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Upon more studies on social capital, a consensus was achieved on its definition; this definition states that social capital is a sign of the
ability of its owner on gaining benefits from being a member of different social structures (Portes, 1998). The main discussion of the social
capital theory is the communication network which is considered as a valuable source and makes its members to gain a joined capital
(Bourdieu, 1985).
After a better look at what we can see in social capital theories, we can make it into two categories (Sandefur & Laumann, 1998; Adler &
Kwon, 2000; Lesser, 2000):
1- Egocentric or Psycho Centric Theories (Granovetter, 1973; Burt, 1992; Coleman, 1990);
2- Socio Centric Theories (Fukuyama, 1997; Putnam, 1995).
These two approaches are different on individual or the main players of the action-based scenarios. According to the Ego Centric theory,
the main player is the person who assigns the resources from social networks or relationships he finds best suited. According to the second
category or the Socio Centric theory, the main player is a group such as an organization or a society and the social capital can be found in
"the internal relationships forming their structure" (Adler & Kwon, 2000, p92).
Following this approach, Dess and Shaw (2001) defined social capital as a public commodity (Organizational resource) rather than a
private commodity (personal resource). Considering many definitions that different people suggest, Portes (1998) concluded that there is no
constant formula for the social capital. But it obvious that social capital shows internal connections of the communication network; and this
communication network facilitates to reach to the resources (Nahapiet & Ghoshal, 1998).
Despite the different definitions of social capital, it is measured by participation rate in group and social activities and the existence of
mutual trust. Although the idea of social capital seems simple, but there's no doubt that it affects much more immense concepts. Social
capital idea has found its way to many areas such as economy, politics, family, organization and even natural disasters.
Three dimensions are assigned to social capital: Structural, cognitive, and relational (Nahapiet & Ghoshal, 1998).
1- Structural Dimension: This dimension points to the structure of the connection of people, which includes the connection of the members
of the network along with the whole structure of the network. This concept affects other factors such as structural pits, concentration and
network mass.
2- Cognitive Dimension: This dimension is achieved through the common language and discussions of the members. This common
language and discussion of the members leads to mutual understanding of the people and thus makes their relationships much more
productive.
3- Relational Dimension: This dimension is very useful. It defines the connections of the network based on the mutual trust of the
members, the existing norms and the common identity they share. In other words, this dimension deals with the nature or the quality of the
network relationships.
These three indices are each explained through elements that were specified by Nahapiet & Goshal (1998), which have been explained
thoroughly in the table 1.
Table 1: Considered indices for the organization's social capital (Nahapiet & Ghoshal, 1998)
Num Social Capital Dimensions The indices and their definitions
1
Cognitive Dimension
Common Language and codes
Existence of common organizational values, goals and vision
2
Common Anecdotes
Existence of recognition and participation based on common experiences, memories or anecdotes
3
Relational Dimension
Trust
Existence of relationships based on mutual honesty and trust and the amount of trust between co-
workers
4
Norms
Treating participation as a necessity; Existence of group work setting in different activities;
Existence of spirit of criticism; Existence of the spirit of commitment and enthusiasm; Existence
of the spirit of forgiveness and dedication between the co-workers
5
Commitments and Expectations
Having commitment towards the goals of the library; Preferring the library's benefits over other's
benefits
6
Identity
Feeling as a member of the organization family; Having interest in working for the library;
Preferring to work in the current department rather than others
7
Structural Dimension
Work Relationships
Existence of earnest personal relationship between the staff; Having some sort of friendship
outside of work
8
Group Relation's Structure
Existence of good work relations in the library; Existence of cooperation and consultation between
different departments of the library
9
Proper Organization
Existence of facilitating communication structure in the organization; Valuing teamwork; Valuing
moral values such as honesty and trust; Emphasizing on friendly relationships between the staff
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Many theories have been presented for the definition of the social capital, and the summary of those theories are presented in table 2.
Table2: A summary of all the presented theories on social capital (Eduardo Bueno, 2004)
The approach of the social capital Main Ideas Original conducted researches
Economic Development Theories Confidence, civilized behavior and association make social
networks stronger which leads to stable economic
development.
Putnam (1994), Knack and Keefer (1997),
Stiglitz
Social Commitment and Morality Social capital explains the degree of social integration in
respect to the society and its functions and groups. This is
based on values, and behaviors such as self-confidence,
participation, security, principles, morals and compromise.
Coleman (1990); Newton (1997); Chang (1997);
Kawachi et al. (1997); Bullen and Onyx (1998);
Joseph (1998); Cortina (2000); Baron (2001)
Corporate Supervision Morality and corporate supervision have a positive impact
on gaining social capital, since they increase solidarity and
overcome market flaws.
Baas (1997); Sen (1997);Zingales (2000); Rajan
and Zingales(2000)
Intellectual Capital Social capital is a component of intellectual capital, which is
based on a number of values and indices such as: self-
confidence, loyalty, honesty, compromise, transparency,
solidarity, accountability, trust and morality.
Nahapiet and Ghoshal (1996); Koening (1998);
Prusak (1998); Lesser and Prusak (1999); Lesser
(2000); Cohen and Prusak (2001); Kenmore
(2001); Lesser and Cothrel (2001); McElroy
(2001)
3. Social Capital's Role in Economy
In ancient Greece, the existing trust and mutual credibility between two parties decreased trade costs and made benefits for both parties.
This approach was based on their well-known philosopher's thoughts at the time. Then, rich people had more credit and were the most
trusted. In the 5th
century AC, due to the fading of social norms, stronger rules for establishments were conducted. The emersion of many
law-making officials and law interpreters, who played the role of the lawyers of that era, was the first result of this approach, which raised
trade costs significantly (Karayiannis, 2012).
According to the neo-classic theory of economy, production is a subordinate of capital and workforce. Although, it is assumed in this
theory that there are no trade costs in place, the productivity of the workforce must be taken into account. In other words, the reason why
we see such different variety of GDPs growth rate is the productivity of the workforce.
Studies have also shown that there is a direct relationship between economic growth and the social capital. According to a study, conducted
by Knack and Keefer (1997), an increase of 1 percent in GDP –as an index in macro-economy- for each 12 percent increase in mutual trust
is indicated. Since mutual trust is considered as the most important index in social capital evaluation, there is a direct relationship between
social capital and economy.
The reasons for the introduction of social capital in economy are as follows:
Difference between the market at the companies' nominal value;
The lack of a theoretical consensus in professional and academic conventions on the principles of intangible capitals'
measurement and management;
The economic recessions caused by modern economy's tangible crisis;
And finally the fact that the relationships are not all like an official contract, based on the financial models, which are conducted
with the purpose of maximizing the investor's profit, in short term. These relationships are based on unofficial values such as
confidence, loyalty, and morality (Tymon & Stumpf, 2003).
Some Scientists believe that the social capital is much more important than physical and human capital. That is because in the modern era
economy which is dependent on fast variations and having competitive advantages –which comes from tangible capital- it is the intangible
capital that can make this competitive advantage in organizations.
On the other hand, social capital is a sort of capital that can be turned into physical and human capital; in other words, capitals can be
invested on social capital, then social capital can itself make other forms of capital or maintain their stability.
Just like Physical and human capital and unlike financial capital, this capital needs maintaining. Otherwise, it will lose its efficiency over
time. Also, just like human capital and unlike physical capital, social capital doesn't have a depreciation rate. It is possible that this capital
may suffer from depreciation if not used in a long time; not only will it not be depreciated for being used, but also it will get stronger. This
capital is considered as a public commodity rather than a private one. And it involves the risk of one of the members, who owns this
commodity, throwing it away (Adler & Kwon, 2000).
4. Social Capital in Financial Crisis
Based on a study, conducted by Anderson (2009) on 99 neighborhoods in Iowa state in United States after the financial crisis, he concluded
that, not only is the defect in social capital caused by losing jobs, but also by the defect in other economical indices. These indices in small
neighborhoods can include the closure of a school, environment pollution or a natural disaster. The studies conducted by Gaurav and
Hoogeveen (2000) in Malaysia, Philippines and Indonesia, between 1997 and 2000 and during the global financial crisis, show the
relationship between financial crisis and social capital. Also, in a study conducted by Dr, Mazharul Islam and Professor Chamuri Siwar
4. Social Capital Critical Role in Financial Crisis Periods
International Journal of Economy, Management and Social Sciences, 3(1) January 2014
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(2010) in Malaysia and on 2000 families, we can witness the decrease in indices that are targeting social capital. Of course there is a big
difference between the two crises, but the result of both is the same (Islam, 2000).
In another study, conducted by Katarzyn Growiec (2010) in Iceland and in a 26 year time period and based on EVS (European Values
Study), on family connection and trust indices, it was witnessed that the growth in these indices was decreased due to the 2008 financial
crisis, even though they still showed a positive economic growth rate.
During the 2008 financial crisis, which occurred due to the improper risk distribution and management, the responsible involved
governments in this crisis couldn't uphold their main responsibility. However, many have pointed out the loss of trust in this crisis.
Economy Nobel Prize winner Joseph Stiglitz has stated that:"This crisis is the fruit of disastrous leap in dishonesty." Although, the right
way of saying that is that this phenomenon is the result and outcome of an incident that has happened and it is not the cause (Tonkis, 2009).
In financial crisis conditions we are witness to a defect in social indices such as social capital. In studies, recently conducted in Euro Region
during the financial crises, this idea was confirmed. Steven Philip Kramer, the professor of Grand Strategy at the National Defense
University of the United States, believes that European Union has turned into a mechanism for social regression, widespread
unemployment, and poverty instead of advancing social development in the Europe (Kramer, 2012, p.86).
Based on a poll, which was taken by Institut für Demoskopie Allensbach (IFD Allensbach) in January 2011, 50% of Germans do not trust
and believe in the European Union and more than 70% of the poll takers believed that Germany could have no future through the European
Union (Guerot & Henard, 2011, p.7). Of course, this is just the level of concern in Germany, which is a country that has lived through the
crisis and suffered less damage than other countries like Greece, Italy and Spain.
Different domestic industries are facing problems such as the decrement of economic growth in the recent years, along with the anticipation
of the International Monetary Fund (IMF) of the negative growth in the following year, and the financial crisis in funding investments.
Social capital is a forgotten capital among other physical capitals in these situations.
5. Conclusion
The mutual relationship between financial crisis and social capital can easily be seen. If a crisis occurs, the social capital weakens and this
weakening leads to an increase in costs and a change in rules and intensity in morbid competition between the organizations, loss of mutual
trust and professional morality in commerce. This mutual relationship goes on without interruption, until a new balance point appears.
However, if the financial crises continue to live on and the social capital weakens, the effect of this lingering crises remains and even after
years it will stay in minds. In other words, what we call culture and define as success waste, are going to be affected after that. Social
values, affected by this process, will suffer change in a way that honesty, as the main component of professional morality and trust, loses its
value and alternatives will take the place of these values.
Given the discussed crisis in the Europe and social capital, we can witness the direct effect of the crises on social capital. Therefore, the
idea that the presence of a crisis accents the need of guarding the social capital makes sense. By conducting a review on inflation and
economic growth indices and comparing these to the current economic situation in Iran, the presence of a crisis is explicit. Therefore, the
same danger that's threatening Europe from the financial crisis, awaits us too. In Iran we are witness to a great defect in social capital and
many other signs that approve this point.
In an organizational view not sufficient attention is being given to this issue, so that the senior managers of organizations see issues only in
a physical and financial capital sense; while understanding the fact that, this issue will harm the organization as a whole and decrease other
capitals and total productivity, can lead to planning short and long term evaluations for social capital variables in organizations and
implementing strategic programs to improve them.
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