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Social Capital Theory for Leadership Effectiveness: Thoughts and Facts

What Does Social Capital Theory Mean?

How Cultural Capital Can Help You Become a More Effective Leader

Developing a comprehensive understanding of how transformational leadership effectiveness could be affected by key organizational factors will require understanding social capital theory. Nahapiet and Ghoshal (1998) determine three dimensions for social capital, and categorize them as structural, cognitive, and relational.

Social Capital Theory – Structural:

The structural dimension stresses “the configuration of the network” (Arling 2006, p.28), and actually portrays an “overall pattern of connections” among actors (Choi 2002, p.35). Based on this view, this dimension could be improved by having access to other actors quickly (Burt 1992), and enhanced through highly flexible structures (Ibarra & Andrews 1993).

The study by Wang and Ahmed (2003) labels highly flexible structures as organic structures, and highlights that these less formalized and less centralized structures could improve social interactions in organizations. Accordingly, the evidence from this study suggests that structural aspects of formalization and centralization negatively related to structural dimension of social capital theory.

Social Capital Theory – Cognitive:

The cognitive dimension is also defined as resources developing shared vision, interpretations and feelings among actors (Nahapiet & Ghoshal 1998). Similarly, Schein (1985, p.12) defines organizational culture as “the correct way to perceive, think, and feel” in order to solve organizational problems. Based on this view, culture could be assumed to be a critical resource for developing a shared interpretation which enhances social capital. Following this approach, Putnam, Leonardi and Nanetti (1993, p.170) maintain that “trust is an essential component of social capital”, and argue that trust enhances interactions among employees. In the same way, Do (2010) considers trust as an important facilitator of social capital.

Social capital theory 2016

Moreover, social capital requires coöperation, and coöperation demands collaborative behaviours (Avila Cobo 2005). Accordingly, Avila Cobo (2005, p.18) argues that collaboration is a strong determinant of “the very existence, strength, and durability of social capital”. As discussed earlier, the cognitive dimension seeks to achieve a shared vision. Based on this view, Inkpen and Tsang (2005) define shared vision as a mutual understanding toward determined goals, and Stein et al. (2007) highlight that this common perception could be reached through developing learning opportunities. Taken together, these results suggest that cultural aspects of trust, collaboration, and learning positively associated with cognitive dimension of social capital theory.

Social Capital Theory – Relational:

Additionally, the relational dimension focuses on the importance of relations (Nahapiet & Ghoshal 1998), and argues that relations based on obligations, reciprocity and identification could develop organizational assets (Nahapiet & Ghoshal 1998). Nahapiet and Ghoshal (1998, p.255) define obligations as “a commitment or duty to undertake some activity in the future”. Moreover, organizational strategy is evaluated as “a plan for interacting with competitive environments to achieve organizational goals” (Daft 1995, p.49).


Based on this view, strategy highlights the critical role of relations with external actors, and enhances social interactions with business environments to meet organizational goals in the future. Furthermore, various authors argue that organizational strategy develops a shared interpretation among organizational members, and positively relates to cognitive dimension of social capital theory (Nahapiet & Ghoshal 1998).

Surprisingly, a study by Bergeron, Raymond and Rivard (2004) has shown that an effective strategy is strong on futurity, defensiveness, analysis and pro-activeness. As a result, these four strategies could be positively connected to cognitive and relational dimensions of social capital theory.


  • Arling, P. (2006). A social capital perspective on communication, technology use and individual outcomes in distributed teams, Thesis (PhD), University of Minnesota, USA.
  • Avila Cobo, S.H. (2005). Collaboration, innovation and the building blocks of social capital in the technology sector: A comparative analysis of knowledge-creating institutions. The role of individual attributes, policies and environments in the collaboration and productivity of scientists and technologists, Thesis (PhD), Stanford University, USA.
  • Bergeron, F., Raymond, L., and Rivard, S. (2004). Ideal patterns of strategic alignment and business performance”, Information & management, 41(8), 1003-1020.
  • Burt, R.S. (1992). Structural holes: the social structure of competition, Cambridge: Harvard University Press.
  • Daft, R.L. (1995). Organization theory and design, Minneapolis/St. Paul: West Pub. Co.
  • Do, S.G. (2010). Impacts of social capital on entrepreneurship, innovation, and economic development in the knowledge economy, Thesis (PhD), George Mason University, USA.
  • Ibarra, H., and Andrews, S.B. (1993). Power, Social Influence, and Sense Making: Effects of Network Centrality and Proximity on Employee Perceptions, Administrative Science Quarterly, 38(2), 277-303.
  • Inkpen, A.C., and Tsang, E.W.K. (2005). Social Capital, Networks, and Knowledge Transfer, The Academy of Management Review, 30(1), 146-165.
  • Nahapiet, J., and Ghoshal, S. (1998). Social Capital, Intellectual Capital, and the Organizational Advantage, The Academy of Management Review, 23(2), 242-266.
  • Putnam, R.D., Leonardi, R., & Nanetti, R. (1993). Making democracy work: civic traditions in modern Italy, Princeton: Princeton University Press.
  • Schein, E.H. (1985). Organizational culture and leadership, San Francisco: Jossey-Bass Publishers.
  • Stein, D.S., Wanstreet, C.E., Glazer, H.R., Engle, C.L., Harris, R.A., Johnston, S.M., Simons, M.R., and Trinko, L.A. (2007). Creating shared understanding through chats in a community of inquiry, The Internet and Higher Education, 10(2), 103-115.
  • Wang, C.L., and Ahmed, P.K. (2003). Structure and structural dimensions for knowledge-based organizations, Measuring Business Excellence, 7(1), 51-62.

Editor: Derin Cag

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