Trust Works! Sources and Effects of Social Capital in the Workplace

Abstract

Substantial evidence illustrates that the social capital of a society affects the productivity of its firms and thereby lifts economic growth rates. The precise transmission mechanisms from social attitudes to organizational efficiency are still a black box. This paper investigates whether and in what form the social and institutional trust of employees has an impact on networks and trust within a firm (termed workplace social capital). A two-level approach enables a simultaneous analysis of potential individual-level and firm-level driving forces of workplace social capital surveyed from 1244 employees of 116 firms. Individual endowments of social and institutional trust are strongly associated with increased rates of workplace social capital at the employee level. High-trust individuals also appear to be clustered in firms, which is evidence for a sorting effect and the potential impact of a firm’s embeddedness in the local area. Aggregated firm rates of workplace social capital are influenced by some of the management tools analysed such as focus on worker’s health and work–life balance. In addition, we find that workplace social capital has a sizable and beneficial impact on satisfaction with obtained wage indicated by employees which is assumed to be a fundamental precondition for high work effort. Thus, we observe a link going from individual trust to wage satisfaction that is mediated by workplace social capital and represents a potential causal mechanism for inducing higher workforce productivity.