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Social Capital and the Creation of Collective Knowledge Part of 2014 article "One Hundred Years of ‘Social Capital’"

The contemporary discourse on Social Capital builds still on Nahapiet and Ghoshal’s (1998)[1] three-dimensional model, which is presented in Figure 1. Their article has been cited more than 9430 times (2014) and has become a top article in business strategy discussions. The authors provide a description, based on empirical and conceptual studies, of how Social Capital contributes to organizational innovation by creating intellectual capital, and describe a series of hypothesized relationships between dimensions of Social Capital and processes necessary for the creation of intellectual capital.

Nahapiet and Ghoshal distinguish three components in the process of creating collective knowledge, namely Social Capital (component I), the combination and exchange of intellectual capital (component II), and the creation of new collective knowledge (component III). They specified the relations in and between these three components in the model presented in Figure 1.

The first component – Social Capital (Figure 1, component I) – consists of three dimensions, namely the structural, the relational and the cognitive, which influence processes of combination and exchange of intellectual capital. The structural dimension addresses properties of the social system, containing the impersonal linkages between people or units and refers to the connections between actors, such as a social network, providing individuals with the accessibility to information or resources. Key facets are network ties, configuration, such as hierarchy, and appropriable organization. The relational dimension, ‘refers to those assets created and leveraged through relationships’ (Nahapiet & Ghoshal, 1998, p.244[1]), for example respect and friendship. Actions differ considerably according to one’s personal and emotional attachments to other network members. Key facets are trust and trustworthiness, norms and sanctions, obligations and expectations, and identity and identification. The cognitive dimension reveals resources in the context of  knowledge sharing and knowledge creation. ‘It refers to those resources providing shared representations, interpretations and systems of meaning among parties including shared language and codes and shared narratives’. This cognitive dimension is important for the creation of new intellectual capital (ibidem, 1998, p.244).

Figure 1. The three-dimensional model of Social Capital and creation of collective knowledge (Nahapiet and Ghoshal, 1998)

Nahapiet and Ghoshal further distinguish collective actions (Figure 1, component II), which are crucial in the process of creating intellectual capital. They describe these collective actions as the ‘combination and exchange of intellectual  capital’.  This stage consists of four conditions for the creation of new capital, namely access to parties who possess knowledge (D), anticipation of value to be created (E), motivation to engage in knowing activity (F) and ‘combination capability’ (G), being the ability to recognize, assimilate and use new knowledge. Together, these four conditions form the heart of the framework and lead to new intellectual capital. Nahapiet and Ghoshal present the complex relationships between the three dimensions of Social Capital and the four conditions (see the arrows in Figure 1) as hypotheses that require further investigation.

The third component of their model – the new intellectual capital (Figure 1, component III) – refers to a specific type of knowledge, ‘the knowledge and knowing capability of a social collectivity’. Nahapiet and Ghoshal do not refer the creation of individual knowledge, but to the creation of collective knowledge.

We made a comprised model, pictured in Figure 2. It shows the spiral process of the creation of new intellectual capital facilitated by Social Capital: the new intellectual capital in turn influences the Social Capital, which in turn facilitates the process of the exchange and combination of knowledge, leading to new intellectual capital, and so on. The creation of intellectual capital through Social Capital should therefore be seen as a complex, dialectic process of ‘co-evolution’ (Nahapiet & Ghoshal, 1998, p.250[1]), or a process of co-creation, as we would say.

Figure 2. The spiral process of the creation of new collective knowledge (Ehlen, Van der Klink & Boshuizen, 2009[2])

Nahapiet and Ghoshal are well aware of the limitations of their model and recommend further development through research. Only a few empirical studies have investigated the entire model (Kaasa, 2009[3]), namely those conducted by Tsai and Ghoshal (1998)[4], Hatzakis, Lycett, Macredie and Martin (2005)[5] and De Jong (2010)[6]. Parts of the model were confirmed by investigations reported by, for example, Adler and Kwon (2002)[7], Kostova and Roth (2003)[8], Leana and Van Buren (1999)[9], Falk and Kilpatrick (2000)[10] and Hanson (2008)[11]. Although studies have shown the impact of the three dimensions on innovation, a consistent use of terminology concerning the investigated facets, conditions and dimensions still seems to be lacking. What is called structural in one study, is called cognitive or relational in another. Studies mainly focus on the structural dimension, while the relational and cognitive dimensions have hardly been investigated, as De Jong states (2010)[6]. Research on the multi-dimensionality and coherence of aspects is still scarce. Supportive for further development of the model is research that allows close collaboration between researchers and practitioners (Adler & Kwon, 2002[7]; Moolenaar, 2010[12]; Weber & Weber, 2007[13]).

Pages in this article: One Hundred Years of ‘Social Capital’

Citing this article

This article is part of a thesis:

Corry.G.J.M. Ehlen. 2015. Co-creation of Innovation: Investment with and in Social Capital. Open University. Heerlen. The Netherlands. ISBN 97894 91825 77 4.

You should reference this work as:

Ehlen, C.G., Van der Klink, M., Boshuizen, H.P.A. (2014). One Hundred Years of ‘Social Capital’: Historical Development and Contribution to Collective Knowledge Creation in Organizational Innovation. Open University. Heerlen. The Netherlands.

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  1. Nahapiet, J., & Ghoshal, S. (1998). Social capital, intellectual capital, and the organizational advantage. Academy of Management Review, 23(2), 242-266. ^
  2. Ehlen, C.G., Van der Klink, M., Boshuizen, H.P.A. (2012). The contribution of social capital to organizational innovation: an exploratory longitudinal study. Proceedings of the 13th International Conference on UFHRD 2012. Famalicao. Portugal. ^
  3. Kaasa, A. (2009). Effects of different dimensions of social capital on innovative activity: Evidence from Europe at the regional level. Technovation, 29(3), 218-233. ^
  4. Tsai, W. & Ghoshal, S. (1998). Social capital and value creation: The role of intrafirm networks. Academy   of Management Journal, 41(4), 464-476. ^
  5. Hatzakis, T., Lycett, M., Macredie, R., D., & Martin, V., A. (2005). Towards the development of a social capital approach to evaluating change management interventions. European Journal of Information Systems, 14(1), 60-74. ^
  6. De Jong, T. (2010). Linking social capital to knowledge productivity: An explorative study on the relationship between social capital and learning in knowledge-productive networks. Universiteit Twente, Enschede. ^
  7. Adler, P. S., & Kwon, S. W. (2002). Social capital: Prospects for a new concept. Academy of Management Review, 17-40. ^
  8. Kostova, T., & Roth, K. (2003). Social capital in multinational corporations and a micro-macro model of its formation. Academy of Management Review, 297-317. ^
  9. Leana, C. R., & Van Buren, H. (1999). Organizational Social Capital and Employment Practices. The Academy of Management Review, 24(3), 538-555 ^
  10. Falk, I., & Kilpatrick, S. (2000). What is social capital? A study of interaction in a rural community. Sociologia Ruralis, 40(1), 87-110. ^
  11. Hanson, C. (2008). An Organization Development Typology of Social Capital. Unpublished Manuscript. St. Paul, University of Minnesota. pp.1-12. ^
  12. Moolenaar, N. (2010). Ties with Potential: Nature, antecedents, and consequences of social networks in school teams. University of Amsterdam, Amsterdam. ^
  13. Weber, B., & Weber, C. (2007). Corporate venture capital as a means of radical innovation: Relational fit, social capital, and knowledge transfer. Journal of Engineering and Technology Management, 24(1-2), 11-35. ^

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