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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

    ()

  • Tomi Kankainen

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

Suggested Citation

  • Petri Ruuskanen & Tomi Kankainen, 2011. "Dynamic capabilities in small and medium manufacturing firms in rural Finland – role of social capital?," ERSA conference papers ersa11p806, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa11p806
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    References listed on IDEAS

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    1. 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.
    2. Luca Anderlini & Dino Gerardi & Roger Lagunoff, 2012. "Communication and Learning," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 419-450.
    3. repec:hrv:faseco:30726298 is not listed on IDEAS
    4. Jonathan Isham, 2002. "The Effect of Social Capital on Fertiliser Adoption: Evidence from Rural Tanzania," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 11(1), pages 39-60, March.
    5. Gaute Torsvik, 2000. "Social Capital And Economic Development," Rationality and Society, , vol. 12(4), pages 451-476, November.
    6. 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.
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