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Social Capital and the Equilibrium Number of Entrepreneurs

Author

Listed:
  • Vicente Salas-Fumás
  • J.Javier Sanchez-Asin

    (University of Zaragoza Faculty of Economics.)

Abstract

Social capital is viewed either as a proprietary asset that serves private interests, including those of entrepreneurs, or as a collective asset that supports trust-based transactions saving on transaction costs both in markets and within the boundaries of firms, and benefiting society as a whole. This paper explains the relative specialization between entrepreneurs and market-governed exchanges as a result of the interaction between social capital that lowers transaction costs, and the scale economies of ability in managerial jobs (Lucas 1978). The main hypothesis formulated in the paper is that higher social capital will benefit the hierarchy relatively more than the market as a governance mechanism, and therefore in economies with higher social capital, the equilibrium number of entrepreneurs will be lower and their average span of control larger than in economies with lower social capital. The empirical evidence, with data from the Spanish Autonomous Communities, is consistent with this prediction.

Suggested Citation

  • Vicente Salas-Fumás & J.Javier Sanchez-Asin, 2011. "Social Capital and the Equilibrium Number of Entrepreneurs," Working Papers 1105, Departament Empresa, Universitat Autònoma de Barcelona, revised Sep 2011.
    • Handle: RePEc:bbe:wpaper:1105
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    More about this item

    Keywords

    Social capital; entrepreneurship; entrepreneurial skills; occupational choice; self-employment; organization of firms.;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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