Value creation through social capital: the role of intra-organizational strategic linkages and networks

Tsai, Wenpin (1998) Value creation through social capital: the role of intra-organizational strategic linkages and networks. Doctoral thesis, University of London: London Business School.

Abstract

Based on the conceptualization of an organization as a set of relational ties linking together many diverse organizational units, this thesis outlines a network approach to investigating how social capital creates value inside the organization. Social capital is operationalized as a multidimensional construct concerning the structure of social ties, the quality of relationships, and the shared vision among different organizational units. Building on the extant literature on social networks, coordination mechanisms, and organizational capabilities, I argue that these three dimensions of social capital can facilitate the exchange and sharing of strategic resources among different parts of an organization. Such internal resource sharing is a critical element of an organization's value creation processes and is embodied through intraorganizational strategic linkages. Inside a multiunit organization, a unit's network position within a hierarchical structure of intra-organizational strategic linkages represents its strategic linking capability, which allows the unit to access strategic resources from other units. I argue that the development of intra-organizational social capital will affect a unit's strategic linking capability which, in turn, influences a unit's product innovations. Based on a questionnaire survey of all the business units in three multinational companies, I analyze the patterns of intra-organizational networks and discuss the consistent findings across these companies. Sociometric techniques are employed to investigate how the business units interact among themselves, and structural equation modeling is applied to test my propositions at the business unit level. The results of different aspects of my analyses provide strong and coherent support for the association between social capital and value creation.