Academic journal article Entrepreneurship: Theory and Practice

A Measure of Variations in Internal Social Capital among Family Firms

Academic journal article Entrepreneurship: Theory and Practice

A Measure of Variations in Internal Social Capital among Family Firms

Article excerpt

Drawing on the social capital literature, this study develops a new measure to assess the internal social capital using a sample of family firms and its effect on economic and noneconomic performance. We collected data from two independent samples to explore the importance of family businesses' internal social capital as assessed by a new instrument--the internal social capital among family business (ISC-FB). Results from confirmatory factor analyses, convergent and discriminant validity assessments, and predictive and incremental validity offered support for the ISC-FB's construct validity. Finally, we cross-validated the hypothesized factor structure with a second sample of family firms. Implications and future research using this measure are proposed.


Research focusing on family business has typically adopted one of several theoretical perspectives, to include agency and stewardship theories (e.g., Chrisman, Chua, Kellermanns, & Chang, 2007; Miller, Le Breton-Miller, & Scholnick, 2008; Schulze, Lubatkin, Dino, & Buchholtz, 2001), as well as perspectives built around the resource-based view (RBV) of the firm (Barney, 1991; Habbershon & Williams, 1999). Recently, scholars have also theorized that a social capital perspective may offer a unique position from which to study family firms (e.g., Arregle, Hitt, Sirmon, & Very, 2007; Pearson, Carr, & Shaw, 2008), with the goal of providing a clearer picture of some of the unique characteristics of family businesses. In this regard, social capital is suggested to capture the collective actions and resultant outcomes associated with the interindividual interaction of groups (Adler & Kwon, 2002).

The application of social capital theory in organizational settings was initially proposed by Nahapiet and Ghoshal (1998), who defined it as "... the sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or social unit" (p. 243). Given that social capital reflects a complex set of dynamic relationships that exist within a group, it has been argued that the social capital of firms can be difficult to quantify and imitate (Dess & Shaw, 2001), and is often based upon the unique circumstances and interactions present within a specific collective. Owing to the mutual interdependence and complexity of these relationships, this field of study has become increasingly fragmented and somewhat inconsistent in its application.

In consideration of this fragmentation, Payne, Moore, Griffis, and Autry (2011) contribute to the study of social capital by not only reviewing its organizational applications over a 20-year period, but also by creating a typology that serves to isolate the areas of prior empirical evidence. These scholars found that social capital theory has been primarily studied from both internal/external and individual/collective viewpoints, which subsequently creates four concentrations of research within this literature. Their typology allows scholars to focus their efforts in a more consistent manner and to identify areas that may be lacking in development.

With the aforementioned in mind, the purpose of our study is threefold. First, we seek to contribute to the literature by linking family business and social capital in a way that is consistent with Payne et al.'s (2011) classification, where we study the variations in internal social capital among family firms. Studying family firms from a social capital perspective provides specific attention to how a potentially dominant group (i.e., the family) may appropriate the advantages associated with social capital (Arregle et al., 2007). Following the suggestion of Sharma (2008), we believe that this may be an important step in creating a social capital model within family firms. Second, we intend to develop a new measure to assess internal social capital, which has been validated in a family business context, and which incorporates the structural, cognitive, and relational dimensions as outlined by Pearson et al. …

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