Social capital and organizational structure in Colombian agroenterprises

Several studies on the importance of social capital in small and medium-sized enterprises have taken the enterprise as the basic unit of analysis and focused on the relationships that it maintains with other individuals and entities. However, studying the enterprise as if it were a single decision maker overlooks some important social relations within the firm itself, principally among the firm’s owners. A firm’s organizational structure determines the rights, responsibilities, and obligations of firm owners with respect to each other and to society in general. Therefore, we would expect that the way a firm’s owners choose to organize themselves will be influenced by the nature of the personal ties among them. In fact, the legal definitions of different organizational structures—e.g. cooperatives, partnerships, corporations--reflect underlying assumptions about the levels of trust and solidarity among the individuals involved. Firms that do not consider these factors when selecting an organizational form may end up with one whose internal incentive structure hinders rather than supports firm performance. This paper examines the social capital within firms by analyzing the implications of the personal relationships among firm owners for firm structure and performance. We propose a typology of organizational structures based on key aspects of owner’s personal relationships. Hypotheses for performance and impact are derived based on the typology, and they typology is validated and the hypotheses tested using data from rural agro-enterprises in Colombia. Based on the results, recommendations for firms and for the institutions that support them are developed