Academic journal article Entrepreneurship: Theory and Practice

The Context of Social Capital: A Comparison of Rural and Urban Entrepreneurs in Uganda

Academic journal article Entrepreneurship: Theory and Practice

The Context of Social Capital: A Comparison of Rural and Urban Entrepreneurs in Uganda

Article excerpt

Classical network theory states that social networks are a form of capital because they provide access to resources. In this article, we propose that network effects differ between collectivistic and individualistic contexts. In a collectivistic context, resource sharing will be "value based." It is expected that members of a group support each other and share resources. In contrast, in an individualistic context, resource sharing will be more often based on reciprocity and trust. Hence, we hypothesized that networks will be more beneficial in individual contexts compared with collectivistic context. We found partial support for our hypotheses.


Social capital created in social networks generates value for entrepreneurs. Through social relations, entrepreneurs learn about business opportunities and acquire resources such as start-up capital. In different contexts, different types of social capital may be needed (Elfring & Hulsink, 2003; Hanlon & Saunders, 2007; Johannisson, Ramirez-Pasillas, & Karlsson, 2002; Kwon & Arenius, 2010). Although researchers are now beginning to uncover the contingencies of social capital, empirical research is still lacking (Parkhe, Wasserman, & Ralston, 2006). It is still unclear how social capital depends on the context in which an entrepreneur is embedded. In this study, our aim is to study how social capital differs between rural and urban communities in a developing country.

We make two specific contributions to the literature. First, we compare social capital created in social networks in two regions within one country. Cross-national comparisons have yielded important insights (De Clercq, Lim, & Oh, 2011; Estrin, Mickiewicz, & Stephan, 2013); however, they are limited since nations are heterogeneous entities (Sivakumar & Nakata, 2001). We compare two regions in Uganda that represent two distinct sociocultural contexts for entrepreneurs: an urban region, the capital Kampala; and a rural region, Mpigi, approximately 30 kilometers away from Kampala. This region is a typical rural region in the sense that there is a clear sense of "community." Since it is located in central Uganda and the distance from Kampala is not overly far, the population not only comprises subsistence farmers, but also some industry.

Second, we aim to contribute to the emerging field of entrepreneurship and economic development in the poorest developing countries (Naude, 2010). Social capital generated in social networks is of special importance in those countries (Acquaah, 2007; Bhagavatula, Elfring, van Tilburg, & van de Bunt, 2010; Fafchamps & Minten, 1999; Grootaert & van Bastelaer, 2002; Honig, 1998; Premaratna, 2011; Pretty & Ward, 2001; Woolcock & Narayan, 2000). Despite the growing interest of scholars and policy makers in the role of entrepreneurship in economic development, our knowledge of entrepreneurship in the very poorest developing countries is still limited (Bruton, Ahlstrom, & Obloj, 2008; Naude). We contribute to the growing field in the intersection of entrepreneurship and economic development by conducting our study in Uganda, a developing country in Africa.

Theory and Hypotheses

Essentially, social capital is about the value of connections (Borgatti & Foster, 2003). Networks of relationships constitute a valuable resource that helps actors to achieve their goals (Nahapiet & Ghoshal, 1998). One theoretical perspective on social capital focuses on bridging ties. In this view, it is argued that entrepreneurs that have otherwise unconnected alters are connected to more heterogeneous sources of information, and hence will detect more novel opportunities (Burt, 1992). In the other view on social capital, scholars focus less on the information and control benefits that are associated with sparse networks. In this so-called "bonding" view of social capital, scholars focus more on coordinated action and resource sharing in dense networks (Coleman, 1988). …

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