What Is Social Capital? Definition, Types, and Examples

What Is Social Capital?

The term social capital refers to a positive product of human interaction. The positive outcome may be tangible or intangible and may include favors, useful information, innovative ideas, and future opportunities. Social capital is not held by an individual, but instead appears in the potential between social network connections between individuals.

It can be used to describe the contribution to an organization's success that can be attributed to personal relationships and networks, both within and outside an organization. It can also be used to describe the personal relationships within a company that help build trust and respect among employees, leading to enhanced company performance.

Key Takeaways

  • Social capital is a set of shared values or resources that allows individuals to work together in a group to effectively achieve a common purpose.
  • Social capital can also be thought of as the potential ability to obtain resources, favors, or information from one's personal connections.
  • The idea is generally used to describe how members are able to band together in society to live harmoniously.
  • In business, social capital can contribute to a company's success by building a sense of shared values and mutual respect.
  • Social capital can manipulate people and destroy order as is the case with drug cartels and corporations that team up to drive out the competition.

Understanding Social Capital

Social capital allows a group of people to work together effectively to achieve a common purpose or goal. It allows a society or organization, such as a corporation or a nonprofit, to function together as a whole through trust and shared identity, norms, values, and mutual relationships. Put simply, social capital benefits society as a whole through social relationships. As such, the study of how social capital works or fails to work pervades the social sciences.

Although the term social capital may have been put into use more recently, the concept itself—that social relationships can have productive outcomes for an individual or a group—has been explored for quite some time. It was commonly used to describe civic and social responsibility or how members of a community work together to live harmoniously and in unison. When used in this context, the definition is purely social with no financial implications.

But the term can have different meanings depending on how it's applied. In fact, social capital is no longer narrow and local in scope. The concept is commonly used to describe the relationships that help contribute to the success of businesses. It is arguably considered as valuable as financial or human capitalNetworking and the use of the internet are prime examples of how social capital works in a business sense. These allow professionals to form social—and often global—connections in many variations. Many jobs are filled through informal networking rather than through job listings. That is social capital in action.

There is no general consensus on how to measure social capital because it can be fairly subjective. Moreover, different social theorists may conceive of social capital somewhat differently.

Types of Social Capital

Researchers identify three primary forms of social capital.

  1. Bonding refers to social capital created within a group with shared interests and goals. A neighborhood association is a good example of how bonding works.
  2. Bridging, on the other hand, is the creation of social capital across groups. When bridging is successful, individuals in the two groups discover shared interests and goals and work together to achieve them. A neighborhood association that links up with a local police department is an example of how bridging works.
  3. Linking, similar to bridging, linking creates ties across groups, but those that span different socioeconomic groups. Linking has been associated with increasing one's chances of upward social mobility.

Social Media and Online Social Networks

The internet has revolutionized social capital, effectively creating a seemingly infinite number of social connections. For example:

  • Airbnb, Uber, and eBay users are able to use social capital to make a selection based on the reviews of past users. The same people contribute to social capital by leaving their own reviews later. The companies that own those sites use reviews as an essential component of their quality control programs.
  • Social networking sites such as Meta (formerly Facebook), strengthen bonds based on personal interests, such as hobbies, past experiences, a shared hometown, or a previous employer.
  • Social media is also a primary source of social capital for small business owners who can showcase their products and services online as effectively, if more cheaply, than larger corporations.
  • Immersive gaming environments like MMORPGs have allowed people from across socioeconomic groups and demographics to convene and collaborate in virtual online worlds, often disguised via in-game avatars. Often, these individuals will develop friendships and relationships that extend beyond the bounds of the game and into the real world.

Advantages of Social Capital

Leveraging social capital increases the flow of information across social connections, opening doors and spreading ideas. The well-known saying, "it's not what you know, it's who you know," is a paradigmatic expression of social capital.

Sociologists and other social scientists have documented the positives that social capital can bring. For example, it has been found that many people have found their jobs through word of mouth as opposed to more formal avenues. Individuals with access to higher levels of social capital also report being happier, in better health, and have increased levels of trust in a community as a result of their positive relationships. Within organizations, such as businesses, high social capital also fosters trust, mutual respect, and collaboration - which, in turn, can lead to increased productivity and profitability.

The idea of social capital has been known for a long time, but was formalized most notably by the sociologists James Coleman, Robert Putnam, Pierre Bourdieu, and Mark Granovetter.

Disadvantages of Social Capital

Many people believe that the success of an organization—whether that's society as a whole or a specific group—depends on the degree of social capital available. This is why social capital has always been linked to positive change. But that's not always true. Although there are distinct advantages to social capital, it can be used for manipulative or destructive purposes.

Nefarious groups, such as gangs and drug cartels, often use social capital to strengthen bonds within the group and to recruit new members. Similarly, a group of corporate executives may collude to manipulate market prices to drive out the competition. The emergence of these kinds of groups can decrease the overall social capital of a neighborhood or city. Residents and local businesses suffer, and potential customers avoid the area.

Even when used for productive purposes, marginalized people and those in minority groups may not have the same social capital resources as others in society, which can put them at a disadvantage. Such people can be shut out of opportunities because they lack the social capital and network connections to be introduced to powerful people or learn about good opportunities.

What Is an Example of Social Capital?

Social capital allows one to leverage information or resources among one's social connections. Asking a friend to borrow their car in a pinch, or finding out about a job opportunity from an old college classmate are both examples of social capital.

How Do You Develop Social Capital?

Social capital is a byproduct of one's social networks and interpersonal relationships. Growing and strengthening these bonds among family, friends, and colleagues will help build your access to social capital. Socializing, keeping in touch with friends and family, attending networking events, and reaching out to old acquaintances are all useful strategies. Forming social networks that are diverse can also help you reach new and different types of people who may have new and different types of information.

What Are the Different Types of Social Capital?

In general, there are three main types of social capital. Bonding builds social connections within groups that have shared similarities. Bridging does so across different groups but among individuals with similar characteristics or status, and linking works across groups of different socioeconomic status.

The Bottom Line

Social capital refers to the benefits and resources one can obtain through their social networks and interpersonal connections. Information, opportunities, and resources that flow through one's social networks are greatly enhanced as that network becomes larger and more heterogenous, as different people occupying different groups can offer different information and insights. In the business world, firms with a high degree of social capital enjoy happier and more productive employees.

Article Sources
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  1. Chetty, Raj, et al. "Social capital I: measurement and associations with economic mobility." Nature, vol. 608, no. 7921, 2022, pp. 108-121.

  2. Granovetter, Mark S. "The strength of weak ties." American Journal of Sociology, vol. 78, no. 6. 1973, pp. 1360-1380.

  3. University of North Carolina. "Social Capital – Health & Economic Benefits of Connecting While Distancing."

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