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Can social capital explain business performance in Denmark?

Author

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  • Cong Wang

    (University of Tasmania)

  • Bodo Steiner

    (University of Helsinki)

Abstract

Motivated by the limited evidence on the positive link between social capital and firm performance, this paper explores this potential driver of firm performance at the firm rather than macro-level by employing a novel approach: we capture social capital at a community level rather than focus on the narrow aspect of entrepreneurs’ own social network. Using principal component analysis to aggregate various trust, norm and network-related variables to construct social capital variables with more than 150,000 firm-level observations for firm performance variables, this paper identifies an overall positive and significant effect of social capital on firm performance in Denmark. These effects are robust to firm-level social capital measures, different sampling years and alternative measures of firm performance (return on asset, current ratio, solvency ratio and profit margin) and network perspectives (Putnam and Olson).

Suggested Citation

  • Cong Wang & Bodo Steiner, 2020. "Can social capital explain business performance in Denmark?," Empirical Economics, Springer, vol. 59(4), pages 1699-1722, October.
    • Handle: RePEc:spr:empeco:v:59:y:2020:i:4:d:10.1007_s00181-019-01731-3
    DOI: 10.1007/s00181-019-01731-3
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    References listed on IDEAS

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    Cited by:

    1. Rodríguez-Pose, Andrés & Ganau, Roberto, 2023. "Firm-level productivity growth returns of social capital: Evidence from Western Europe," CEPR Discussion Papers 17979, C.E.P.R. Discussion Papers.
    2. Roberto Ganau & Andrés Rodríguez‐Pose, 2023. "Firm‐level productivity growth returns of social capital: Evidence from Western Europe," Journal of Regional Science, Wiley Blackwell, vol. 63(3), pages 529-551, June.

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    More about this item

    Keywords

    Social capital; Firm performance; Denmark; Border regions; Rural-urban divide;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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