Ekomenzoge; Social Capital (As A Factor For Regional Development)

SOCIAL CAPITALSOCIAL CAPITAL

AS A FACTOR FORAS A FACTOR FOR REGIONAL DEVELOPMENT REGIONAL DEVELOPMENT

Presented By: Ekomenzoge Metuge Presented By: Ekomenzoge Metuge Euromaster: Free University Brussels (VUB)Euromaster: Free University Brussels (VUB)

Social Capital an Indicator for Social Capital an Indicator for Regional Development in EURegional Development in EU

► IntroductionIntroduction►DefinitionsDefinitions► IndicatorsIndicators►Social Capital & Regional Policy ‘the Social Capital & Regional Policy ‘the

OSTUNI CONSENSUS on Social CapitalOSTUNI CONSENSUS on Social Capital►Social Capital as a Factor of Regional Social Capital as a Factor of Regional

DevelopmentDevelopment

Social Capital Formation Social Capital Formation

Globalisation Economic Globalisation Economic DevelopmentDevelopment

Competitiveness ComplexityCompetitiveness Complexity

InnovationInnovation NetworkingNetworking

Social Capital Social Capital

Selected definitions of Social Selected definitions of Social Capital Capital

► Social capital is networks together with shared Social capital is networks together with shared norms, values and understandings that facilitate norms, values and understandings that facilitate cooperation within or among groups (OECD 2001)cooperation within or among groups (OECD 2001)

► Social capital is an instantiated informal norm that Social capital is an instantiated informal norm that promotes cooperation between two or more promotes cooperation between two or more individuals (Fukuyama 1999)individuals (Fukuyama 1999)

► The ability of actors to secure benefits by virtue of The ability of actors to secure benefits by virtue of memberships in social networks & other social memberships in social networks & other social structures (Portes 1998)structures (Portes 1998)

► The information, trust & norms of reciprocity The information, trust & norms of reciprocity inhering in one’s social networks (Woolcock 1998)inhering in one’s social networks (Woolcock 1998)

► ‘‘..features of social organisation such as trust, norms ..features of social organisation such as trust, norms & networks that can improve the efficiency of society & networks that can improve the efficiency of society by facilitating coordinated actions (Putnam 1993)by facilitating coordinated actions (Putnam 1993)

Selected definitions of Social Selected definitions of Social Capital Capital

► Social capital represents the degree of social cohesion which exists Social capital represents the degree of social cohesion which exists in communities. It refers to the processes between people which in communities. It refers to the processes between people which establish networks, norms & social trust, & facilitate co-ordination & establish networks, norms & social trust, & facilitate co-ordination & co-operation for mutual benefit (WHO 1998)co-operation for mutual benefit (WHO 1998)

► Social capital is defined by its function. It is not a single entity but a Social capital is defined by its function. It is not a single entity but a variety of entities with two elements in common: they all consist of variety of entities with two elements in common: they all consist of some aspect of social structures & they facilitate certain actions of some aspect of social structures & they facilitate certain actions of actors – whether persons or corporate actors – within the structure actors – whether persons or corporate actors – within the structure (Coleman)(Coleman)

► The aggregate of the actual or potential resources which are linked The aggregate of the actual or potential resources which are linked to the possession of a durable network of more or less to the possession of a durable network of more or less institutionalised relationships of mutual acquaintance or recognition, institutionalised relationships of mutual acquaintance or recognition, (Bourdieu 1985)(Bourdieu 1985)

► Resources embedded in a social structure which are Resources embedded in a social structure which are accessed/mobilised in purposive actions (Lin, 2001) accessed/mobilised in purposive actions (Lin, 2001)

Indicators of Social Capital Indicators of Social Capital (1) (1)

►Horizontal Associations:Horizontal Associations:► Number & type of associations or local Number & type of associations or local

instititutionsinstititutions► Extent of participatory decision-makingExtent of participatory decision-making► Extent of trust in governmentExtent of trust in government► Extent of trust in trade unionExtent of trust in trade union► Reliance on networks of supportReliance on networks of support►Old-age dependency ratioOld-age dependency ratio► Perception of extent of community organisationPerception of extent of community organisation► Percentage of household income from Percentage of household income from

remittancesremittances


► Civil & Political SocietyCivil & Political Society► Index of civil libertiesIndex of civil liberties► Percentage of population facing political discriminationPercentage of population facing political discrimination► Percentage of population facing economic discriminationPercentage of population facing economic discrimination► Percentage of population involved in separatist Percentage of population involved in separatist

movementmovement► Index of democracy Index of democracy ► Index of government inefficiency & corruptionIndex of government inefficiency & corruption► Degree of decentralisation of governmentDegree of decentralisation of government► Measure of ‘human liberty & political stability’Measure of ‘human liberty & political stability’► Voter turnoutVoter turnout► Constitutional government changesConstitutional government changes


►Social IntegrationSocial Integration► Indicator of social mobilityIndicator of social mobility► Ethnolinguistic fragmentationEthnolinguistic fragmentation► Riots & protest demonstrationsRiots & protest demonstrations► Strikes, Homicide rate, Suicide rateStrikes, Homicide rate, Suicide rate► Prisoners per 100.000 peoplePrisoners per 100.000 people► Percentage of single-parent homesPercentage of single-parent homes►Divorce rateDivorce rate► Youth unemployment rateYouth unemployment rate


►Legal & governance aspectsLegal & governance aspects►Quality of bureauracyQuality of bureauracy► Independence of court systemIndependence of court system►Expropriation & nationalisation riskExpropriation & nationalisation risk►Repudiation of contracts by governmentRepudiation of contracts by government►Contract enforceabilityContract enforceability►Contract-intensive money (currency/M2)Contract-intensive money (currency/M2)

Measurement of Social Measurement of Social CapitalCapital

►Direct obervation, content analysis, SWOT, Direct obervation, content analysis, SWOT, surveys, enquiries, indepth interviews, logic surveys, enquiries, indepth interviews, logic frameworks, case studies, expect panels & frameworks, case studies, expect panels & focus groups, etc.focus groups, etc.

The pertinent data should be:The pertinent data should be:► Associational activity indicators (general & Associational activity indicators (general &

of businessesof businesses► Trust (interpersonal & generalisedTrust (interpersonal & generalised► Rules & institutions (private & public)Rules & institutions (private & public)► Actual resultsActual results► Clearly defined & easy to understandClearly defined & easy to understand

Social Capital & Local Economic Social Capital & Local Economic Development (1)Development (1)

► Is Social Capital Capital? If yes, then Is Social Capital Capital? If yes, then value of Stock & Assetvalue of Stock & Asset

►Social Capital Accumulation: Can be Social Capital Accumulation: Can be accumulated by: extending the accumulated by: extending the borders of networking (bridging), & by borders of networking (bridging), & by increasing the frequency of mutual increasing the frequency of mutual interaction in the community (bonding)interaction in the community (bonding)

Social Capital & Local Economic Social Capital & Local Economic Development (2)Development (2)

► Social Capital is fungible: (Economic, Cultural & Social Capital is fungible: (Economic, Cultural & Social) capitalSocial) capital

► Economic capital; convertible into money & may be Economic capital; convertible into money & may be institutionalised in the form of propice rightsinstitutionalised in the form of propice rights

► Cultural capital; can be transformed into economic Cultural capital; can be transformed into economic capital & may be institutionalised in the form of capital & may be institutionalised in the form of educational qualificationeducational qualification

► Social capital; can be convertible into economic Social capital; can be convertible into economic capital & may be institutionalised in the form of a capital & may be institutionalised in the form of a « title of nobility »« title of nobility »

► The idea of convertibility (rotating savings & credit The idea of convertibility (rotating savings & credit associations (RoSCAs))associations (RoSCAs))

Role of Social Capital in the EU Role of Social Capital in the EU EconomyEconomy

► As quoted by Ostuni, social capital is especially relevant for regional As quoted by Ostuni, social capital is especially relevant for regional development. In this context social capital is market based social development. In this context social capital is market based social exercise based on trust, shared norms & institutions.exercise based on trust, shared norms & institutions.

► Second, it facilitates cooperation within & among groups as well as Second, it facilitates cooperation within & among groups as well as enlarges a capacity action lending to mutual benefitsenlarges a capacity action lending to mutual benefits

► Third, it improves collective processes of learning & constitutes a key Third, it improves collective processes of learning & constitutes a key element of knowledge creation, diffusion & transfer – all processes element of knowledge creation, diffusion & transfer – all processes critical for innovation and competitivenesscritical for innovation and competitiveness

► Finally, social capital cements value based networks stimulating Finally, social capital cements value based networks stimulating successful regional clusters as well as regional innovation strategies successful regional clusters as well as regional innovation strategies & policies.& policies.

► This issue is especially important for the less favoured regions that This issue is especially important for the less favoured regions that have weak social capital & little understanding of science, yet face have weak social capital & little understanding of science, yet face fundamental economic, technological & social change.fundamental economic, technological & social change.

SOCIAL CAPITAL AND SOCIAL CAPITAL AND REGIONAL POLICYREGIONAL POLICY

►Draft for edition and publicationDraft for edition and publication

►Reflections on social capital, Reflections on social capital, innovation and regional innovation and regional developmentdevelopment

►The Ostuni ConsensusThe Ostuni Consensus

THE OSTUNI CONSENSUS ON THE OSTUNI CONSENSUS ON SOCIAL CAPITALSOCIAL CAPITAL

► -In July 2003 a number of academics and regional -In July 2003 a number of academics and regional planners came together in Ostuni (Italy) in a Summer planners came together in Ostuni (Italy) in a Summer SchoolSchool

► -to discuss the contribution of social capital to regional -to discuss the contribution of social capital to regional economic development and innovation in lagging economic development and innovation in lagging regions,regions,

► - after the summer school participants were asked to - after the summer school participants were asked to summarize their thinking on this topic in a short ten-summarize their thinking on this topic in a short ten-page paper,page paper,

► -these papers make the chapters of the book,-these papers make the chapters of the book,► -over twenty academics and policy makers from more -over twenty academics and policy makers from more

than ten countries from Europe and the U.S.A. and than ten countries from Europe and the U.S.A. and from two international organizations, the OECD and from two international organizations, the OECD and the European Union, contributed to this effort.the European Union, contributed to this effort.

► -The book is divided into two parts:-The book is divided into two parts:

SOCIAL CAPITALSOCIAL CAPITAL► -The book is divided into two parts:-The book is divided into two parts:

► -the first part-the first part► -deals with regional development models and policy -deals with regional development models and policy

issues in connection with the concept of social capital, issues in connection with the concept of social capital, ► -reflects a variety of views about the challenges ahead -reflects a variety of views about the challenges ahead

for regional policy and the best policy options at handfor regional policy and the best policy options at hand

► -the second part focuses on-the second part focuses on► -the relevance of social capital for innovation through -the relevance of social capital for innovation through

its significance for innovation networks and clusters,its significance for innovation networks and clusters,► - the possible contribution of the social capital to the - the possible contribution of the social capital to the

creation of efficient regional innovation systems and creation of efficient regional innovation systems and learning regions.learning regions.

SOCIAL CAPITALSOCIAL CAPITAL► All participants in Ostuni agreed that,All participants in Ostuni agreed that,► -Social capital and the ability to form and nourish -Social capital and the ability to form and nourish

appropriate networks and interactions among regional appropriate networks and interactions among regional stakeholders are necessary conditions for a sustained stakeholders are necessary conditions for a sustained and sustainable development path in less favoured and sustainable development path in less favoured regions, regions,

► -conventional economic theory and policy practice so far -conventional economic theory and policy practice so far had underestimated the influence that the social capital had underestimated the influence that the social capital may have on regional growth prospects, may have on regional growth prospects,

► -there are limitations in understanding, measuring and -there are limitations in understanding, measuring and using the concept of social capital, using the concept of social capital,

► - improving our understanding of regional development - improving our understanding of regional development and economic competitiveness requires understanding and economic competitiveness requires understanding the concept of social capital, the concept of social capital,

► -it is necessary to integrate the organisational, -it is necessary to integrate the organisational, institutional, cultural and political aspects into economic institutional, cultural and political aspects into economic theories about regional development,theories about regional development,

ARGUMENTS FROMARGUMENTS FROM SOME SOME PARTICIPANTS (1)PARTICIPANTS (1)

► Mario PezziniMario Pezzini argues thatargues that

► -Globalization process raises the need for a paradigm change in regional -Globalization process raises the need for a paradigm change in regional policy, policy,

► -regional policy should aim at facing globalization by regional empowering, -regional policy should aim at facing globalization by regional empowering, ► - it is necessary to change from an inter-regional redistribution and gap-- it is necessary to change from an inter-regional redistribution and gap-

reduction approach towards policies that focus on exploiting underutilized reduction approach towards policies that focus on exploiting underutilized resources at the local level resources at the local level

► -to do so, it is necessary to change regional policy from cost reduction -to do so, it is necessary to change regional policy from cost reduction subsidies towards regional empowering through public investments in subsidies towards regional empowering through public investments in innovation and social capital,innovation and social capital,

► - the main objective of regional policy should be to create an adequate - the main objective of regional policy should be to create an adequate institutional and economic environment for new economic opportunities to institutional and economic environment for new economic opportunities to flourish by improving organizational skills, institutional capacity, community flourish by improving organizational skills, institutional capacity, community participation and democratic local management, which are recognized as key participation and democratic local management, which are recognized as key ingredients of economic development success,ingredients of economic development success,

► -the capacity to valorize local collective goods, such as multicultural -the capacity to valorize local collective goods, such as multicultural integration, inter-firm relations and access to natural and cultural resources is integration, inter-firm relations and access to natural and cultural resources is the main source of regional disparitiesthe main source of regional disparities

► -so, social capital, in the form of regional and local networking and improved -so, social capital, in the form of regional and local networking and improved governance, should be a key ingredient of the new generation of regional governance, should be a key ingredient of the new generation of regional policies,policies,


► Antoni KuklińskiAntoni Kukliński argues thatargues that

► -There is a need for a new model of regional -There is a need for a new model of regional policy, which shifts from 'socially minded' policy, which shifts from 'socially minded' regional policy towards a 'globally minded' regional policy towards a 'globally minded' regional policy,regional policy,

► -The latter model, is based on the idea that -The latter model, is based on the idea that regions must be an efficient actor on the regions must be an efficient actor on the global scene,global scene,

► -social capital should be recognized as an -social capital should be recognized as an crucial element in the construction and crucial element in the construction and implementation of the new model of regional implementation of the new model of regional policy.policy.


► Jean-Marie RousseauJean-Marie Rousseau claims thatclaims that

► -The way forward for less favoured regions is not an -The way forward for less favoured regions is not an “assisted” mentality which gives priority to policies based on “assisted” mentality which gives priority to policies based on traditional physical infrastructures,traditional physical infrastructures,

► -It is the innovation promotion policies based on intangibles -It is the innovation promotion policies based on intangibles which focus on building social capital in the form of which focus on building social capital in the form of

► -an ability to internalise a regional strategy and renewal or -an ability to internalise a regional strategy and renewal or revival of local identity, revival of local identity,

► -a capacity to coordinate, participate and link up the threads -a capacity to coordinate, participate and link up the threads of interrelationships and of interactive and smart of interrelationships and of interactive and smart connections,connections,

► -acceptance of a culture aimed at reinforcing human capital, -acceptance of a culture aimed at reinforcing human capital, investing in knowledge and the thirst for creativity in each investing in knowledge and the thirst for creativity in each and every firm.and every firm.

► -social capital which boosts confidence and mutual trust -social capital which boosts confidence and mutual trust among local actors seems most suited to bringing effective among local actors seems most suited to bringing effective solutions to local problems.solutions to local problems.


► Benedicte MoutonBenedicte Mouton argues thatargues that

► -Social capital is a regional partnership process in which priority -Social capital is a regional partnership process in which priority is given to the networking of actors,is given to the networking of actors,

► -in social capital, the role of regional governments is to create an -in social capital, the role of regional governments is to create an environment favorable to the regional innovation system, playing environment favorable to the regional innovation system, playing the role of catalyser, broker and animator in order to “open the role of catalyser, broker and animator in order to “open minds rather than to open roads”, minds rather than to open roads”,

► -social capital is a key success and failure factor in building -social capital is a key success and failure factor in building regional innovation systems,regional innovation systems,

► -public and private partnerships and networking among firms and -public and private partnerships and networking among firms and the regional knowledge-based infrastructure flourished in those the regional knowledge-based infrastructure flourished in those regions regions

► -where good regional governance structures and adequate -where good regional governance structures and adequate political and community commitment existed and were political and community commitment existed and were appropriately mobilized through direct participation and open appropriately mobilized through direct participation and open discussion;discussion;

► -progress was scarce or non-existent in those regions -progress was scarce or non-existent in those regions ► -were there was a lack of trust among institutional actors and -were there was a lack of trust among institutional actors and

absence of a good public-private collaboration.absence of a good public-private collaboration.


► Carlos RomanCarlos Roman claims thatclaims that

► -Conventional economic development or growth -Conventional economic development or growth models were unable to capture the complexity and models were unable to capture the complexity and interactions among the different factors of economic interactions among the different factors of economic development in a given region,development in a given region,

► -there are no one-fits all solutions for economic -there are no one-fits all solutions for economic development, whose understanding requires development, whose understanding requires

► -a different paradigm much more open, systemic, wide, -a different paradigm much more open, systemic, wide, multicausal and flexible, in which social capital plays a multicausal and flexible, in which social capital plays a critically important role,critically important role,

► -economic development may depend basically on the -economic development may depend basically on the social aptitude to self-organize and to create value for social aptitude to self-organize and to create value for endogenous resources regardless their nature, to endogenous resources regardless their nature, to acquire information and to use knowledge,acquire information and to use knowledge,


► Lydia GreunzLydia Greunz argues thatargues that

► -Knowledge has become a production factor and, -Knowledge has become a production factor and, mainly due to globalisation, more than ever, mainly due to globalisation, more than ever, innovation is a necessary condition for economic innovation is a necessary condition for economic growth,growth,

► -social capital is the material of knowledge spillovers,-social capital is the material of knowledge spillovers,► -the quality and quantity of social capital have become -the quality and quantity of social capital have become

major determinants of the innovation performance,major determinants of the innovation performance,► -policy efforts aiming at developing social capital are -policy efforts aiming at developing social capital are

essential for the implementation of an innovation essential for the implementation of an innovation system able to nourish sustained economic growthsystem able to nourish sustained economic growth


► Knut KoschatzkyKnut Koschatzky points out thatpoints out that

► -Social capital is constituted by general components -Social capital is constituted by general components like trust, norms, values, attitudes and understandings like trust, norms, values, attitudes and understandings attained through the process of social interactions, attained through the process of social interactions, and therefore it has a strong collective feature, and therefore it has a strong collective feature,

► -social interaction is the most important means in -social interaction is the most important means in social capital accumulation,social capital accumulation,

► -networks can be regarded as social capital’s -networks can be regarded as social capital’s infrastructures,infrastructures,

► -the stimulation of network building, the promotion of -the stimulation of network building, the promotion of key persons as network moderators and the production key persons as network moderators and the production of success stories might contribute to the objective of of success stories might contribute to the objective of increasing the social capital stock of regions and to increasing the social capital stock of regions and to make use of this social capital for innovation and make use of this social capital for innovation and regional developmentregional development


► Phil CookePhil Cooke claims thatclaims that

► -Social capital is a protean concept for defining ‘the missing -Social capital is a protean concept for defining ‘the missing ingredient’ in successful practice that economics cannot ingredient’ in successful practice that economics cannot explain,explain,

► -Social capital is the application or exercise of social norms of -Social capital is the application or exercise of social norms of reciprocity, trust and exchange for political or economic reciprocity, trust and exchange for political or economic purposes,purposes,

► -social capital in the world of the real economy is a kind of -social capital in the world of the real economy is a kind of entry-ticket to doing business,entry-ticket to doing business,

► -according to the results of his empirical research,-according to the results of his empirical research,► -not only are the most competitive -not only are the most competitive regionsregions the most the most

pronounced exploiters of social capital, but also good-pronounced exploiters of social capital, but also good-performance areas in all types of region contain innovative performance areas in all types of region contain innovative firms that are high social capital users, both locally and firms that are high social capital users, both locally and globally.globally.


► Stuart RosenfeldStuart Rosenfeld argues thatargues that

► -Social capital creates economic advantages, which may -Social capital creates economic advantages, which may be a key force for clustering,be a key force for clustering,

► -in clusters with high levels of social capital, knowledge -in clusters with high levels of social capital, knowledge and innovation is transferred much more readily, and innovation is transferred much more readily, becausebecause

► -social networks developed within clusters help -social networks developed within clusters help companies make more informed decisions about companies make more informed decisions about investments, services, and suppliers,investments, services, and suppliers,

► -cluster associations are structures for social capital -cluster associations are structures for social capital and sources of intelligence,and sources of intelligence,

► -social capital often proves to be the difference in -social capital often proves to be the difference in competitiveness of clusters that are “overachievers” competitiveness of clusters that are “overachievers” and those that are “underachievers” which exist but and those that are “underachievers” which exist but lack synergy.lack synergy.

►


► Similarly,Similarly, Sergio Arzeni and Dina Ionescu Sergio Arzeni and Dina Ionescu argue argue thatthat

► -Social capital can play a critical role in shaping -Social capital can play a critical role in shaping inter-firms relations within local clusters and in inter-firms relations within local clusters and in contributing to the identity of clusters,contributing to the identity of clusters,

► -since innovation in clusters is based on -since innovation in clusters is based on collaboration, proximity and networks and spurs collaboration, proximity and networks and spurs through a process of mutual learning, emulation, through a process of mutual learning, emulation, positive role models, and personal contacts and positive role models, and personal contacts and much of this exchange is of a social nature, social much of this exchange is of a social nature, social capital building seems to be a necessary capital building seems to be a necessary ingredient to successful cluster buildingingredient to successful cluster building

SOCIAL CAPITAL AS A SOCIAL CAPITAL AS A FACTOR FOR REGIONAL FACTOR FOR REGIONAL

DEVELOPMENT.DEVELOPMENT.► Traditional neo-classical economic thinking placed emphasis on Traditional neo-classical economic thinking placed emphasis on

agents (firms/regions) acting individually in the pursuit of agents (firms/regions) acting individually in the pursuit of defined outcomes.defined outcomes.

► And competitiveness depended on strategic location (proximity And competitiveness depended on strategic location (proximity to seaports, highways, large markets), access to unique and/or to seaports, highways, large markets), access to unique and/or cheap resources (oil, gold, patents, labour, abundant cheap resources (oil, gold, patents, labour, abundant rainfall/sunlight, etc).rainfall/sunlight, etc).

ᇸ Also, policy-making was basically top-down, and focused on Also, policy-making was basically top-down, and focused on human and financial capital.human and financial capital.

► Increasingly, however, more critical reflections have shifted the Increasingly, however, more critical reflections have shifted the emphasis markedly, more so, in a globalised and knowledge-emphasis markedly, more so, in a globalised and knowledge-driven world – individualism is replaced by collectivism, and driven world – individualism is replaced by collectivism, and location or natural resource factors, by knowledge creation and location or natural resource factors, by knowledge creation and dissemination, and planning, by strategy. dissemination, and planning, by strategy.

HOW SOCIAL CAPITAL WORKS HOW SOCIAL CAPITAL WORKS (1)(1)

► The Ideals of collectivism, knowledge creation and sharing, The Ideals of collectivism, knowledge creation and sharing, and of and of strategy (see Lisbon Agenda) are captured by the concept of social capitalstrategy (see Lisbon Agenda) are captured by the concept of social capital..

► Social capital is the “resources embedded in a social structure, which Social capital is the “resources embedded in a social structure, which are accessed/mobilized” in purposive actions” (Lin, 2001).are accessed/mobilized” in purposive actions” (Lin, 2001).

► Therefore, social capital is localised, and consists in social networks, Therefore, social capital is localised, and consists in social networks, shared attitudes and values that generate trust and reciprocity, but shared attitudes and values that generate trust and reciprocity, but more importantly, in the special knowledge and other advantages more importantly, in the special knowledge and other advantages enjoyed by regional actors.enjoyed by regional actors.

► Unlike “pedestrian” resources (buildings, cars, furniture, etc) and Unlike “pedestrian” resources (buildings, cars, furniture, etc) and other natural/location factors (see feta cheese: Greece vs. Denmark; other natural/location factors (see feta cheese: Greece vs. Denmark; and tomatoes: Spain/Italy vs. Holland), this learning and sharing and tomatoes: Spain/Italy vs. Holland), this learning and sharing experience enables regions to innovate and enhance their experience enables regions to innovate and enhance their competitiveness, in a knowledge-based world that demands competitiveness, in a knowledge-based world that demands relentless improvement. relentless improvement.

HOW SOCIAL CAPITAL WORKS HOW SOCIAL CAPITAL WORKS (2)(2)

► ““Capital” means this is an asset, and “social” means Capital” means this is an asset, and “social” means by belonging to a social group, one enjoys the asset. by belonging to a social group, one enjoys the asset. This entails trust, loyalty and reciprocity.This entails trust, loyalty and reciprocity.

► Two complementary forms of social capital exist: Two complementary forms of social capital exist: bonding social capital - strong communal ties that bonding social capital - strong communal ties that relay reliable, though mundane information, and relay reliable, though mundane information, and bridging social capital - loose links with outsiders that bridging social capital - loose links with outsiders that relay fresh and varied, though less reliable relay fresh and varied, though less reliable information (Putnam, 2000).information (Putnam, 2000).

► Both forms of social capital, usefully combined, may Both forms of social capital, usefully combined, may offer competitiveness-enhancing benefits to a region: offer competitiveness-enhancing benefits to a region:

SOME BENEFITS OF SOCIAL SOME BENEFITS OF SOCIAL CAPITAL (1)CAPITAL (1)

► (i) (i) Knowledge SharingKnowledge Sharing► useful information is vital for competitiveness, but difficult anduseful information is vital for competitiveness, but difficult and expensive to attain from the marketexpensive to attain from the market► through social networks, a region can gain easier access to such through social networks, a region can gain easier access to such

information that might concern new technologies, market niches, information that might concern new technologies, market niches, and reliable business partners, which give it a competitive edge and reliable business partners, which give it a competitive edge

► (ii) (ii) Cost SavingCost Saving► strong communal links (bonding) lead to trust and loyalty,strong communal links (bonding) lead to trust and loyalty,► thereby preventing dishonesty – members are aware that thereby preventing dishonesty – members are aware that

information about dishonesty could cause loss of potential partners, information about dishonesty could cause loss of potential partners, and access to knowledge (especially tacit knowledge), due to social and access to knowledge (especially tacit knowledge), due to social exclusion.exclusion.

-accordingly, reliable information can be volunteered, tacit knowledge -accordingly, reliable information can be volunteered, tacit knowledge shared, contracts honoured, and relations become informal, free and shared, contracts honoured, and relations become informal, free and fair, with less cost of enforcementfair, with less cost of enforcement

SOME BENEFITS OF SOCIAL SOME BENEFITS OF SOCIAL CAPITAL (2)CAPITAL (2)

► (iii) (iii) Group ActionGroup Action► social capital facilitates partnership and social capital facilitates partnership and

solidarity, that help in the supply of public solidarity, that help in the supply of public goods such as joint marketing, waste goods such as joint marketing, waste management, and the running of management, and the running of training/research centrestraining/research centres

►mutual support also serves as a form of risk mutual support also serves as a form of risk management that encourages innovative management that encourages innovative actions, particularly in societies that lack actions, particularly in societies that lack formal insurance mechanisms.formal insurance mechanisms.

Empirical demonstration of Empirical demonstration of social capital social capital

► Research has demonstrated a positive link Research has demonstrated a positive link between social capital and economic between social capital and economic performance.performance.

► Case Studies:Case Studies:► (i) (i) Pays de Saint-FlourPays de Saint-Flour► cattle breeding-based economy, located on a cattle breeding-based economy, located on a

mountainous region, but with rich landscape, mountainous region, but with rich landscape, traditional craftsmanship and food products, traditional craftsmanship and food products,

► good transport links to metropolitan centres good transport links to metropolitan centres (Clement Ferrand and Montpellier)(Clement Ferrand and Montpellier)

► suffers, however, from declining employment suffers, however, from declining employment and populationand population


► Research findingsResearch findings► collective action virtually non-existent – collective action virtually non-existent –

hardly any cooperation among municipalities hardly any cooperation among municipalities on basic matters such as common schools, on basic matters such as common schools, tourism agencies, etctourism agencies, etc

► also no collaboration among firms even when also no collaboration among firms even when synergies are clearly possible in the food and synergies are clearly possible in the food and tourism sectorstourism sectors

► population intolerant to strangers, reinforcing population intolerant to strangers, reinforcing their isolation (see Michael Florida’s 3 Ts) their isolation (see Michael Florida’s 3 Ts)


► (ii) (ii) Pays du ForezPays du Forez► situated at the edge of Saint-Etienne, a situated at the edge of Saint-Etienne, a

dwindling industrial areadwindling industrial area► nonetheless, proves to be economically nonetheless, proves to be economically

dynamicdynamic► Research findings Research findings ► collaboration very common in the economic collaboration very common in the economic

sector, particularly among firms, although less sector, particularly among firms, although less so among municipalitiesso among municipalities

► very open to strangers – many workers come very open to strangers – many workers come from the neighbouring Saint-Etienne, and claim from the neighbouring Saint-Etienne, and claim to be attracted by this Pays’ positive image to be attracted by this Pays’ positive image


►(iii) (iii) The Third Italy/ Italian NorthThe Third Italy/ Italian North ►populated by craft-based SMEs populated by craft-based SMEs

(clothing, ceramics)(clothing, ceramics)►characterised by industrial districtscharacterised by industrial districts►economically more developed than the economically more developed than the

Italian South Italian South

Research findings Research findings ► a strong culture of interaction and collaboration among a strong culture of interaction and collaboration among

the SMEs, and the industrial districts, unlike the Souththe SMEs, and the industrial districts, unlike the South► also thrives in co-petition – an efficient mix of also thrives in co-petition – an efficient mix of

competition (driving innovation), specialisation competition (driving innovation), specialisation (boosting productivity), and cooperation (facilitating (boosting productivity), and cooperation (facilitating knowledge sharing, as well as reduction of intrigues knowledge sharing, as well as reduction of intrigues and anxiety)and anxiety)

► the presence of this trustful, entrepreneurial, the presence of this trustful, entrepreneurial, collaborative and learning tradition created an collaborative and learning tradition created an endogenous development pathendogenous development path

► See similar research on Burgenland (Austria), Jämtland See similar research on Burgenland (Austria), Jämtland (Sweden), Lucena (Spain), the Ireland/Northern Ireland (Sweden), Lucena (Spain), the Ireland/Northern Ireland border region, etc., by the European Foundation for border region, etc., by the European Foundation for the Improvement of Living and Working Conditions the Improvement of Living and Working Conditions

The flip side of Social Capital The flip side of Social Capital

► The flip side of Social CapitalThe flip side of Social Capital

► Though clearly vital to regional development, Though clearly vital to regional development, social capital if not properly managed, may social capital if not properly managed, may produce negative outcomes:produce negative outcomes:

► being embedded in a social structure might stifle being embedded in a social structure might stifle the efficient allocation of resourcesthe efficient allocation of resources

partners may form according to social, rather informed partners may form according to social, rather informed business considerationsbusiness considerations

also a community’s loyalty to the local shop owner might also a community’s loyalty to the local shop owner might mean loss of cheaper options for the former, and mean loss of cheaper options for the former, and inefficiency for the latter, in the absence of “cold shower inefficiency for the latter, in the absence of “cold shower effect” effect”

The flip side of Social Capital The flip side of Social Capital

► (ii) social embeddedness may equally lead to (ii) social embeddedness may equally lead to

discrimination and exclusion - “we” vs discrimination and exclusion - “we” vs “them”“them”

► consequently, valuable input from the consequently, valuable input from the excluded class (bridging) is lost, and excluded class (bridging) is lost, and open tensions might develop, with overall open tensions might develop, with overall welfare losses for the region. welfare losses for the region.

ConclusionConclusion► Social capital (bonding and bridging) is crucial to regional Social capital (bonding and bridging) is crucial to regional

development development

► Natural and location factors may give comparative advantage, Natural and location factors may give comparative advantage, and “pedestrian” resources may sustain daily operations, but and “pedestrian” resources may sustain daily operations, but are not sufficient for competitiveness.are not sufficient for competitiveness.

► Therefore, it is imperative for national and regional Therefore, it is imperative for national and regional policymakers to establish the conditions for social capital to policymakers to establish the conditions for social capital to flourish, whilst taking care to minimise potential side effects.flourish, whilst taking care to minimise potential side effects.

► Such efforts should create space for social dialogue among Such efforts should create space for social dialogue among citizens, communities, businesspeople, academia, citizens, communities, businesspeople, academia, research/technology centres, NGOs, and authorities at the research/technology centres, NGOs, and authorities at the local, regional and national levels. local, regional and national levels.

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Journal of sociology, 94, pp. 95-120Journal of sociology, 94, pp. 95-120► Collier P., 1998, ‘Social capital & poverty’, Social capital Initiative Working Collier P., 1998, ‘Social capital & poverty’, Social capital Initiative Working

paper, World Bank, Social Development Department, Washington, DC.paper, World Bank, Social Development Department, Washington, DC.► Cote S., Healy T., 2001, The well being of nations. The role of human & Cote S., Healy T., 2001, The well being of nations. The role of human &

social capital, Paris Organisation for Economic Co-operation & Development social capital, Paris Organisation for Economic Co-operation & Development► Callois, Jean-Marc & Aubert, Francis.Callois, Jean-Marc & Aubert, Francis. Towards indicators of social capital for Towards indicators of social capital for

regional development issuesregional development issues (2005). (2005).► European Foundation for the Improvement of Living and Working Conditions, European Foundation for the Improvement of Living and Working Conditions,

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Eastern Economic JournalEastern Economic Journal (2000) Vol. 21, No. 3, 295-307. (2000) Vol. 21, No. 3, 295-307. ► Maskell, Peter. Maskell, Peter. Social Capital and Regional DevelopmentSocial Capital and Regional Development (1999). (1999).► Narayan, D. “Bonds and Bridges : Social Capital and Poverty” in Narayan, D. “Bonds and Bridges : Social Capital and Poverty” in Policy Policy

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Education

Ekomenzoge; Social Capital (As A Factor For Regional Development)