Social Capital: The Driver for Corporate Success in the Knowledge Era

Abstract

The evolution of corporate markets from an industrial era to a knowledge era is being played out on the world’s stock exchanges. Over the past 10 to 15 years, world markets have experienced unprecedented fluctuations, most recently illustrated by the dotcom boom and bust. Movements in financial performances, yields, earnings, returns on physical assets cannot explain the variations the markets have experienced. Intangible capital is being promoted now as having the largest impact on company valuations in the knowledge era. A growing body of research is targeting a greater understanding of intangible capital. Various concepts for human capital, structural capital, customer capital, external capital, innovation capital, intellectual capital etc. are being put forward as components of intangible capital. Mechanisms like the balanced scorecard and the intangible asset monitor have been developed to assist executives manage the non-financial aspects of their businesses. This paper develops an argument for the use of Social Capital as the leading indicator for the management of intangibles. The argument is based on recognition that managing knowledge flows will determine success in the knowledge era, and that leveraging Social Capital is the most appropriate means for managing this. Social Capital is also promoted as a theme for developing heuristics for managing intangibles. The premise being that if a firm is managing its Social Capital well, then all other aspects of intangible capital will naturally follow. Examples are provided on the use of Social Network Analysis techniques for measuring and managing Social Capital at the individual, group and market-place levels.