Social Capital

DEFINITION of 'Social Capital'

An economic idea that refers to the connections between individuals and entities that can be economically valuable. Social networks that include people who trust and assist each other can be a powerful asset. These relationships between individuals and firms can lead to a state in which each will think of the other when something needs to be done. Along with economic capital, social capital is a valuable mechanism in economic growth.

BREAKING DOWN 'Social Capital'

For example, if you know someone at a company where you are applying for a job and this connection helps you get the job at the company, you have used social capital. Social capital can also have negative effects. For example, if a social network is used for manipulative or destructive purposes that will affect the economy negatively, such as when a group colludes to fix market prices.

RELATED TERMS
  1. Corporate Social Responsibility

    Corporate initiative to assess and take responsibility for the ...
  2. Capital

    1) Financial assets or the financial value of assets, such as ...
  3. Social Entrepreneur

    A person who pursues an innovative idea with the potential to ...
  4. Guanxi

    A Chinese term meaning "networks" or "connections," understood ...
  5. Uneconomic Growth

    When economic growth produces negative external consequences ...
  6. Ghosting

    An illegal practice whereby two or more market makers collectively ...
Related Articles
  1. Personal Finance

    Can You Count On Goodwill?

    Carefully examine goodwill and its sources before considering the value of your investment.
  2. Investing Basics

    Human Capital: The Most Overlooked Asset Class

    The skills and knowledge that allow you to make money are your best asset. Remember to invest in yourself!
  3. Active Trading Fundamentals

    Evaluating A Company's Management

    Financial statements don't tell you everything about a company's health. Investigate the management behind the numbers!
  4. Markets

    Intangible Assets Provide Real Value To Stocks

    Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value.
  5. Term

    How Market Segments Work

    A market segment is a group of people who share similar qualities.
  6. Active Trading

    Market Efficiency Basics

    Market efficiency theory states that a stock’s price will fully reflect all available and relevant information at any given time.
  7. Stock Analysis

    Tribune Media: An Activist Investment Analysis (TRCO)

    Learn more about the breakup of Tribune Company, once a powerful newspaper and broadcasting giant, and the role of activist investor Cliff Robbins.
  8. Stock Analysis

    PepsiCo: An Activist Investment Analysis (PEP)

    Read about the nearly two-year public feud between activist investor Nelson Peltz, head of Trian Fund Management, and iconic soft drink maker PepsiCo.
  9. Fundamental Analysis

    5 Basic Financial Ratios And What They Reveal

    Understanding financial ratios can help investors pick strong stocks and build wealth. Here are five to know.
  10. Stock Analysis

    Hologic: An Activist Investment Analysis (HOLX)

    Read about a health care company that attracted activist investors Carl Icahn, Barry Rosenstein and Ralph Whitworth at the same time.
RELATED FAQS
  1. What are some examples of different types of capital?

    The term "capital" can refer to a number of different concepts in the business world. While most people think of financial ... Read Full Answer >>
  2. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  3. What is the difference between positive and normative economics?

    Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Full Answer >>
  4. How are joint ventures regulated in the United States?

    Joint ventures are a very specific type of business arrangement. They can be organized in several different legal structures, ... Read Full Answer >>
  5. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  6. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center