Social Capital and Entrepreneurship

Introduction

It is a constant struggle for the firms, particularly the small ones, to access resources vital for firms' development (Carter & Van Auken, 2006; Jansen et al., 2011). Lacking such access on resources includes financial ones that negatively impact the firm's development, technological ones that affect the firm's competitive advantage and managerial capabilities (management skills, planning, record keeping, professional advice, educational level, learning) that impacts entrepreneurs' ability to improve firm's performance in general (Apostolos, 2016).

Social capital has the potential to mitigate the negative impact of such limitation the firm faces because it has the potential to function as a resource upon which the entrepreneur can build a competitive advantage (Aldrich& Kim, 2007). Social capital refers to the value embedded in the connections between individuals. This is true for individuals, social groups, or other social entities, where the firm or organizations are one example.

Capitalizing on social capital, which means making use of resources embedded in the connections, is vital for new entrepreneurs of small enterprises. It is often the case that the owner also manages the firm, particularly in the initial phase after establishing the firm, therefore making the resources embedded in the entrepreneur network an integral and important part of the firm's resources. Capitalizing on such connections might appear in the form of being part of professional associations that facilitate access to trade platforms, accessing technological resources (Teckchandani, 2014), better relationships with suppliers that may impact firm's flexibility in pricing (Sherry &Stubberud, 2013) and personal, informal links and connections that often time serve as a reservoir for innovation (Komulainen, Mainela, & Tahtinen, 2006).

It is of interest to mention that concepts similar to social capital as we know it today have been presented by Ibn Khaldun, the Tunisian Arab philosopher, born in 1332, in his monumental work “The Muqaddimah”, The Introduction to History (Ibn K & Rosenthal, 1967). Ibn Khaldun, in his book, presents the idea that civilization holds in itself the seeds of its destruction. The same idea is presented later by Karl Marx. Ibn Khaldun introduces the term “asabiya,” loosely translated as “group feeling,” to describe the bond of connection among people within a community. The concept behind”asabiya” is very similar to the concept of social capital. This social bond is present at different levels of intensity in a given community or social entity, be it a tribe, a nation, an empire, a civilization or an organization. Ibn Khaldun argues that each society, as a social entity (the organization is similar in nature), holds the seeds of its demise within itself. He continues explaining that communities with strong community bonds (high levels of social capital) appear at the peripheries of the great empires, and they use their social bond in their favour. Eventually, these communities with high levels of social bond (high levels of social capital) will establish themselves into empires or civilizations, living an abundant and comfortable life. A luxurious, productive and comfortable life will weaken and undermine the social bond (social capital) among the community or social organization, leading them to become less competitive, less disciplined and more dependent on others.