Roles of Social Capital in Venture Creation: Key Dimensions and Research Implications*

This study was built upon Nahapiet and Ghoshal's three dimensions of social capital--structural, relational, and cognitive. It addresses three research questions: (1) Are there significant differences in social capital between nascent entrepreneurs and the general public (control group)? (2) Are there significant differences in social capital between technology and nontechnology nascent entrepreneurs? (3) How do the three dimensions of social capital interact among themselves across different sample groups? These questions were examined by using the Panel Study of Entrepreneurial Dynamics data set. Results suggest that there are no significant differences in various dimensions of social capital between nascent entrepreneurs and the general public. What differentiates the two groups is not the amount of social capital but the patterns of association among its different dimensions. Additionally, the authors found that technology-based nascent entrepreneurs tend to have a higher degree of relational capital than their nontechnology counterparts. Implications and future research directions are discussed. Introduction Researchers studying social capital are centrally concerned with the significance of relationships as a resource for social action (Burt 1992; Baker 1990; Coleman 1988, 1990; Bourdieu 1985). The term social capital has traditionally been conceptualized as a set of social resources embedded in relationships (for example, Burt 1992; Loury 1977). It takes a sociological view of human action and perceives individuals as actors who are shaped by societal factors. Early usage highlighted the central importance of the development of individuals in community social organizations (Loury 1977; Jacobs 1965). A broader conceptualization presents social capital as including not only social relationships but also the norms and values associated with them (for example, Tsai and Ghoshal 1998; Putnam 1995; Coleman 1990). Social capital is therefore described by researchers as an asset embedded in the relationships of individuals, communities, networks, or societies (Nahapiet and Ghoshal 1998; Burt 1997; Walker, Kogut, and Shan 1997). The concept has been applied to a wide range of social phenomena, with focused attention on the role of social capital as an influence on compensation of chief executive officers (CEOs) (Belliveau, O'Reilly, and Wade 1996), individual occupational attainment (Lin and Dumin 1986), economic performance of firms (Baker 1990), the development of human capital (Coleman 1988), industry creation (Aldrich and Fiol 1994), and firm growth (Ostgaard and Birley 1994). More recently, the theory of social capital has been expanded to the field of entrepreneurship research. At the company level, the entrepreneurship literature has highlighted the significance of social capital in understanding how firms create and manage a network and what the outcomes are (e.g., Florin, Lubatkin, and Schulze 2003; Larson and Starr 1993; Aldrich and Zimmer 1986). At the individual level, studies have demonstrated that an entrepreneur's personal network allows access to resources that are not possessed internally (Ostgaard and Birley 1994). The general consensus is that a high level of social capital, built on a favorable reputation, relevant previous experience, and direct personal contact, often assists entrepreneurs in gaining access to venture capitalists, key competitive information sources, potential customers, and others (for example, Florin, Lubatkin, and Schulze 2003). The availability of resources made possible by entrepreneurial networks greatly enhances the survival and growth potential of new firms (Bruderl and Preisendorfer 1998). Although the theory of social capital has made significant inroads into entrepreneurship research, there are a number of limitations in how the concept is explored. First, social capital has been mainly defined and operationalized as a unidimensional rather than multidimensional construct, with much emphasis placed on the network or structural component. …