1 Social Capital of Organization: Conceptualization, Level of Analysis and Performance Implications

In this chapter we explore the benefits of social capital and the harmful affects of social liabilities. Following Allison (1971), two models of the organizations are juxtaposed: those of the Rational and Political Actors. The issues of social capital require different perspectives when its implications for performance are addressed. The mediation through individuals takes a prominent place in the Political Actor, and moves to the background in the Rational Actor. The issue of aggregation from the member to the organization is primarily an issue when we view the organization as a Political Actor in which the members ’ social capital aggregates to that of their organization. Two illustrative cases that fit the two models are then presented, the industrial business groups in Japan and Korea on the one hand, and the population of professional services firms in the Netherlands on the other. In the case of business groups we point to both the benefits of social capital and the drawbacks of social liability. When we shift to the study of professional services firms, we demonstrate that social capital as a distinct organizational resource diminishes the likelihood of dissolution. The implications for social capital and liability are exposed and reviewed.