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Social capital, embeddedness, and market interactions: An analysis of firm performance in UK regions

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  • Phil Cooke

Abstract

This article presents results of a research project examining the effects of social capital on small and medium-sized enterprise (SME) performance. The first main part of the article is a review of literature of relevance to the study. The second part reports the main quantitative results of research on the role of social capital in SME markets in the UK. It compares SME performance and social capital usage across UK regions, with samples stratified according to degrees of knowledge intensiveness of firms and economic status of their area. It shows, perhaps surprisingly, that for many SMEs the “market” is more or less wholly constituted by social capital. The third main part of the article investigates in depth a number of representative and illustrative cases of SMEs deploying social capital in distinctive ways within markets. It shows that without social networks most firms cannot function in markets. It shows high performance firms to be the most intensive users of social capital. This research on social capital underlines the distorted nature of mainstream (neoclassical) economic theory by demonstrating “relational embeddedness” to be an important indicator of SME performance.

Suggested Citation

  • Phil Cooke, 2007. "Social capital, embeddedness, and market interactions: An analysis of firm performance in UK regions," Review of Social Economy, Taylor & Francis Journals, vol. 65(1), pages 79-106.
    • Handle: RePEc:taf:rsocec:v:65:y:2007:i:1:p:79-106
    DOI: 10.1080/00346760601132170
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    Cited by:

    1. Wu, Bao & Wang, Qi & Fang, Chevy-Hanqing & Tsai, Fu-Sheng & Xia, Yuanze, 2022. "Capital flight for family? Exploring the moderating effects of social connections on capital outflow of family business," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 77(C).
    2. Roberto Ganau & Andrés Rodríguez‐Pose, 2023. "Firm‐level productivity growth returns of social capital: Evidence from Western Europe," Journal of Regional Science, Wiley Blackwell, vol. 63(3), pages 529-551, June.
    3. Feldman, Maryann & Fleming, Lee & Heaton, Sohvi & Desai, Sameeksha & Teece, David, 2022. "Uncommon methods and metrics for local entrepreneurial ecosystems," Research Policy, Elsevier, vol. 51(9).
    4. Charis Vlados & Nikolaos Deniozos & Dimos Chatzinikolaou & Agis Digkas, 2019. "From Traditional Regional Analysis to Dynamics of Local Development: Foundations and Theoretical Reorientations," International Journal of Regional Development, Macrothink Institute, vol. 6(1), pages 1-1, December.
    5. Xuhua Hu & Bertha Ada Danso & Isaac Adjei Mensah & Michael Addai, 2020. "Does Innovation Type Influence Firm Performance? A Dilemma of Star-Rated Hotels in Ghana," Sustainability, MDPI, vol. 12(23), pages 1-27, November.
    6. Cain, Trudie & Spoonley, Paul, 2013. "Making it Work: The Mixed Embeddedness of Immigrant Entrepreneurs in New Zealand," IZA Discussion Papers 7332, Institute of Labor Economics (IZA).
    7. Ganau, Roberto & Rodríguez-Pose, Andrés, 2023. "Firm-level productivity growth returns of social capital: Evidence from Western Europe," CEPR Discussion Papers 17979, C.E.P.R. Discussion Papers.
    8. Pochara Arayakarnkul & Pattanaporn Chatjuthamard & Sirimon Treepongkaruna, 2022. "Board gender diversity, corporate social commitment and sustainability," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(5), pages 1706-1721, September.
    9. Yokoyama, Shigeki & Sakurai, Seiichi, 2009. "Social Capital and the Local Food Movement in Japan: The Case of the Chiba Prefecture," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 6(1), pages 1-20, June.
    10. Johannes Boshuizen & Peter Geurts & Anne Van Der Veen, 2009. "Regional Social Networks As Conduits For Knowledge Spillovers: Explaining Performance Of High‐Tech Firms," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 100(2), pages 183-197, April.
    11. Massimo Baù & Francesco Chirico & Daniel Pittino & Mikaela Backman & Johan Klaesson, 2019. "Roots to Grow: Family Firms and Local Embeddedness in Rural and Urban Contexts," Entrepreneurship Theory and Practice, , vol. 43(2), pages 360-385, March.
    12. Alonso, Suyen & Leiva, Juan Carlos, 2019. "Business competitiveness in Costa Rica: a multidimensional approach," TEC Empresarial, School of Business, Costa Rica Institute of Technology (ITCR), vol. 13(3), pages 28-41.

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