6.3 Social capital
The importance and functions of tacit knowledge can be reinforced by a deeper analysis of social capital. Social capital is the ‘social dimension to human activity and relationships that enables knowledge creation, transfer and generation processes’ (Bowles, 1999:44).
In fact it is social capital that is required to multiply the effect of people working and interacting together. All relationships are enhanced by the quality of their interrelationships — trust, networks and shared values. That is what social capital is — the shared values, networks and trust that enhance the productivity of people’s interactivity. Social capital is the product of strategic learning, if that learning is for a shared and worthwhile purpose. Real lessons can be learnt from an analysis of social capital. In this section the study of social capital is not intended to cover the theoretical or empirical arguments surrounding social capital (Portes, 1998). Nor is this section intended to expand on selections of current thinking to provide a definitive statement on the value of social capital within an organisation (see Woolcock, 1998:193–196 for an extensive list of sources). This section simply seeks to illustrate the importance of maximum individual knowledge assets by drawing on resources that extend beyond the boundaries of an organisation, into wider societal sources.
Social capital is the focus of many authors and managers because it deals with the management and quality of social relationships as both an asset and a critical factor effecting positive group, regional, community, social and organisational outcomes (Woolcock, 1998:170).
Social capital has variously been defined. From a network perspective:
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, 1985:248)
From a structural–functional perspective:
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 structures. (Coleman, 1990:302)
Robert Putnam, defining social capital, states that it:
. . . refers to features of social organization, such as trust, norms, and networks, that can improve the efficiency of society by facilitating coordination of actions. (Putnam, 1992:167)
Some core features of social capital are that it:
- ‘Inheres in the structure of their [individual] relationships’ (Portes, 1998:7);
- Is mobile and cannot be embedded in structures or processes;
- Cannot be physically banked (Portes, 1998:7) or placed on a balance sheet;
- Is not easy to gauge by studying types of relationships because it is context specific (i.e. weak relationships may provide the information and links necessary to achieve a profound outcome where strong relationships may not have generated the same outcome);
- Resides in humans and in their ‘accumulated mutual obligations’ and the societal need for reciprocity (acquittal of obligations) (Portes, 1998:7);
- Is built as acts of reciprocity and relationships that promote group trust, norms and collective ‘rituals’ that govern behaviour and facilitate further interaction (Falk & Kilpatrick, 1999); and
- Is both the means that reside as individual property and the ends achieved through networks and relationships.
Some claim that social capital can generate negative influences (Portes & Landolt, 1996; Portes, 1998:13) such as:
- Exclusion of others not sharing purpose or mutual obligations (for instance, cliques and rhetorical communities);
- Competing claims for group membership and group direction;
- Restrictions on individual action through collective demands for converging behaviours rather than individual divergence; and
- Downward levelling norms (e.g. group think; bounded innovation and problem solving).
However, others claim that if the effects of interaction are negative, the interactions do not generate social capital (e.g. Falk & Kilpatrick, 1999; Falk, 1999). This is one of the debates in this field.
Michael Woolcock (1998:164) distinguishes between two forms of social capital:
- Embedded — The integrative elements that assist structure relationships such as capacity, networks, credibility and procedures; and
- Autonomy — The linkages at a micro level that may refer to intra-community ties or, at a macro level, the state–society relationships. Networks across homogeneous cultures may encompass individual reason and social ties that dictate how individuals interact.
Social capital picks up on earlier works that emphasise both relationships and customers as holding capital value. The value lay in the networks of interaction and the ability to hold a relationship with an individual. Bowles (Bowles, 1999; Bowles & Baker, 1998), reporting on the implementation of integrated learning and performance systems established in Woolworths Australia from 1994 to 1998, actually reported a three-tier approach to encompass the creation and management of knowledge capital within an organisation. The types or dimensions of knowledge assets include infrastructural, human and social capital.
Figure 2 Types of knowledge capital
(© Bowles 1997 Bowles, 1999:24)
Unlike some proponents of intellectual capital, Bowles (see figure above) suggests that social capital is an additional knowledge capital resource, not a subset of structural, or other categorisations such as customer, relational or human, capital (Edvinsson & Malone, 1997:52; Stewart, 1997). Writing on social capital, Woolcock (1998:179) warns:
Forging and sustaining social relationships connecting top-down resources and bottom-up capacity building is not easily achieved.
The warning generates fear in those wishing to add social capital to existing knowledge management equations that have social aspects tied to performance and its ‘asset value’ determined through attainment of set customer and market outcomes. The approach posited by Bowles sees human capital focusing on skills and knowledge associated with operational outcomes — the explicit knowledge. Social capital represents the stocks of tacit knowledge resident within individuals, networks of interaction, relationships and cultural attributes of people, the organisation and society (Bowles, 1999:23). The framework acknowledges that the stocks and flow of knowledge within an organisation may extend well beyond the boundaries of the organisation.
Firstly, however, managers must acknowledge that the outcome of social capital is inconsequential in terms of its asset value. The ‘capital value’ resides in the potential to utilise social interactions or the capacity to source knowledge utilising social capital (Woolcock, 1998:157, 185; Portes, 1998:6).
Secondly, different types of social relationships are directly related to the forms of interaction that add to the tacit knowledge held by individuals within the organisation. Social capital provides a mental construct that warns us, at the very least, to be aware that management of these individual relationships must occur beyond the organisation’s parameters if certain sources of knowledge assets that can affect outcomes of an organisation are to be managed.
Thirdly, there is no predictive model that can sort social capital into means–ends, negative–positive and cost–benefit dimensions of organisational management. Social capital does, however, exist and is a positive factor that can be harnessed in the generation of knowledge capital.
Reading 2
Järvenpää, E & Immonen, S (April, 2004), ‘Social capital and knowledge management of organizational networks’, Fifth European Conference on Organizational knowledge, learning and capabilities(OKLC), Innsbruck, Austria. Available at www.ofenhandwerk.com/oklc/pdf_files/I-4_jarvenpaa.pdf.
Activity 3
- How does social capital as a pool of IC or KC relate to relationship capital? Are they interchangeable terms?
- In what ways are networks, relationships and supply chains related ?
- Because social capital enabled the exchange of intellectual capital does that mean all organisations will view the major value in social capital as predominantly residing in how value is created through tangible knowledge assets?
- Reflect on how could trust and moral basis for cooperation be given a capital value and measured as part of a knowledge management framework? Note some possible solutions.
- Do we have to always structure supply chains/ networks in the same manner to create knowledge and IC value for all organisations ?
So, social capital reinforces the fear of the power of knowledge — that knowledge can reside not only in individuals but also in networks and relationships between individuals that cannot be owned by an organisation, and may well exist outside the organisation’s domain of operation and influence.
The study of tacit and explicit knowledge, whether this knowledge is embedded or migratory, must also span interactions within and outside the organisation. The development of knowledge assets is about managing knowledge that is tacit or explicit, migratory or embedded; that is, knowledge found not just in pools of knowledge capital resources owned by the organisation, but in:
- Networks that orchestrate individual interaction, inside and outside the organisation (micro level — individual to group);
- Groups or communities within the organisations that have connections to other organisations and the wider society (meta level — group to organisation); and
- Policies and rules that govern company interaction with governments and society in general (macro level — organisational to ‘civil’ society) (Putnam, 1996:34–35; Putnam, 1992:165–69; Woolcock, 1998:186).
The very reason tacit or explicit knowledge is embedded or migratory may in fact be due to who ‘owns’ that knowledge, and where that knowledge is sourced. Harnessing existing social networks and relationships may accelerate communication between individuals and enhance organisational responsiveness, but can these relationships be sustained, and oriented towards sustainable strategic outcomes, and are they unique so that a competitor cannot replicate them with their existing capabilities?
Capital value of managing knowledge as an asset is not complete if the aim is only to embed explicit knowledge. Maximisation of knowledge as an asset requires recognition that it is a volatile mix of explicit, tacit, embedded and migratory dimensions. Each varies with the specific context. Management based on the achievement of set actions or strategic outcomes may well deny the competitive advantage inherent in how individuals source knowledge. Ignoring the individual and social dimensions that promote tacit knowledge assets may restrict the sorts of knowledge an organisation requires, if it is to be responsive, agile and able to generate the capabilities necessary to meet potential market demands.
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