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Dynamic capabilities in small and medium manufacturing firms in rural Finland – role of social capital?

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  • Petri Ruuskanen

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  • Tomi Kankainen
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    Abstract

    During the last decade, there has been wide agreement on the importance of dynamic capabilities on economic performance of firms. Simultaneously an increasing literature suggests that economic dynamics is embedded in social relations and social institutions. In this article, the determinants of dynamic capabilities of small manufacturing Finnish firms will be explored. Specifically we focus on the importance of social capital for firm dynamics. According to analysis, the most important antecedents of dynamic capabilities of firms are its strategy and social capital. Social capital as wide and active participation in network cooperation correlates statistically significantly with the firm dynamics. Social capital increases firm dynamics by enhancing communication and knowledge spillovers in corporate networks. Active networkers gain important information from their bridging and linking ties, such as other firms and public institutions. According to the analysis, the increase of trust in business relations does not correlate with the dynamic capabilities. Instead trust acts as a trigger factor when firms consider their network activities. Keywords: social capital, networks, trust, dynamic capabilities, small and medium sized enterprises

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    Bibliographic Info

    Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa11p806.

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    Date of creation: Sep 2011
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    Handle: RePEc:wiw:wiwrsa:ersa11p806

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    1. Stefano Breschi & Francesco Lissoni, 2003. "Mobility and Social Networks: Localised Knowledge Spillovers Revisited," KITeS Working Papers 142, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Mar 2003.
    2. Jonathan Isham, 2002. "The Effect of Social Capital on Fertilizer Adoption: Evidence from Rural Tanzania," Middlebury College Working Paper Series 0225, Middlebury College, Department of Economics.
    3. Anderlini, Luca & Gerardi, Dino & Lagunoff, Roger, 2008. "Communication and Learning," Working Papers 37, Yale University, Department of Economics.
    4. Dahl, Michael S. & Pedersen, Christian O.R., 2004. "Knowledge flows through informal contacts in industrial clusters: myth or reality?," Research Policy, Elsevier, vol. 33(10), pages 1673-1686, December.
    5. Torsvik, G., 2000. "Social Capital and Economic Development," Norway; Department of Economics, University of Bergen 216, Department of Economics, University of Bergen.
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