Horizontal Associations Vertical and Horizontal Associations Enabling Social and Political Environment Social capital refers to the institutions, relationships, and norms that shape the quality and quantity of a society's social interactions. Increasing evidence shows that social cohesion is critical for societies to prosper economically and for development to be sustainable. A narrow view of social capital regards it as a set of horizontal associations between people, consisting of social networks and associated norms that have an effect on community productivity and well-being.
Social networks can increase productivity by reducing the costs of doing business.
Social capital facilitates coordination and cooperation. A broader understanding of social capital accounts for both the positive and negative aspects by including vertical as well as horizontal associations between people, and includes behavior within and among organizations, such as firms. The broadest and most encompassing view of social capital includes the social and political environment that shapes social structure and enables norms to develop. This analysis extends the importance of social capital to the most formalized institutional relationships and structures, such as government, the political regime, the rule of law, the court system, and civil and political liberties. Similarly, the state depends on social stability and widespread popular support.