Investing in Social Capital

The article analyzes how social capital—social networks and trust—is created, addressing different levels of economic organization. Contrary to much literature on trust and social capital, the article also generates a role for policy efforts in creating social capital. It argues that social capital at the level of a national industry may accumulate when social learning processes centered on a few formalized economic networks change the dominant beliefs of managers. Core groups of successful social capital investors may thus inspire industry-wide imitation, as well as draw local firms into investment processes. The paper supports its theoretical observations with three empirical case studies of economic networking within the Swedish furniture industry. In this industry, which is poor in social capital, political efforts to promote economic networking may be an appropriate way of facilitating bottom-up institutional change.