital?
Early – and continuing – excitement about the Online Social Networking saw it as stimulating
positive change in people‘s lives by creating new forms of online interaction and enhancing offline
relationships. The Internet would restore community by providing a meeting space for people with
common interests, overcoming limitations of space and time. (Wellman, et al. 2001)
Online communities would promote open, democratic discourse, allow for multiple perspectives, and
mobilize collective action. Although early accounts focused on the formation of online ―virtual‖
communities (e.g., Rheingold, 1993), it has become clear that most relationships formed in
cyberspace continue in physical space, leading to new forms of community characterized by a mixture
of online and offline interactions (e.g., Rheingold, 2001). Moreover, online interactions fill
communication gaps between face to face meetings. The Internet thus enhances the tendency for
many ties to be nonlocal, connected by cars, planes, phones, and now computer networks. Although a
developing phenomenon worldwide, nonlocal community is probably most prevalent in North
America where people move frequently and sometimes far-away; where family, friends, former
neighbors, and workmates are separated by many miles; and where the many immigrants keep contact
with friends and relatives in their homelands. (Wellman, et al. 2001)
Those who see the Internet as playing an increasingly central role in everyday life would argue that it
increases communication, offline as well as online. In this view, not only does the Internet afford
opportunities to contact friends and kin at low cost, it enhances face-to-face and telephone
communication as network members become aware of each others‘ needs, stimulate their
relationships through more frequent contact; exchange songs, pictures, and other files; and make
57
online arrangements to see and phone each other. The Internet can also increase organizational
involvement by facilitating the flow of information between face-to-face meetings and arranging these
meetings themselves. The plethora of information available on the web and the ease of using search
engines and hyperlinks to find groups fitting one‘s interests should enable newcomers to find, join,
and get involved in kindred organizations. Thus, if the Internet increases social capital, then high
Internet use should be accompanied by more offline interpersonal contact, organizational
participation, and commitment to community. (Wellman, et al. 2001)
7.3.2 Does Online Social Networking Decrease Social Capital?
The second view argues for an inverse relationship, that the Internet is fostering a decline in social
capital. The interrelated bases for the argument are that:
1) The Internet may be diverting people from ―true‖ community because online interactions are
inherently inferior to face-to-face and even phone interactions. Online ties may be less able
than offline ties to foster complex friendship, provide intangible resources such as emotional
support, and provide tangible material aid. As Robert Putnam once told Barry Wellman: ―I
think you're a wild-eyed optimist to think that person-to-person networks are just as good as,
if not better than old-fashioned door-to door (or rather faces-to-faces) networks‖ (personal
email, January 10 2000).
2) The Internet may compete for time with other activities in an inelastic 24-hour day. There are
discrepant findings about whether online time sinks do or do not pull people away from other
interactions inside and outside the household. The Internet can draw people's attention away
from their immediate physical environments while they are online. Some researchers see a
parallel in the impact of the Internet with the influence of television on North American life.
The television had a similar absorptive effect that reduced social interaction in the home, as
58
well as social and political involvement outside it. But broadcast television is not a clear
analogue to the socially interactive Internet.
3) The Internet may be a stressor that depresses and alienates people from interaction. One
longitudinal study of ―newbies‖ to the Internet found that as Internet use increases, social
contact offline decreases, and depression and loneliness increase. Although the Internet
enhanced weak online ties, it simultaneously decreased stronger offline interactions. How
might the Internet be alienating?
a) Newbies often experience stress and time pressures after getting computerized.
b) Experienced users may have better coping techniques, but their more complex uses of the
Internet creates problems because programs often interact badly and much time is
required to cope with computer failures.
c) The vaunted ubiquitous connectivity of the Internet makes people more accessible to each
other, whether the recipients want it or not. Contact with less-enjoyable people, perhaps
bringing unwanted information, may depress and alienate. Active participants are more
likely to be flawed and defamed.
4) Not all uses of the Internet are social. Much activity is web-oriented, seeking information or
engaging in solitary recreations. Moreover, many social activities online such as email are
asynchronous, delaying gratifying feedback until the recipient signs on, reads the message,
decides to answer, and the original sender eventually gets his answer.
5) Computerization and the Internet can blur the home-work boundary. People bring work home,
and attend to it rather than to their families, friends, and other activities. The ease of working
at home both reflects and reinforces the contemporary proliferation of ―knowledge workers.‖
59
6) Although the Internet can foster global interactions, it keeps people indoors, staring at their
screens and neglecting local interactions at home and in the neighborhood.
7) Online ties may be more homogeneous in perspective. They often evolve around a specific
interest such as soap operas or BMW cars. This narrows perspectives and access to new
information
8) The Internet may so foster contact with acquaintances as to tilt the balance between weak and
strong ties. The value of weak ties is in their provision of new information and access to
disparate networks, whereas strong ties bound to a community are characterized by
commitment, friendship, and exchange of resources such as emotional support. Thus, if the
Internet decreases social capital, then high Internet use should be accompanied by less offline
interpersonal contact, organizational and political participation, and commitment to
community.
7.3.3 Does the Internet Supplement Social Capital?
Where the Increase and Decrease arguments privilege the Internet by seeing it as radically changing
how people interact offline, the supplement argument gives this new technology less of a central role
in shaping social trends. It presents the Internet as best understood in the context of a person‘s overall
life. It is integrated into rhythms of daily life, with life online viewed as an extension of offline
activities. For example, one study finds the Internet to be ―a multidimensional technology used in a
manner similar to other, more traditional technologies.‖ Thus, the Internet provides an additional
means of communication to telephone and face-to-face contact, one that can be more convenient and
affordable.
60
The supplement argument suggests that the Internet‘s effects on society will be important but
evolutionary, like the telephone has been, continuing and intensifying the interpersonal transformation
from ―door-to-door‖ to individualized ―place-to-place‖ and ―person-to-person‖ networks. Although
face-to-face and telephone contact continue, they are complemented by the Internet‘s ease in
connecting geographically dispersed people and organizations bonded by shared interests.
The Internet may be more useful for maintaining existing ties than for creating new ones. Nor might
the Internet lead to organizational and political participation, if users have no interest in such matters.
For example, wiring Blacksburg Electronic Village did not produce large changes in interpersonal
contact and community involvement. Similarly, the introduction of sophisticated information and
communication systems in the business world has not demonstrably created social capital. Thus, if the
Internet supplements social capital, then Internet use should supplement offline interpersonal
interaction, not affect organizational participation, and increase commitment to community. The level
of Internet involvement will not be associated with either more or less offline activity.
7.4 Enterprise-related social capital
As this paper deals with implications of social capital for business, we mainly focus on the prime
actor in business – the enterprise – and the social capital it invests in. Table 7 provides a schematic
picture of the component parts of enterprise-based social capital.
Table 7.4.1: Social capital of the enterprise broken down into different component parts
Social capital internal
to the enterprise
The enterprise‘s external social capital
Links/relations filled
with attitudes, norms,
Production-related Environment-related Market-related
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traditions etc. that are
expressed in the form
of:
- Company spirit
- Climate for
cooperation
- Methods for
codifying knowledge,
product development,
conflict resolution,
etc.
Links/relations to
suppliers, product
users, partners in
cooperation and
development
Links/relations to the
local/regional
environment, to
political decision-makers
etc. (Lobby
capacity, etc.)
Trademarks and
other
general customer
relations
SOURCE: Westlund (2003)
7.4.1 The enterprise’s internal social capital
The basic division in the figure is between the enterprise‘s internal and external social capital. All
actors in the enterprise, i.e. both the management and the employees, form the internal social capital.
Mainly in the disciplines of management, business administration and business sociology, the
literature in these topics has expanded heavily, although other terms than social capital has been used.
One important topic has been. employee-employer relations.
One often cited historical example of the importance of employment relations is the Swedish
―Saltsjöbad Spirit‖, named after the place where Sweden‘s central employers‘ association and blue-
collar union signed an agreement 1937. Up to the beginning of the 30‘s the Swedish labor marked was
characterized by hard class struggles that reached their climax with the shooting of five striking
workers 1932. This became a signal for afterthought and both sides realized the need for a new
strategy. Labor market relations in Sweden were peaceful until 1969, with exception of a communist
dominated national strike among metal workers 1945, and conflicts were solved by negotiating. The
years between 1945-70 was also characterized by very rapid growth in Sweden‘s economy, a growth
that during the entire century 1870- 1970 was surpassed only by Japan. It is of course not possible to
claim that the peaceful employee relations were the one single factor behind 25 years of extraordinary
growth, but no judge has denied their impact. The agreement of the employee relations was a central
agreement, based on opinions on local level. It later became the model for basically every enterprise.
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Japan is the other country where employment relations have been highlighted as an important
explanation to growth of firms and the economy in general up to around 1990. Fruin‘s (1992)
description of the Japanese firm‘s employment relations after World War II could have been quoted
from a description of the Swedish model around 1965 although emerged in another environment and
context,: ―a veritable partnership in goals, methods, and means has been negotiated and renegotiated
… and this accomplishment has depended on contributions and initiatives from both labor and
management…. Reciprocity hinges on balance, equity, and fair recognition; these can be encouraged
and enhanced but they cannot be mandated or legislated…. the post-war environment of industrial
relations has evolved in the direction of a kind of organic solidarity between labor and management.
Interdependencies bind the two‖ (Fruin 1992: 174-5).
Another important topic in the literature related to enterprises‘ internal social capital is that of learning
organizations and the development of methods to transform tacit knowledge to codified knowledge.
The observations that man knows more than he can tell have been made by many philosophers. Also
Keynes has been quoted for saying that an economist always knows more than he can explain
(Johnson & Lundvall 2001). The explicit distinction between tacit and codified knowledge was made
by Michael Polanyi (1958, 1966). In particular during the 90‘s a growing share of literature has
discussed the issue. Codified knowledge can be defined as formalized, stored, written or digitalized
information, which can be used or tested by another actor than the one that formalized the information
(if the actor has access to the information and the necessary competence to use it). ―Tacit knowledge
is defined as knowledge that cannot be obtained by a mere sum of codified (digitalized) information.
It can be generated through intimate ‗indwelling‘ (Polanyi 1966:17) within a relevant local domain, or
as personal knowledge through particular experiences and/or due to inherently personal qualities and
competence; therefore it cannot become immediately available in open markets.‖ (Aoki 2001: 308).
Aoki uses the example of the knowledge needed by venture capitalists, which to a large extent is tacit
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and non-codified. If codified knowledge would be enough, ―everybody‖ would be able to pick the
winners and there would not be any need for venture capital.
In contrast to tacit knowledge, codified knowledge can be regarded as an asset that the enterprise
deliberately can use to increase its competitive power. The task is often formulated in terms of
commercializing or capitalizing the tacit knowledge to a controlled input in the production process or
a product of its own. Being able to control the production of knowledge in an enterprise and the use of
it in the production process gives the enterprise a competitive advantage and contributes to growth. In
the knowledge economy, we also witness a rapid growth of firms that have codified knowledge as
their main product, e.g. consultants and education enterprises.
In our terms the strivings to transform tacit knowledge to codified knowledge are attempts to
institutionalize a capital that originally is social and non- institutionalized. Not all tacit knowledge
should be considered as social capital since some of the tacit knowledge is strictly personal. However,
most tacit knowledge must be regarded as created in social interactions, which makes it a part of the
social capital. From the enterprise’s perspective, this means that codifying knowledge mainly should
be considered as investments to be able to use parts of the existing social capital in an enterprise, but
not as investments in new social capital in itself. The literature in this field has almost entirely focused
on enterprises‘ investments to commercialize the parts of their social capital that consist of tacit
knowledge. Very little attention has been given to how new enterprise- internal social capital is
created. However, there is no doubt that an enterprise takes many intentional or unintentional steps
that affects its internal social capital. Among intentional arrangements we find those devoted to
affecting the company‘s spirit, culture and cohesion. Not less important are probably arrangements
aiming at affecting the institutional capital of an enterprise. How a firm is organized has important
effects on how it produces tacit knowledge and other components of social capital. There is a well-
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known fact that knowledge-producing enterprises normally has a much more horizontal organization
than traditional hierarchical industrial enterprises. This can be seen as an indication that enterprises in
the knowledge economy need another internal social capital than enterprises of the industrial age (see
below). Thus, social capital is a crucial factor in the internal governance of firms.
7.4.2 The firm’s production-related social capital
A striking development in recent research is the discussion of social capital in interfirm relations,
especially relations between firms and their suppliers. This stands in sharp contrast to the traditional
perspective of economics in which the enterprise is a non-cooperative monolith that buys its input
from suppliers and sells its output to customers. According to this view, the production-related
networks of an enterprise are technical and economic, and exist only to fulfill the input and output
services.
This simplified view is today sometimes referred to as production relations of the ―Fordist‖ or
manufacturing- industrial age, but that is not a correct description. Social networks, even the actors of
production, are not an invention of the knowledge economy. There are however arguments saying that
they have become more important in the knowledge economy: ‖In a knowledge-based economy the
perhaps most significant rent originates from the way in which the easy exchange of knowledge, only
partly understood, between and among a constantly changing configuration of firms within the
community dramatically enhances their innovative capabilities. Reducing your development to
commercialization time is often worth virtually whatever you have to pay and social capital
contributes by cutting the expenses and reducing the time needed to benefit from knowledge residing
elsewhere. As innovative capabilities become increasingly important so does social capital.‖ (Maskell
2000:116).
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Maskell connects social capital not only to the firm‘s internal knowledge production (as we did in the
former section) but also to knowledge exchange between firms that temporarily or on a more long-
term basis have some kind of production-related links. Moreover, he explicitly connects social capital
to firms‘ innovative capabilities. His argument is that social capital cuts expenses and reduces time
needed for knowledge exchange between firms.
These arguments could further be developed. Social, non- formalized links, between a firm (and its
co-workers) and firms with which it has production relations, increase the flows of knowledge and
information between the firms. Feedback, from the firm to its suppliers and to the firm from its
customers, is increased and speeded up. These links of acquaintance and trust are of obvious
importance in R&D-projects, aimed at developing new products or production methods. They are
probably also essential in the small, invisible development processes that take place in firms
everyday, which constitute the base for new innovations.
During the last decade a growing interest in formalizing these formerly mainly spontaneous technical-
economic networks can be discerned. The issue of innovation has been brought up on every
developed nations policy agenda. By institutionalizing innovation processes within innovation
systems, policy makers attempt to achieve similar results on macro level as when firms make
arrangements for transforming tacit knowledge to codified knowledge on micro level.
7.4.3 The firm’s environment-related social capital
The border between a firm‘s production relations and its environment-related networks is not entirely
sharp. In a spatial context, production relations in principle constitute a component of the environment
relations as well. Therefore, we here delimit the firm‘s environment relations with other firms to
relations not being mainly technical-economical.
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Even with this delimitation, Maskell‘s arguments concern the enterprise‘s environment as well, as he
speaks about ―community‖. This adds a spatial aspect on social capital. A firm‘s costs for, among
other things, knowledge and information are influenced by social capital through the degree of trust
and the climate of cooperation prevailing both in individual workplaces and between firms and actors
in a region. Marshall (1920: 271) described this vividly in his nowadays celebrated account of the
positive external effects which come about in industrial districts: ‖The mysteries of the trade becomes
no mysteries; but are as it were in the air, and children learn many of them unconsciously. Good work
is rightly appreciated, inventions and improvements in machinery, in processes and the general
organization of the business have their merits promptly discussed: if one man starts a new idea, it is
taken up by others and combined with suggestions of their own; and thus it becomes the source of
further new ideas.‖
Marshall‘s industrial districts were for generations of economists merely a queer marginal note in the
classic textbook of microeconomics. However, Porter‘s (1990) book on clusters marked a new and
growing interest in the spatial milieu of firms (even if Porter 1990 considered cluster as functional,
non-spatial concept as well). In the rapidly expanding cluster literature, clusters are normally defined
as spatially delimited industrial systems regardless the size of the enterprises, whereas industrial
districts are defined as spatial agglomerations of SMEs in one or a few complementary industries. As
noted above, both concepts are connected to production relations as well as to more general relations
to the firm‘s spatial environment. These general, spatially dependent networks consist in principle of:
Non-technical-economic links to other firm‘s
Links to local/regional politically governed bodies
Links to the citizens of the civic society and their organizations
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The first of these network types contributes to explain agglomeration phenomena as that of the IT-
industry in Silicon Valley. Enterprises emerge there and choose to locate there because ―the air‖ is full
of tacit knowledge and information (incl. gossip and rumors), potential partners and co-workers are
there, the competitors are there and it is easier to watch and learn from them if you are near them, etc.
Even if the firm have business with only a little fraction of all the other enterprises in the region, the
presence of all the other firms is a positive external effect, a social environment that the firm benefits
from. The open, innovative spirit that characterize these agglomerations until they mature and
eventually become petrified, is closely allied to the encouragement of entrepreneurship.
The second of these network types is an expression of the firm‘s dependence on a predictable
political- institutional infrastructure and the needs of favorable political decisions also in a medium-
term and short-term perspective. Those who wish, might see these networks as a confirmation of the
public choice theory, i.e. that politics does not work in accordance with its ideals. To achieve
favorable decisions, to receive non-official information off- the-record, etc, the firm cannot restrict
itself to let its individuals take part in the public debate and to vote in elections and referendums. It is
in the interest of the firm to establish social relations with public decision-makers, either directly or
indirectly through branch organizations or lobbyist groups.
The third and last network type is an expression of a firm‘s needs of being embedded in a local social
context. This need of embeddedness varies depending on, among other things, the firm‘s size,
alternative locations, space-bound capital, type of production, type of customer, type of labor, etc. In
general a small firm with spatially fixed capital and production for the local market have great
incentives to build a strong social capital with the local environment. A big, global firm with
alternative locations, low investments in space-bound capital and production for the world market
have much smaller incentives. Still, local units of global firms engage in building good local public
relations through sponsoring or giving grants to local non-profit organizations and other similar
purposes. The reasons may be twofold.
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First, a global company may be more dependent on a good reputation than a local one. A global
company not following the local informal rules of behavior might become worldwide news the next
day. Increased consumer awareness about environmental, child labor and other such issues has caused
many commercial firms to initiate reorganization of their production and distribution networks, which
is also a sign that customer relations can no longer be confined to offering anonymous products at the
best price. Generally speaking, the increased importance - and market value - of trademarks provides
testimony that customer relations are being impinged on more and more by considerations which must
be regarded as social. It is no longer the product alone but also the customer relationship established
by the trademark that constitutes a firm's market value.
Another reason might be that both the firm‘s management and employees are individuals with social
needs. Some of these needs are often expressed in becoming an accepted and respected part of the
local community. Contributions to the local civic society and its organizations thus raise the status of
both the firm and its employees and increase the experienced individual welfare. The connections to
public choice theory are evident here as well.
7.4.4 Market-related social capital
In Table 7, a trademark is seen as a component part of an enterprise‘s social capital that is created and
maintained through marketing. With this approach, the trademark is a relational network to the
anonymous mass of customers, to which the enterprise has no personal relations. Here the competitive
aspect of social capital is obvious. By creating relationships with customers in diverse ways
(advertising, personal contact, servicing contracts, etc.) a firm attempts to shut out competitors from
the network it has established. It can build similar networks with suppliers. An established firm with
strong customer and supplier networks can use these to shut out competitors, which perhaps have
newer and more productive physical and human capital, from the market. In this way, the established
69
firm might temporarily substitute renewal of its physical capital with investments in social capital.
The new enterprises have to find new, un-established market segments or else break down parts of the
established firm‘s customer and supplier networks in order to force its own way into the market.
Including trademarks in the concept of social capital is not without objections. A trademark is an asset
which, as opposed to other forms of social capital, is actually property that is not directly linked to a
specific owner but can be bought and sold in the same way that enterprises are bought and sold. While
social capital in civil society is, to a varying extent, semi-public goods or club goods (see Buchanan
1965), enterprise-related social capital consists of social networks that the enterprise has built up and
may dispose of as it wishes. Most of these social networks cannot be separated from the enterprise‘s
productive and/or financial activities, but they can of course be acquired since an enterprise, or part of
it, can be bought and sold. However, the trademark is an example of a type of social network that is
not necessarily integrated with other activities of the enterprise. This type of social capital is a private
good, property in the legal sense of the term, and can thus be directly valued on the market. Thus, it
might be more correct to say that a trademark is based on a firm‘s social capital, but that it is
transformed, institutionalized and commercialized in the same way as the case of tacit knowledge
being transformed to codified knowledge.
7.5 Business implications of “third sector” activities
Putnam (1993) stressed a certain kind of organizations as producers and bearers of the civil society‘s
social capital: non- governmental organizations, based on citizens‘ own activities. The ―third sector‖
is one of the denominations of citizens‘ activities and organizations that neither takes place within the
private profit-seeking sector nor the public sector. The third sector covers a broad specter, from local
civic initiatives to international organizations as the Red Cross.
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"Social economy" has been an official term in the European Union since 1989, a special unit of the
Commission's General Directorate Employment and Social Affairs being responsible for social
economy-related issues. The definition of social economy selected by the EU confines it to four types
of entrepreneurial and organizational forms, viz Cooperatives, Mutuals, Associations and Foundations
(CMAF). However, in the international debate on the social economy there are a number of different
concepts which can be put on more or less the same footing as social economy, the third sector being
perhaps the best known. Other terms used are non-profit sector, not- for-profit sector, solidarity
economy, alternative economy and third system. The concepts have emerged in different national and
cultural contexts. In France, Belgium and other mainly catholic and Latin-speaking countries, social
economy became the established term. In the United States, the UK and other West European
countries, non-profit sector and third sector became the most common concept.
The concept of social economy seems to have been used for the first time in France 1830, by Charles
Dunoyer in his paper Nouveau traité d économie sociale. The advocates of social economy directed
their attention towards measures for social peace and reduced class conflict, often in a conservative,
paternalistic spirit. Profit-sharing was one of the methods advocated. The best known of the French
social economists was Charles Gide, representing a more radical line. He considered cooperation to be
the principal instrument for attaining the social economy which was regarded as the alternative both to
the crude free market economy and to state socialism. Besides cooperation, the social economists
worked for the growth of related organizations such as e.g. savings banks and educational
organizations. In France, social economy became something which firstly united "a catholic and
conservative right, an egalitarian socio- liberal center and a left which leaned in the utopian socialistic
and perhaps also anarcho-syndicalist direction". (Trädgårdh, 2000, p 16). The feature common to the
adherents of social economy was a lively suspicion of the state as an economic actor. In the conflict
between capitalism and socialism which characterized twentieth century Europe, the social economy
became a "third" way which never became dominant but did achieve a sufficiently important position
in several Latin countries for it to be accorded official EU status.
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Among researchers there seems to be a basic, common concordance about social economy being
something between market capitalism and state economy. In the concept‘s native countries, France
and Belgium, the relations between the Latin and Anglo-Saxon concepts were discussed during the
90s (see e.g. Gui, 1991; Monnier and Thiry, 1997; Mertens 1999). This discussion has partly
coincided with increased research on the third sector in Anglo- Saxon and other countries, among
which the Johns Hopkins Comparative Nonprofit Sector Project perhaps is the best well known (see
e.g. Salamon and Anheier, 1994, 1998).
Simultaneously, with the enlargement of the European Union 1995, the concept of social economy
have been spread to new countries, whom endeavor to adapt the concept to their conditions. CIRIEC
(2000) has presented an overview of the ―third system‖ in the fifteen countries of the EU. CIRIEC
equals the concepts social economy, third sector and third system and defines them as ―cooperatives,
mutual organizations as well as voluntary organizations, associations and foundations which
remunerate work‖ (CIRIEC, 2000, p. v).
Malinovsky (1930), Thurnwald (1932), Polanyi (1944) and others have told us that historically,
human society has developed, side by side with family housekeeping, three principles of production
and distribution, viz reciprocity, redistribution and the market. Prior to the market revolution,
humanity's economic relations were subordinate to the social. The market revolution has reversed this
situation so that economic relations are now generally superior to social ones. Even though the market
dominates modern society, however, this still does not mean that the two other principles have
disappeared. The secular sovereign power, the state, has been based on a redistribution principle
throughout history. The same applies to the modern public sector. The social economy may be said to
be a modern generic term for activities based on the reciprocity principle.
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Reciprocity can be described in terms of give-and-take in a relationship between actors who to a
certain extent are equals. This does not mean that reciprocal relations are wholly lacking in power
aspects - even activities in the social economy have governing boards and management groups. But
there are important differences between reciprocal power relations and those which characterize
relations between state and citizen or between employer and worker. Reciprocal relations are
significantly more horizontal than those of hierarchical power systems. Another difference is the
absence of legal means of coercion. Nor are reciprocal relations based on supply and demand on the
free market, but on a striving to internalize wants and their satisfaction in networks with rights and
duties, thus being the expression of an endeavor to make themselves less dependent on the market.
It has to be underlined that even though this argument accords with a tradition in the disciplines of
anthropology and economic history, it may be in conflict with other disciplines. Mutuality is often
used as a synonym for reciprocity. Basic economic micro theory is grounded on the assumption of
balance and exchange between actors to the mutual advantage of both. The exchange would simply
not take place were it not of benefit to both parties – even if the "benefit" for one of them only
consists, for example, of temporarily alleviating social need and getting food for the day. Thus on this
theoretical market, neither power aspects, unequal relations, norms, customs or institutions have any
influence. From this perspective, therefore, it may be argued that a sort of mutuality imbues all
exchange.
However, it is important to realize that this economic mutuality is a strictly theoretical economic
concept, ignoring social conditions and relations. But the reciprocity discussed by Malinovsky,
Thurnwald and Polanyi proceeds from social conditions and relations, and regards the economic
exchange as a result of these. Reciprocity of social relations creates mutuality of economic relations,
but mutuality in economic transactions is no guarantee of reciprocity in social relations.
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It may also be appropriate to point out, moreover, that in economics there is another mutuality
concept, viz interdependence, which is not to be confused with the concepts above. Interdependence is
an expression of the economy's character as a system in which one unit is mutually dependent upon
other units, and changes in one unit are transmitted to the rest of the system.
In this way the reciprocity criterion does form something of a theoretical basis for the social economy
concept. There is another problem here, however. Many actors in the social economy undoubtedly
designate their work as social but hardly as economic. They do not describe their activities in terms of
"production and distribution" or other economic concepts. To them the word "economic" is usually
synonymous with market economics, in contradistinction to the "non-economic" activities in which
they themselves are engaged and which do not strive for any return in market terms. Economic profit
does not constitute the primary purpose of their business but is more in the nature of a necessary evil
to enable them to carry on their activities. From an "economic" perspective, it is similarly possible to
pay regard only to the monetary aspects of the social economy without realizing that the primary
purposes of these activities are in fact social and not market-economic.
If the social economy is to be analyzed not only as a social but also as an economic phenomenon,
therefore, there are good reasons to highlight the distinction between different types of economy and
to describe the difference between the social and other types of economy in economic terms too.
Like the publicly-managed economy, the profit-maximizing market economy and the family
economy, the activities of the social economy consist in production in which human and material
resources are processed and exchanged for the ultimate purpose of being consumed. The relation
between the social economy and other economies, therefore, might possibly be described as follows,
for example:
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Like the family economy, the social economy is based on a reciprocity principle. Unlike the
family economy, however, the social economy's relations are not based on circumstances of
marriage and kinship but on more open and changeable relationships.
While the modern market economy and public sector economy are based chiefly on monetary
principles, non-monetary factors play a large role in the social economy. Whereas the pure
cash economy attributes value only to wages and capital yield in monetary terms, in the social
economy these elements are mere constituents of a total return in which social factors play a
crucial role. Solidarity with the local community; better care of children and the elderly;
reduced human suffering; improved leisure activities; less destructive behavior; job
opportunities near to home: these are some examples of the social values yielded by activities
in the social sector.
In many instances the public sector has objectives which are identical to those of the social
economy. But whereas the public sector economy is based on official legislation and a system
of official sanctions, activities in the social economy are based on the actors' unofficial
commonality of interest and values. The public economy is based on an official and
obligatory system of taxes and dues. The social economy is based on reciprocal, voluntary
adherence and subscriptions - although in certain respects social pressure may function as an
unofficial form of coercion.
Whereas the market economy and public sector are based primarily on material capital
(money and plant) plus individual human capital, the social economy is based to a higher
degree on the types of social capital which take the form of reciprocal social networks
between people, organizations, firms and the society at large. Reciprocity implies that
networks in the social economy are considerably more horizontal in nature than networks in
the other economic spheres. The activities of the other economies also have elements of social
economy in them (social objectives for example), a certain voluntary element, and diverse
forms of social capital; but these elements do not constitute the primary basis of their
production.
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The social economy defined in this way should consist of that portion of society's production which
is guided primarily by a principle of reciprocity
is based on the types of social capital which take the form of reciprocal social networks
is organizationally independent of the state power
is not sold mainly on the official markets.
Even if the above definition has theoretical merits, it is in many cases difficult to operationalize. One
alternative way of discussing the social economy can be based on the "model depiction" shown in
Figure 2. The figure starts out from the assumption that all production carried out in a society
(whether or not counted as part of the gross domestic product) can be graded on a scale showing
respectively how "social" or "commercial" it is.
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Figure 7.5.1: Schematic depiction of juridical forms of society's production according to
degree
SOURCE: Wellman, et al. (2001)
The purpose of commercially-orientated activity can be described briefly and concisely as a rule: it is
to earn money. The purpose of socially-orientated activity, on the other hand, may centre on the
promotion of one or more of a number of different values. Blennberger, Jess and Olsson (1999)
mention the following as examples of such values: euphoria and significance, cultural diversity, social
solidarity and integration, training in democracy, defense of rights, mobilization of marginal groups,
inculcation of discipline, cost effectiveness, socioeconomic gain, public health, job opportunities,
fresh ideas and innovation, and other particular qualities.
Other objectives which have been cited in the course of debate on social economy, such as members'
good and social good, may be regarded as combinations of social and commercial objectives;
combinations which look different depending on level in society and target group. A centre line in the
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figure marks a boundary between socially dominated and commercially dominated activity. The
instances in which activity is social throughout or commercial throughout really constitute extreme
theoretical cases. In principle, all activities have elements of both objectives. Social activity cannot be
carried on entirely without economic/commercial elements. Commercial activity cannot be conducted
entirely in isolation from social norms and behavior.
The figure also describes where different juridical forms engaged in the nation's production are to be
found on the commercialization scale. It should be pointed out here that the figure is a model
depiction and does not purport to give any description to scale. The lower part of the figure consists of
activities which have no formal juridical form. These thus include sundry activities such as production
conducted within the household/family, informal economy between neighbors, relatives and friends,
and also "black" economy and seriously criminal activities. Obviously a very broad span is covered
by the degrees of commercialization featuring in all these various activities.
The majority of the juridical forms contain highly disparate activities with strongly varying degrees of
commercialization. Public sector activity has social objectives to a large extent. But openly result-
orientated activities with profit as the end in view are also carried on under public auspices.
The juridical forms reckoned as being organizationally within the social economy also extend in most
cases over to the commercially dominated side. Among the largest group of non-profit associations,
i.e. sports associations, the numerous small clubs kept afloat by voluntary work are of course
predominant. But the same movement also contains large clubs, with turnovers in multi- millions of
kronor, which are professional clubs in all but their organizational form. The neo-cooperative
movement consists of a large number of small local economic associations in which work contributed
by members themselves is essential to the activity.
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The large established consumer and producer cooperative movements also operate via the same
entrepreneurial form, viz the economic association. Their business extends far out into the
international market and is carried on in competition with privately-owned firms and at the same level
of commercialization as theirs. (Westlund 2003)
Figure2 also shows that by no means all of the business conducted within the framework of private
firms or companies is to be found to the right of the centre line, where it constitutes commercially
dominated activity. As Figure 3 shows, about 85% of Swedish firms are what may be called
―subsistence‖ enterprises, meaning that maximizing profit is not their primary objective but achieving
a tolerable level of subsistence within a chosen lifestyle. As a proportion of employment the self-
employed share is obviously much lower, but even so it amounted to 9% in 1996
(Näringsdepartementet, (Ministry of Industry) 1999). The motives of the self-employed, exactly like
those of other entrepreneurs, are varied and complex, but while the motive of very commercially
focused enterprise may often be to change social environment, an important motive of the self-
employed may be to succeed in making a living within their established social milieu. Many small
firms managed in company form probably also have similar aims. This group also includes employee-
owned firms managed as companies. Thus it is a highly plausible supposition that for a certain
proportion of the self-employed, commercial activity is a means of attaining social ends. (Westlund
2003)
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Figure 7.3: Distribution of Sweden's approximately 600 000 business firms 1996.
Source: Westlund (2003).
Firms quoted on the stock exchange are to be found to the right of the centre line in Figure 2. It is an
indication that although the activities of quoted companies always have social aspects - employment
for example - and perhaps even social purposes in some instances, quotation on the stock exchange is
an important sign that the aims of the enterprise are primarily commercial. (Westlund 2003)
Of course it is not the case that activities conducted in social-economic forms automatically comply
with all the social values mentioned above while those conducted in openly commercial forms comply
only with purely commercial values. If the juridical form of the activities in a society were completely
neutral with regard to degree of commercialization, the juridical forms would be evenly distributed
The subsistence enterprises
The established medium-
sized and large enterprises
The well-known successful
growing enterprises
Innovators of technology –
want
to grow but are seldom
able to Those that start to grow – but
falls back
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along the scale. This is not so, however. Social-economic forms preponderate on the left-hand,
socially dominated side of the figure while commercial forms dominate the right- hand side. The
social values which Blennberger, Jess and Olsson (1999) believe can be created by social economy
naturally arise in formally commercial activities as well to a varying extent. Job opportunities are
perhaps the most obvious example. But viewed as a whole, it is probably not to be doubted that it is
mainly the formally social-economic organizations and the enterprises on the left- hand side of the
figure that give priority to compliance with the social values cited. (Westlund 2003)
From the standpoint represented by the figure, activities to the left of the centre line may be assigned
to the social economy and activities to the right to the commercial economy. In practice, of course,
such a balancing-out of the considerations involved is very difficult, not to say impossible. In
principle it would require a judgment to be made as to the principal purpose of the activities of every
single enterprise or organization. Thus it is not possible to demarcate the social economy
operationally on the basis of degree of commercialization.
However, the figure shows that the juridical form of activity is not capable of serving as any sort of
boundary- line between social and commercial economy either. Although activities with mainly social
objectives predominate among the juridical forms categorized as social economy according to the
semi-official EU definition, activities in which commercial purposes predominate do occur within
these forms of organization as well. (Westlund 2003)
While underlining the problems of defining the concept of social economy in practical terms, Figure 3
does at the same time open the way to a more dynamic approach to changes in degree of
commercialization and changes of juridical form. An activity may be carried on in unaltered juridical
form even though its degree of commercialization changes. Similarly, an activity may alter its
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juridical form without its degree of commercialization being changed. However, longer shifts of
position along the scale may be assumed to furnish an increased incentive to change juridical form.
(Westlund 2003)
Thus the figure may help to illustrate how voluntary, spare-time and other activities serving mainly
social purposes expand and create employment, both by taking the step from unorganized to formally
organized activity, by growth within the social economy, and by going over to commercially
dominated activity. (Westlund 2003)
There are numerous historical examples of such commercialization processes in Sweden. These
Swedish examples have their similarities in other West European countries. During the building-up
phase of the consumer cooperative movement the social and ideological aspect of the business was a
very important foundation of the customer relations developed in competition with private trade.
Today these customer relations remain in being only among certain of the older generation, and the
cooperative ideology plays a very unobtrusive role in the marketing strategies of Konsum, the
cooperative retailing arm. A large part of the activities of Kooperativa Förbundet (the wholesaling
arm) - including trade in everyday goods - is conducted not in cooperative but in company form, on
the same terms and using the same methods as private trade. (Westlund 2003)
The savings banks and the cooperative agricultural bank (the Föreningsbank) were built up as a
people's alternative and supplement to the commercial banks. During the 1990s the Föreningsbank
has undergone conversion from a cooperative to a joint stock company, amalgamated with a majority
of the savings banks and taken its place on the Stockholm stock exchange, thus shifting itself to the
outer margins of the commercially dominated side. What is significant about both these examples is
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that it is during a restructuring and rationalizing phase, including downsizing of the work force, that
the transition from social-economic to open commercial form takes place. (Westlund 2003)
Other examples may be cited from the IT branch. Many firms which made their appearance in this
branch during the 1990s had their genesis in young people's leisure interests. Commercial products
and services have gradually evolved from the latter, leading to the establishment of businesses. In
many instances the leisure activity seems to make the transition to commercially dominated activity in
company form without passing through any intermediate phase in the shape of voluntary or economic
association. In other cases company formation has been preceded by activity within a framework of
voluntary or economic association. (Westlund 2003)
From the perspective outlined in this section, activities and organizations summarized under the
concept of social economy have historically played a certain role in Europe‘s economic dynamics in
certain sectors. Current experiences in Sweden also seem to indicate that local associations are used as
a ―first step‖ in business development. However, the importance of associations in the creation of new
enterprises is limited. In 1999 (the only year for which statistics is available) 2% of the new founded
limited and closely held companies had their origin in associations (ITPS, unpublished statistics).
Thus, even if activities in the third sector originally aim at filling social and not economic needs,
certain of these activities can, if they are competitive, develop and transform to ―real‖ enterprises.
(Westlund 2003)
What is then the role of the third sector in creating a social capital that contributes to business
development and economic growth? Putnam (2000) has shown that the civil society seems to have
been weakened in America during several decades. He has also shown that civil society‘s social
capital is among the strongest in Montana and among the weakest in Los Angeles (Los Angeles
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Times, March 1, 2001) – a fact that do not coincide with economic development in the areas
concerned. Moreover, Cohen and Fields (2000) have concluded that whatever has caused the
expansion of Silicon Valley, it is not the civic engagement. These findings may be interpreted as a
limited and/or decreasing importance of the civil society on local and regional business development.
(Westlund 2003)
One explanation to this might be that Putnam‘s model does not include the actor where economic
growth is created – the enterprise. Putnam‘s perspective is that of the political scientist and is
concentrated on democracy issues. Unfortunately there are very few studies on the relationship
between enterprises, their business success and their embeddedness in their local environment – in
which the third sector often is an important component. One interesting exception is a study by
Kilkenny et al. (1999) that in an empirical test showed the significance of reciprocated community
support in the success of over 800 small businesses in small towns of Iowa, USA. Using logistic
regression, they found that the interaction effect of an entrepreneur‘s service to the community,
reciprocated by community support of the business, was the single most significant determinant of
business success among dozens of indicators and characteristics of the managers, the businesses, and
the communities. Thus, these results support the view that local initiatives in the civil society might
contribute to creating a favorable local environment, milieu or culture for business and
entrepreneurship. (Westlund 2003)
However, an alternative interpretation is that Putnam is focusing on the social capital of the (civil)
industrial society, whereas other, new forms of social capital develop in the emerging (civil and
business) knowledge society. Some critics of Putnam underline that the Internet, mobile phones, etc.
offer new networks for social interaction among young people, who do not find traditional
84
organizations very exciting. Another argument is that in the knowledge economy‘s career
communities, informal professional networks substitute organized civil networks. (Westlund 2003)
7.6 Social capital in the knowledge economy
Several scholars (like Maskell 2000, quoted above) have underlined the increased importance of
social capital as society has transformed from a manufacturing- industrial economy to a knowledge
economy. Although ―knowledge society‖ or ―knowledge economy‖ are concepts used every day in
debates on society, it is not easy to find a concise summary of the characteristics of the concepts and
how the knowledge society is distinguished from earlier societal forms. Figure 5 is an attempt to
present some key attributes of the knowledge and industrial societies and of the mercantilist era of the
pre- industrial society.
Table 7.6.1: Key attributes of the knowledge and industrial societies and of the mercantilist era
Attribute Knowledge society Industrial society Mercantilist era
Key assets / production
factors
Labor with knowledge
and information
Physical capital,
transportation
Land and trading
assets
Market’s extension Global Mainly national Mainly local
Polity ―Supra-state‖
organizations increase
in importance
Nation-state
democracy
Autocracy /oligarchy
Central principle(s) Application of
knowledge
Use of non-muscle
power, division of
labor
Increase muscle
power through
population growth,
organize trade
Owners of decisive
production factor
The individuals Capitalists Landowners
Central conflict Access / rights to
knowledge,
information and
benefits
Justice: Division of
social accumulation
between labor and
capital
Liberty: business
autonomy, the
individual‘s freedom
from feudal
restraint s
Management
principles
Horizontal,
cooperative
Vertical Vertical
85
Dependency
relations
Organization/collective
needs the individual
who possesses
knowledge
The individual needs
the organization /
collective
(enterprise, trade
union, etc)
Mutual collective
dependencies
between crown,
nobility, church,
burghers and
peasants
Central individual
qualification
Creativity Adaptability Fidelity
Gender relations Growing equality Emerging
emancipation
Patriarchal
Infrastructure Digital nets, social
infrastructure, airports,
roads, rail
Land transportation
systems
Waterways and ports
Central spatial units Metropolitan region Industrial town Agricultural region,
market town
SOURCE: Westlund (2003)
Table 8 shows that the differences between the knowledge and industrial societies are at least as
comprehensive as between the industrial society and the mercantilist era. Knowledge, the individual
bearers of it and their social infrastructures are some of the key elements of the knowledge society.
This makes new demands on the individual‘s qualifications and affects relations between the
individual and the organizations as well as gender relations. (Westlund 2003)
A presumption based on Figure 5 is that a social capital adapted to the needs of the industrial
economy cannot fulfill much of the needs of the knowledge economy. This can be illustrated with a
Swedish example.
During Sweden‘s industrialization, the pre- industrial ironworks regions became the centers of the
modern steel industry. Bruksandan, a ‖local industrial community spirit‖ was formed in these
communities and subsequently this spirit also became a characteristic of communities with other
manufacturing industries. The local industrial community spirit thus became a term for the norms and
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values that were created from the relations between a dominant local employer and a closely-knit,
locally recruited group of workers with a strong trade union, during the industrial era. The spirit of
common interest, which was formed through demands and counter-demands, resulted in the local
factory assuming responsibility for the welfare of their employees and their families in exchange for
the loyalty of the families to the local factory. There was, in principle, a local employment guarantee
for the male population of the community. Education after primary school was not necessary for
entering the industry. The women had in principle two alternatives: become a housewife or move.
Other enterprises, apart from the requisite local service businesses, were potential competitors for the
labor force and were regarded as unnecessary. The consequence was that entrepreneurship and the
establishment of new enterprises were not promoted by the norms and values of the local industrial
community spirit. The actors that formed the local industrial community spirit – the factory and the
trade union of the (mainly) male workers – opposed, consciously or subconsciously, the emergence of
new actors. (Westlund 2003)
During Sweden‘s industrial era, the local industrial community spirit was, in many respects, the local
foundation for the successful Swedish model. On the other hand, during the structural adjustment of
the last twenty- five years, this spirit has proved to be a critical problem for these communities. When
the context changed, the communities needed actors to renew the local economy and the local social
capital. However, to a large extent, the local industrial community spirit has obstructed the emergence
of actors of this type. (Westlund 2003)
In the case of the local industrial communities, the dominating parties had invested in very strong
links both internally locally, and externally with customers and suppliers. When the markets
eventually declined and the external links were weakened, the strong internal links were an
impediment that obstructed the development of new links to new external actors. Thereby, the
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necessary importation of new ideas and values was prevented. More than a generation after the
emergence of the knowledge society, these regions are still in crisis with low growth and
outmigration, particularly of young women. The growth in Sweden has taken place in other regions,
mainly in the three metropolitan regions and the university centers.
The Swedish local industrial community spirit is one example of the type of social capital that
was formed in and by the industrial regions of Europe and North America. Their industrial heritage
has left these regions with obsolete networks and obsolete attitudes which constitute severe obstacles
to a smooth and rapid transition to the knowledge economy.
In earlier sections, we referred to arguments saying that the enterprise-related social capital expressed
in employer relations were among the factors contributing to the very rapid economic growth in
Sweden (1945-1970) and Japan (1945-1990). The industrial crisis of the 70‘s caused severe structural
problems in Sweden, which still are not solved in certain regions. The employer relations in existing
industries were not of much use since growth was dependent on new industries in new sectors. It is
highly probable that the good employer relations in Japan contributed to its continued industrial
success until 1990, but after that this social capital, build up under the manufacturing- industrial age,
could not prevent the recession. (Westlund 2003)
The examples above might be viewed as a support to a hypothesis concerning the needs to transform
the social capital in accordance with the economy‘s transformation: During stable growth phases the
economy benefits from strong, stable societal networks that are closely adapted to the needs of the
economy. Actors (nodes) form links to distribute and reproduce desirable norms, values and behavior
which are in conformity with the economy‘s demand. When economic-structural changes happen, the
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economy needs new industries with new actors not to stagnate. However, the existing networks are
adapted to the earlier economic structure and do not necessarily support the restructuring of the
economy and the emergence of new actors. The new actors need to build new, competing networks
that distribute and reproduce norms, values and behavior in conformity with the new economic actors‘
demand. If the networks of the old economic structure are too strong, they may retard or prevent the
emergence of new actors, new networks and economic restructuring. With Schumpeter‘s expression,
one might argue that there is a need for a ―creative destruction‖ of obsolete social capital, in order to
facilitate the creation of new social capital. The transformation from industrial society to knowledge
society is a huge-scale example of this economic restructuring and the needs of new economic and
social networks to emerge. (Westlund 2003)
7.7 A Framework for Strategic Business Networks.
Organizations should embrace the online social networks in their attempt to increase social capital,
effective collaboration and learning of employees. A few areas that organizations can implement this
are:
A development organization wants to improve learning and knowledge management amongst
their international offices, local staff, beneficiaries, and relevant experts.
A policy organization wants to draw upon a multitude of opinions and experiences, to draft a
policy proposal to be submitted to decision-making processes.
An advocacy organization wants to coordinate their activities across a global network of
grassroots, autonomous member organizations.
A campaigning organization wants to enable their constituency to self-organize activities that
create both local change and global impact.
The starting point can be a very detailed question, like "how can we use web 2.0", "what platform
should we use", "how can we write a document together", "how can we manage our projects", or
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"how do we set up a knowledge management strategy". There is a deeper question behind this project,
and it can be approached from three perspectives:
"Purpose": what is the vision and mission of the organization, how are they partnering with
other organizations, and who are the people they try to involve?
"Process": how do people work together, what policies and strategies are there, and what
communities exist already?
"Technology": what platforms can be used, what tools are people using to perform their work,
and how does it link with the rest of the internet and ICT in general?
More often than not, there is a gap between the "purpose people", who think in organizational
strategies and communication impacts, and the "technology people", who manage the tools, both ends
often in a more central role. In between are the "process people" who work in the field. The challenge
is then to find a way to "make things flow" between all of them.
Putting it all together
Figure 7.7.1 is a framework that combines the "purpose, process, technology" dimension with sphere
of influence: how much control does the leading organization have in a specific area of their
environment. The organizations have control of their own strategy, they can concentrate on a specific
part of the model e.g. increasing social capital which in turn can influence other strategies like
marking, team building e.t.c.
90
Figure 7.7.1: A Framework for Strategic Business Networks
Purpose
Process
Technology/Tools
Core
Business
Vision
,mission,
strategy
business plan
Communication
identity
design
brand mantra
common story
Intervention
knowledge
managemen
t strategy
monitoring
and
evaluation
Engagement
pyramid of
engagement
communication
matrix
tool selection
Marketing
Market research
Competitive
analysis
Advertising
Periphery
Partnership
strategic
networking
"movement
as network"
Community
processes
and roles
community
of practice
life cycle
User experience
Information
architecture
Usability
Visual design
Network
Social capital
technology
roadmap
tool
configuration
Networking
Social
network
analysis
Social sites
usage
Team
building
Internet
Social Sites
Benchmarking
metrics
Advertising
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Chapter 8: Recommendation and Conclusion
Does the Internet affect social capital in terms of social network contact, organizational and political
participation, and community commitment? Extensive research results indicate that Internet use
supplements network capital by extending existing levels of face-to-face and telephone contact. This
is one of the few situations in the social sciences where a lack of association is meaningful. Heavy
Internet users neither use email as a substitute for face-to-face visits and telephone calls, nor do they
visit and phone more often. Most Internet contact is with people who live within an hour's drive.
People who live further apart have less overall contact. Yet these long-distance ties use the Internet
for a higher proportion of their overall contact. The Internet is especially used to maintain ties with
friends. Friends usually interact as either two people or two couples, while kin and neighbors are
likely to be in densely knit social networks. The findings suggest that the Internet is particularly useful
for keeping contact among friends who are socially and geographically dispersed. (Wellman 2003)
These results suggest that the effects of the Internet on social contact are supplementary, unlike the
predictions of either the utopians or dystopians. Moreover, the research results show that Internet use
is not a uniform activity: People engage in both social and asocial activities when online. On the one
hand, the Internet is used as a tool for solitary activities that keep people from engaging with their kin
and in their communities. On the other hand, not all online activities compete with offline
interactions. People might read newspapers or search for information regardless of whether they do
this online or offline. The time people save because they shop online may be spent in offline
socializing with family and friends.
Internet use increases participatory capital. The more people are on the Internet, and the more they
are involved in online organizational and political activity, the more they are involved in offline
organizational and political activity. We cannot make any inferences about how Internet activity
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influences political participation. Although future research will have to specify the causal sequence,
we suspect a positive feedback effect. Rather than distinct online and offline spheres, people are using
whatever means are appropriate and available at the moment to participate in organizations and
politics. People already participating offline will use the Internet to augment and extend their
participation. People already participating online will get more involved in-person with organizations
and politics. (Wellman 2003)
Internet use is associated with decreased commitment to online community. Because the association is
limited to online community, researchers suspect that high Internet use has led to bad experiences that
have led to low levels of commitment.
Taken together, the research results suggest that the Internet is increasing interpersonal connectivity
and organizational involvement. However, this increased connectivity and involvement not only can
expose people to more contact and more information, it can reduce commitment to community. Even
before the advent of the Internet, there has been a move from all-encompassing, socially-controlling
communities to individualized, fragmented personal communities (Wellman, 1999, 2001). The
security and social control of encompassing communities have given way to the opportunity and
vulnerability of networked individualism. People now go through the day, week and month in a
variety of narrowly-defined relationships with changing sets of network members. (Wellman 2003)
It is time for more differentiated analyses of the Internet, and analyses, which embeds it in everyday
life, offline as well as online. Although researchers have shown that the Internet affects social capital,
the mechanisms are unclear. Knowing that people have been using the Internet for more than two
years or that they are online for three hours per day, does not provide a clear picture of the activities in
which they are engaged.
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Future analyses need to examine in more detail the effects of the Internet, focus on the types of
activities performed online, and explore how these fit into the complexity of everyday life. In general,
the activities fall into two categories:
a) social activities, such as email and chatting that promote interactions;
b) asocial activities such as web-surfing and reading the news.
When the Internet engages people primarily in asocial activities, then even more than television, its
immersiveness can turn people away from community, organizational and political involvement, and
domestic life. By contrast, when people use the Internet to communicate and coordinate with friends,
relatives, and organizations - near and far - then it is a tool for building and maintaining social capital.
In this era of spatially-dispersed community, the Internet fills needs for additional interpersonal
contact that supplement in-person and telephone contact. At a time of declining organizational
participation, the Internet provides tools for those already involved to increase their participation. Yet,
at a time when networked individualism reduces group social cohesion, extensive involvement with
the Internet apparently exposes participants to situations that weaken their sense of community online.
This suggests that future examination of Internet use might identify what affects the quality as well as
the quantity of online social interaction – for both weak and strong ties.
94
Appendices
Appendix 1: Survey Questionnaire
I am a Master of Science, Information Technology student at Strathmore University undertaking a
project on Online Social Networks and how they can be used to develop social capital for corporate
agility.
Instructions
This questionnaire will take at most 10 minutes of your time to fill.
Please, read the instructions provided for each question. A number of questions only require you to
indicate your response(s) by marking an X in the boxes provided. In cases where you are required to
write down your response(s) or comments, write them in the spaces immediately after the questions.
Be brief and precise.
For clarifications regarding any aspect of the questionnaire, please send an e-mail to
[email protected] or post mail to P.O. BOX 647 Tala.
1. Gender: Male [ ] Female [ ]
2.Age:Under18[] 18-20[]21-25[]26-30[]31-40[]41-50[]51-65[]66orover[]
3. What is your major focus: Science/Technology [ ] Business Disciplines [ ] Arts & Humanities [ ]
Social Sciences [ ] Other _____________________
4. Nationality:
5. Country currently residing in:
6. Have you created a profile on a social networking website, like MySpace, Facebook, or Orkut? Yes [ ]
No[ ] DO NOT GO ON if you answered NO to question 6, If you answered Yes, please proceed.
95
7. How many social networking websites have you created profiles on? 1 [ ] 2 [ ]3 [ ] 4 [ ] 5 or more [
]
8. What is your primary social networking website? ____________________________
9. In this next section, please check the number that best indicates your level of agreement with each
statement. 1
Disagree2 3 4 5 6 7 -Agree I use a social networking site because people whose opinions I respect
think I should use it [ ] I use online social networking because it is fun for me. [ ] I use online
social networking because it makes me happy. [ ] I am often afraid that I give too much
information to people I do not know. [ ] I like to ask personal questions to the people I meet
online. [ ] I use online social networking because it helps me find new friends and network [ ]
I go to online social networking sites because they help me keep in contact with my school
friends [ ] The online social networking site I choose to use the most is because most of my
friends are also members of that site. [ ] I often use social networking sites to collaborate on
projects [ ] Using online social networking sites is easy for me. [ ]
I find my favorite online social networking site is also the easiest for me to navigate in [ ] I often think
of ways that my favorite social networking site could be made easier to use. [ ] I consider
whether an online social networking site is easy to use more than any other criteria[ ] Signing
up for my favorite social networking site was confusing [ ]
For your primary social networking website:
13. How public is your profile? How public is your profile? visible to anyone [ ] visible only to friends [ ]
don't know to whom it's visible [ ]
14. About how often do you visit social networking sites? Several times a day [ ] About once a day [ ] 3 to
5days a week[ ] 1 to 2days a week[ ] Every few weeks [ ] Less often [ ]
15. What are the different ways you use social networking sites? Do you ever use those sites to…?
96
Make new friends Stay in touch friends you see a lot Yes [ ] No[ ] Stay in touch with friends you rarely
see in person Yes [ ] No[ ] Make plans with your friends Yes [ ] No[ ] Stay in touch with family
members Yes [ ] No[ ]
16. We'd like to know the specific ways you communicate with your friends using social networking sites.
Do you ever…?
post messages to a friend's page, space or wall Yes [ ] No[ ] send a bulletin or group message to all of
your friends Yes [ ] No[ ] send private messages to a friend within the social networking system Yes [
] No[ ] post comments to a friend's blog Yes [ ] No[ ]
17. We would like to know if the following kinds of information are posted to your profile, or not. You
can just tell me yes or no. On your profile, do you provide. . . ?
First name Yes [ ] No[ ] Last name Yes [ ] No[ ] Photos of friends Yes [ ] No[ ] Photos of yourselves Yes
[ ] No[ ] City or town Yes[]No[] Link to your blog Yes [ ] No[ ] University name Yes [ ] No[ ] IM
screen name Yes [ ] No[ ] email address Yes [ ] No[ ] stream audio or MP3 files Yes [ ] No[ ] videos
Yes [ ] No[ ] cell phone numbers Yes [ ] No[ ]
18. Please tell me if you think it is okay to share the following information with someone you just met on
the
Internet:
First name Yes [ ] No[ ] Last name Yes [ ] No[ ] Photos of friends Yes [ ] No[ ] Photos of yourselves
Yes [ ] No[ ] City or town Yes[]No[] Link to your blog Yes [ ] No[ ] University name Yes [ ]
No[ ]
IM screen name Yes [ ] No[ ] email address Yes [ ] No[ ] stream audio or MP3 files Yes [ ] No[ ]
videos Yes [ ] No[ ] cell phone numbers Yes [ ] No[ ]
19. Do you provide any false information about yourself on your profile? Yes [ ] No[ ]
20. Have you used your online social network to seek information on new/ existing products? Yes [ ] No[
]
21. Thinking about the last time you were contacted online by someone who was a complete stranger to
you, how did you respond?
97
Just ignored it [ ] Responded so I could find out more about the person[ ] Responded and told them to
leave me alone[ ]
22. About how long have you had a profile on your primary social networking website?
Within the last six months [ ] A year ago [ ] Two or three years ago [ ] More than three years ago [ ] don't
know [ ]
23. Do you ever access your social networking website using a wireless device like a PDA, cell phone, or
wireless laptop? Yes [ ] No[ ]
24. From where do you access your social networking website most often? From where do you access
your social networking website most often? Home [] Workplace [ ] Someplace else_____________
25. In your off-line life, about how many friends do you keep in touch with on a regular basis, meaning
you see them or talk with them at least once a week. Just your best guess is fine. . . 1 to 4[ ] 5 to 9[ ]
10 to 14 [ ] 15 to 19 [ ] 20 to 29 [ ] 30 or more [ ] Don't know [ ]
26. About how many friends do you keep in touch with on a regular basis on your social networking
website, meaning you communicate with them at least once a week. Just your best guess is fine. . .
1 to 4[ ] 5 to 9[ ] 10 to 14 [ ] 15 to 19 [ ] 20 to 29 [ ] 30 or more [ ]
27. About how many friends do you keep in touch with on a regular basis on your social networking
website who you have never met in person, meaning you communicate with them at least once a week.
Just your best guess is fine. . .
1 to 4[ ] 5 to 9[ ] 10 to 14 [ ]
15 to 19 [ ] 20 to 29 [ ] 30 or more [ ]
28. About how many friends do you keep in touch with on a regular basis on your social networking
website who are from other nationalities, meaning you communicate with them at least once a week. Just
your best guess is fine. . .
1 to 4[ ] 5 to 9[ ] 10 to 14 [ ] 15 to 19 [ ] 20 to 29 [ ] 30 or more [ ]
98
29. What content do you publish or communicate about on your social networking website? (Mark all that
apply.)
Politics [ ] Religion/Spirituality [ ] Personal Hobbies[ ] Music [ ] Movies/TV [ ] Games [ ] Other
entertainment (besides music, movies/TV, and games) [ ] Social events/parties [ ] Sports [ ] Sports
Yes [ ] Jobs/Work [ ] Friendships [ ] Shopping [ ] Fashion [ ] Travel/Vacations [ ]
30. How often do you read the web diaries or blogs of strangers?
Several times a day [ ] About once a day [ ] 3-5 days a week [ ] 1-2 days a week [ ] Every few weeks [ ]
Less often [ ] Never [ ] Don't know or don't care to answer [ ]
31. What blogs do you read?
Only read blogs of people I know [ ] Only read blogs of people I don‗t know [ ] Both equally [ ] Never
read blogs [ ] Don't know or don‗t care to answer [ ]
99
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