SOCIAL CAPITAL, STRUCTURAL HOLES AND THE ENTREPRENEUR

This paper is an introduction to social capital effects at the top of the firm. I contrast social capital with human capital, and discuss th e information and control benefits provided by contact networks rich i n structural holes. Higher returns to human capital are expected for p eople rich in social capital. I use network data on a probability samp le of senior managers to illustrate two conclusions : (1) Social capit al matters for the relative success of managers. (2) Social capital ma tters more where individuals matter more. Where many people do the sam e kind of work, peers are a frame of reference, and legitimacy is esta blished by the number of people doing the work. Where few people do th e same kind of work, there is no frame of reference, and legitimacy ha s to be established. The information and control benefits of structura l holes are more valuable for the second kind of work. Results on the senior managers show that social capital is more valuable toward the t op of the firm, and more valuable for managers in unique jobs than for managers with many peers. In fact, the value of social capital decrea ses exponentially with the number of managers doing the same work.