Social Capital

In the recent years, social capital has been recognized as a key factor to success in organizational activities. And opinion on social capital varies from one author to another. Among those, Burt (1992) identifies social capital as opportunities which every individual can receive by building relationships with others. Coleman (1990) has included social capital not only relationship but norms and values. Based on some views of the authors above, we can see that social capital focuses extremely on relationships, and these relationships can help an organization to create value and trust. Social capital effects are described from substantive, such as supplier relationships, to facilitative, for example innovation and entrepreneurship (Ahuja, 2000a; Hitt, et al., 2002).

Social capital provides some advantages which can help improve firm performance and competitive position. First, in a fiercely competitive environment, firms absolutely require information about technological evolution, change in market trend, change in behavior and attitude of consumers, industry evolution signal, legal reform, and so on. By keeping themselves with that information, firms become flexible and effective because those firms will transform that information into knowledge for internal uses. Firms demand that knowledge, known as conscious knowledge, automatic knowledge, objectified knowledge, and collective knowledge (Hitt, et al., 2002) to be responsive to market change and be competitive to maintain or improve positions. Social capital is one of the most effective ways that can help firms to absorb that knowledge. Second, in order to formulate and implement strategy, firms need to make sure that adequate resources and capabilities they possess. Among those resources, human and social capitals play very important roles in implementing strategy and help create competitive advantage through relationships with every player, ranging from suppliers to distributors.

According to that, the core idea of social capital is to build relationship, so that is the reason why social capital is an effective tool for multinational companies to be successful in the world arena because this kind of company requires effective integration of internal business units across geographically different locations and strive to succeed in building linkages in a broadly external network of organizations (Bartlett & Ghoshal, 1998).

Dimensions of social capital are often viewed differently by authors. Yli-Renko, et al. (2001) identified three criteria of social capital: social interaction, relationship quality, and network linkages. Tsai and Ghoshal (1998) summarized broadly social capital dimensions are related to social context, such as social ties, trusting relations, and value systems. In their study testing hypotheses of how social capital helps create value, they identified three key elements of social capital proposed by Nahapiet and Ghosal (1997), known as: structural (social interaction ties), the relational (trust and trustworthiness), and the cognitive (shared vision) items. The result of the study generally shows that investing in building social capital inside organizations creates value, and the examination of the inter-relationships among the three dimensions of social capital, structural, relational, and cognitive, shows how each of them contributes to value creation process (Tsai & Ghoshal, 1998). All these criteria lie on one dimension, which is trust. The core ideas of building relationships between each others, creating social interaction ties, sharing visions, or setting up network linkage are just for the word “trust”. Trust, by the meaning of Bradach and Eccles (1989), is an expectation that another party will not respond opportunistically.

Trust can be self-interest trust and socially-oriented trust (Gainy & Klaas, 2005). By the two authors, socially-oriented trust somehow helps build relationships. Socially-oriented trust is something about understanding each other’s behavior, responsibility for each other, and loyalty to one another, etc. (Gainy & Klaas, 2005). Unlike socially-oriented trust, self interest trust, Gainy & Klaas (2005) quoted from Dasgupta (1988), is the measurement of costs and benefits related to behaving trustworthy. Based on this, self-interest trust is not considered as suitable for this study. So, this study identified some items associated with socially-oriented trust, which is about relationships between people; and this is appropriate for testing trust environment perceived by employees in organizations.