Social Capital and Organizational Performance: A Theoretical Perspective

Abstract

On the basis of differentiating between group-level and individual-level social capital, the paper advances two arguments: 1) group-level social capital is a prerequisite for high organizational performance if intra-organizational transactions are characterized by low transparency; and 2) the existence of individual-level social capital (not belonging to the holders of residual claims in the organization) is likely to reduce organizational performance by providing more opportunities for rent-seeking behavior. The arguments are applied to several examples from the field of agricultural organization, relating to comparative performance of family-based, hierarchical, and cooperative governance.

Keywords: social capital, organizational performance, transaction costs, opportunism

JEL Classification: D21, D23