social capital: reconceptualizing the bottom line

Social capital:reconceptualizing thebottom line

Vincent Hazleton and

William Kennan

Communication is a central and important

feature of economics. What is missing and

required to solve the problem of accounting

for the relationship between communication

and economic outcomes is an explanatory

concept or force. Social capital is, we believe,

such a concept.

Social capital

Social capital has emerged as an increasingly

popular concept. According to Portes (1998),

social capital is based upon the fundamental

assumption that group involvement and

participation can be beneficial to individuals

and groups, an idea present in most social

theories. The unique element, in this

resurfaced idea, is its links to other forms of

capital, as an explanatory force capable of

linking social behavior to other aspects of the

bottom line.

Contemporary notions of social capital

appear to have developed independently in

the work of at least two theorists: Bourdieu

(1979, 1980, 1985) and Coleman (1988a, b;

1990; 1993; 1994a, b). While Bourdieu's

work clearly precedes Coleman's work,

Coleman's work was the first to receive

widespread attention.

Coleman defines social capital functionally

as `̀ a variety of entities with two elements in

common: they all consist of some aspect of

social structures, and they facilitate certain

action of actors ± whether persons or

corporate actors ± within the structure''

(Coleman, 1988a, s. 98; 1990, p. 302).

Specifically it is changes in the relations

between actors that produce social capital

(Coleman, 1988a; Baker, 1990). These

changes are only accomplished through

communication.

Bourdieu defines the concept as `̀ the

aggregate of the actual or potential resources

which are linked to possession of a durable

network of more or less institutionalized

relationships of mutual acquaintance or

recognition'' (Bourdieu, 1985, p. 248; 1980).

Bourdieu's definition is important because it

distinguishes between two critical elements

(Portes, 1998):

(1) the social relationship itself that allows

actors to claim access to resources

possessed by their associates; and

(2) the amount and quality of those resources.

The authors

Vincent Hazleton is Professor of Speech Communication

at Radford University, Radford, Virginia, USA.

William Kennan is an Associate Professor and Chair of

the Department of Speech Communication at Radford

University, Radford, Virginia, USA.

Keywords

Public relations, Social theory, Networks

Abstract

Examines social capital as a theoretic construct with the

potential to enhance our understanding of public relations

contribution to the organizational bottom line. There are

three classes of outcomes: increased and/or more

complex forms of social capital, reduced transaction costs,

and organizational advantage. Like economic capital,

social capital is not always used wisely and can produce

negative consequences for actors.

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Volume 5 . Number 2 . 2000 . pp. 81±86

# MCB University Press . ISSN 1356-3289

It is important theoretically to distinguish the

resources from the ability to obtain those

resources through membership in different

social structures or relationships. Failure to

acknowledge this distinction can easily lead to

tautological statements (Portes, 1988).

Information (intellectual capital), economic

and other forms of physical capital, human

capital, and cultural capital may all be

acquired through the utilization of social

capital. The possession of social capital does

not necessarily lead to its successful

exploitation. Like power, social capital is best

conceived as potential and its exploitation

recognized as influence. Also, like economic

capital, social capital is not always used wisely

and can produce negative consequences for

actors.

Obligations and expectations

Coleman (1988a) explains the basic process

underlying the function of social capital and

its equivalence to other forms of capital using

the concepts of expectations and obligations.

If A does something for B and trusts B to

reciprocate in the future, an expectation is

established in A and an obligation incurred on

the part of B. This obligation can be

conceived as a credit slip held by A for the

execution of an obligation by B. If A holds a

large number of these credit slips, for a

number of persons with whom A has

relations, then the analogy to financial capital

is direct. These credit slips constitute a large

body of credit that A can call in if necessary

unless of course, the placement of trust has

been unwise, and these are bad debts that will

not be repaid.

Dimensions of social capital

Social capital, grounded in social

relationships, is obviously complex and multi-

dimensional. Identifying the nature of social

behaviors and relational constructs that

parsimoniously account for economic and

other consequences is a critical feature of the

development of theories of social capital.

Putnam (1995) recognized the tendency to

proliferate concepts and claimed that a high

priority be placed on clarifying the

dimensions of social capital.

Organizational theorists, Nahapiet and

Ghoshal (1998), have proposed a three-

dimensional model of social capital. They

identify a structural dimension, a cognitive

dimension, and a relational dimension. Our

approach is similar. The main distinction is

that the approach suggested in this paper

includes a communication content dimension

rather than a cognitive dimension. In order to

create and exploit social capital

communication behaviors are necessary. The

elements of our model are presented below.

The structural dimension

Structure affects access to other actors,

individual and corporate. This is a necessary

condition for the development and utilization

of social capital. Thus, a network tie (the

connection between two social actors) is a

fundamental structural concept, the basic

element of communication networks.

When more than two actors are connected,

the configuration of the network influences

outcomes. Communication scholars have a

long history of interest in communication

networks (Monge, 1987). Elements of

configuration such as network density,

hierarchy, and connectivity all influence the

flow and influence of communication.

Burt (1992) identifies three aspects of

communication in networks that serve to

affect the potential of communication as

social capital: access, timing and referral.

Access describes the opportunity to send or

receive messages as well as knowledge of the

appropriate network channels to use in

`̀ effectively communicating''. Knowledge of

formal and informal networks facilitates both

strategic choices and the efficiency of

communication. Knowing whom to talk with

about what is important and reflects what

Garfinkel (1967) would call `̀ what anyone

knows''.

Timing is a consequence of both knowledge

and network structures. However, all other

factors being equal, organizations that can

communicate more quickly are likely to

possess an organizational advantage.

Frequently, they will be more efficient in the

formation and utilization of social capital.

Referrals indicate the network processes

that provide information to actors about

availability and accessibility of additional

network ties; that is, some networks are more

open and accessible than others. Also,

inclusion in one network can make

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Social capital: reconceptualizing the bottom line

Vincent Hazleton and William Kennan


Volume 5 . Number 2 . 2000 . 81±86

membership in other networks available.

Networks with high referral potential are

clearly more likely to produce more social

capital from more different relationships than

networks with low referral potential.

The final feature of network structure is

appropriable social organization (Coleman,

1988a). This is the feature that describes the

ability of networks or organizations formed

for one purpose to be utilized for other

purposes. Fukuyama (1995), for example,

describes the transfer of trust from family and

religious affiliations into work situations.

Coleman (1990) provides examples of the use

of social capital from personal relationships

used for business purposes. Burt (1992)

describes how social capital from personal

relationships may be aggregated to create

organizations.

The content dimension

Communication, as a visible, manifest

activity, is a necessary condition for the

formation and utilization of social capital.

Communication may be understood from a

variety of perspectives. Hazleton (1993), for

example, proposes a three by three matrix for

the analysis of communication as physical,

psychological, and social objects in terms of

content, structure, and function. The historic

distinction between task oriented and

relationship oriented communication at the

social level conceptually distinguishes

between goals of forming social capital and

utilizing social capital.

More recently, Hazleton (1998), has

suggested that organizations have two types of

goals: instrumental and relational. He argues

that public relations is directly involved in the

achievement of relational goals and that the

achievement of relational goals is frequently

necessary for the achievement of instrumental

goals. This is consistent with our view and

understanding of the concept of social capital

and its role in organizational outcomes.

Hazleton (1993) proposed a taxonomy of

seven public relations strategies in terms of

psychological functions that we feel are

useful: facilitative, informative, persuasive,

promise and reward, threat and punishment,

bargaining, and cooperative problem solving.

Page and Hazleton (1999) have validated the

taxonomy and demonstrated empirical

linkages between perceived attributes of

publics and perceived public relations

effectiveness.

Communication, in addition to laying the

foundation for the emergence of social

capital, is also the mechanism whereby the

available stock of social capital can be

accessed and expended to further various

organizational goals and objectives. There are

four communication functions that provide

the mechanism for exploiting the stock of

social capital: information exchange,

problem/solution identification, behavior

regulation, and conflict management.

Information exchange refers to the ability

that organizations possess to gather, interpret,

organize, store, and disseminate symbols to

relevant constituencies. Without a systematic

and successful strategy for information

exchange organizations lose their ability to

interact and adapt to their environments.

Access to the tacit and explicit forms of

information is only possible where trust is

sufficient to allow knowledge use.

Problem identification and solution

recognizes that organizations must be able to

effectively exchange symbols in order to

identify the problems that confront them and

to find appropriate solutions matched

effectively to those problems. Problem

identification and solution is inherently and

fundamentally a symbolic process made

possible only by the presence of sufficient

social capital. The absence of problem

identification and solution capacity creates

inflexibility and an inability to reconfigure in

response to environmental change.

Conflict management is the symbolic

process through which conflict is understood

as a normal and even valuable organizational

activity that must be managed as a regular and

ongoing process.

Behavior regulation is the symbolic process

through which the behavior of various actors

is shaped in relation to organizational goals

and objectives. Employees must understand

and accept policies and procedures.

Customers must develop appropriate images

of organizations.

The relational dimension

We have already identified expectations and

obligations as central features of social capital.

Both the amount and nature of both are

central features in understanding

organizations' relations with publics and the

influence of communication. Relationships

within role theory are frequently explained in

such terms.

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Whether or not B repays A depends upon a

number of factors. Among them are

motivation to repay and the extent to which

obligations are held. Sources of motivation to

supply resources (Portes, 1998) is another

important consideration at the relational

level. Two different relational consequences

of communication are important in our

model: trust and identification. Trust and

identification account for three different types

of motivation.

Trust is the primary relational feature of

social capital in Coleman's (1988a) model

and the most frequently studied concept

linked to other social outcomes from a social

capital perspective (Portes, 1998). Trust on

the part of an actor supplying resources

assumes the trustworthiness of the actor

requesting resources. The norm of

reciprocity, a dyadic concept, constitutes the

motivating force in accounting for effects of

trust.

Identification refers to the extent to which

actors view themselves as connected to other

actors. Portes (1998) identifies two additional

motivational forces in addition to trust. Both

may be linked to the concept of identification.

The first is `̀ bounded-solidarity''. Grounded

in Marx's concept of emergent class-

consciousness (Marx, 1894 (1967 ed.); Marx

and Engels, 1848 (1947 ed.)) the production

of social capital is a product of the emergent

awareness of a common fate. The willingness

of B to repay A is not universal in this

situation, it is bounded by the limits of their

community. This represents a form of social

identification in which A and B view each

other as sharing common features, such as

goals or ethnicity.

A third form of motivation arises when A

and B belong to a common social structure.

Unlike the `̀ bounded solidarity'' situation,

repayment is not dependent upon B's

knowledge of A but on the normative force

provided by the overlapping social structure.

In some instances the actual repayment to A

may not come from B, but from the

collectivity as a whole. For example, the

benefit to an employer creating a day-care

center for employee children does not derive

from the children, or even necessarily their

parents, but from the potential approval and

affection of all employees.

Another condition which is necessary, but

not sufficient, to ensure normative

compliance is an adequate degree of social

system closure. In Coleman's example, trust

and trustworthiness are essential but they do

not by themselves constitute adequate

normative force to ensure repayment. Closure

allows effective sanctions to be enacted by

those for whom the system of social capital is

valued. Reciprocity, as a norm, is more likely

in social systems which employ negative

sanctions when B fails to repay A. The effect

of system closure is the emergence of

observable norms.

Consequences of social capital

As exploitative communication draws upon

the available store of social capital, various

organizational outcomes emerge or are

enhanced. In this regard there are three

classes of outcomes: increased and/or more

complex forms of social capital, reduced

transaction costs, and organizational

advantage. These outcomes can be either

positive or negative and can be characterized

along a continuum that ranges from the highly

concrete to highly abstract. Further, the

nature of the outcomes predicated on the

emergence and expenditure of social capital

are less easily observed and more uncertain

than other types of exchanges (Bordieu, 1979;

1980).

The appropriate use of communication to

draw on the store of social capital may

produce additional social capital and/or

expressions of social capital, e.g. intellectual

capital (Napahiet and Ghoshal, 1998), new

relationships and networks, etc. For example,

effectively managed relational

communication can enhance employee

relations. Exploitative communication can

make use of this store of social capital to

provide a context in which successful

restructuring is possible. The outcomes could

include increased commitment to

management and the broader organizational

framework, community relations could

improve based on positive employee

responses to change, media could come to

identify the organization as `̀ excellent'', etc.

Fukuyama (1995) identifies transaction

costs as those costs which accrue to

organizations or cultures in the absence of

social capital. In Fukuyama's analysis, simpler

and less expensive systems based upon trust

must be replaced by `̀ a system of formal rules

and regulations, which have to be negotiated,

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agreed to, litigated, and enforced, sometimes

by coercive means'' (Fukuyama, 1995, p. 27).

Transaction costs are grounded in the

available stock of social capital. Its absence is

reflected in a decline in or absence of trust.

Such costs can assume a variety of guises: the

cost of sexual harassment suits, age

discrimination suits, disability claims, legal

costs, employee theft, labor union based

grievances, etc. Rather than reflecting purely

economic costs closely associated with market

activities, our intent is to index costs that

reflect the lack of associational capital that

directly breeds mistrust, hostility, suspicion,

and hate and encourages costly and

prolonged conflict. Employee theft, for

example, reflects the absence of a relational

context in which a norm resides producing a

set of expectations and obligations regarding

theft. Employee monitoring devices are costly

methods for enforcing a kind of relationship

that has not emerged culturally through

appropriate communicative relationships.

Third, expenditures of social capital via

communication can result in increases in

organizational advantage: productivity,

efficiency, quality, customer satisfaction, net

asset value, stock value, etc. Organizational

advantage refers to outcomes which improve

the ability of the organization to adapt to

changing environments. Organizational

advantage issues are the traditional kinds of

organizational outcomes that theorists have

pursued. The results of that research have

been mixed and, as noted above, the modest

results that have been produced have

dismayed and frustrated researchers.

The pursuit of quantitative associations

between social capital expenditures and the

three categories of outcomes must be

understood. First, outcomes are complex,

turbulent, and uncertain because of the

nature of the relationships that produced

them. This may be more clearly understood

by recognizing that outcomes are

characterized by unspecified obligations,

uncertain time horizons, and potential

violations of reciprocity expectations

(Bordieu, 1979; 1980). That is, one does not

know exactly how actors might construe their

obligations based on social capital and hence

the type of outcomes that can emerge are

contextually embedded. Further, it is difficult

to understand when obligations will be repaid

(uncertain time horizons). When can one

expect an obligation to be repaid or whether

actors perceive reasons for reciprocating at

all? Finally, actors may violate reciprocity

expectations. Most simply put, an actor loans

an acquaintance $20. The actor expects that

the loan will be repaid promptly. The

acquaintance seeks to meet the obligation by

offering to buy lunch in some unspecified

time frame. While the intent is to repay the

obligation, the manner in which the

obligation is to be met fails to meet

conventional expectations.

Within this context, researchers have

sought associations among communication

and organizational advantage, for example, in

an effort to satisfy bottom line demands. The

overall strategy has been to literally presume

that the only good outcome is a significant

economic outcome. That is, if net asset value,

for example, is not significantly increased, the

search has been in vain. Violations of

obligation expectations introduce a level of

complexity and uncertainty that makes the

link between communication and outcomes

more challenging. How to proceed?

An approach to this relationship requires a

twofold focus. First, while associations with

desired organizational advantage issues may

be modest, the associations with additional

forms of social capital and with transaction

costs may provide a better picture especially

when seen as additive with organizational

advantage concerns. Second, over time

associations among organizational advantage,

transaction costs, and the emergence of

additional forms of social capital may interact

synergistically to produce additional effects.

Consequently, the better question may focus

on which outcomes (and what types) actually

emerge, what is their net effect, and how do

they associate in desirable ways.

Our failure to demonstrate the

consequences of communication empirically

as a discipline is grounded in two research

tendencies. First, there is a tendency in

research to focus on a limited number

(usually one) of dependent variables in any

project. Second, there is a tendency in

research to emphasize case studies and

examine data from a single organization.

Conclusion

Increasingly contemporary organizations

scrutinize every aspect of their activities in an

effort to determine which of their functions

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Volume 5 . Number 2 . 2000 . 81±86

add value and which don't. Social capital

provides a theoretical explanation of how the

relationships created through organizational

behavior and public relations specifically are

transformed into other forms of capital. It is

these other forms of capital that are routinely

considered as `̀ the bottom line''.

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Portes, A. (1998), `̀ Social capital: its origins andapplications in modern sociology'', Annual Reviewof Sociology, Vol. 22, pp. 1-25.

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Further reading

Aupperle, K.E., Carroll, A.B. and Hatfield, J.D. (1985), `̀ Anempirical examination of the relationship betweencorporate social resposibility and profitability'',Academy of Management Journal, Vol. 28,pp. 446-63.

Conine, T.F. and Madden, G.P. (1986), `̀ Corporate socialresponsibility and investment value'', in Guth, W.D.(Ed.), Handbook of Business Strategy 1986/1987Yearbook, Warren, Gorham, & Lamont, Boston, MA.

Downs, C.W., Clampitt, P.G. and Laird, A.L. (1988),`̀ Communication and organizational outcomes'', inGolhaber, G.M. and Barnett, G.A. (Eds), Handbookof Organizational Communication, Ablex, Norwood,NJ, pp. 171-212.

Fombrun, C. and Shanley, M. (1990), `̀ What's in a name?Reputation building and corporate strategy'',Academy of Management Journal, Vol. 33,pp. 233-58.

McCloskey, D. and Klamer, A. (1995), `̀ One quarter ofGDP is persuasion'', American Economic Review,Vol. 85, pp. 191-5.

Shiller, R.J. (1989), Market Volatility, MIT Press,Cambridge, MA.

Shleifer, A. and Summers, L.H. (1988), `̀ Breach of trust inhostile takeovers'', in Auerbach, A.J. (Ed.),Corporate Takeovers: Causes and Consequences,The University of Chicago Press, Chicago, IL,pp. 33-56.

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social capital: reconceptualizing the bottom line

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