Keystone sector methodology applied to Portugal
“ small firms still persist because they have a dense local social networks ”, they
therefore survive because they use their social relations as an asset to survive within
competitive markets.
Nan Lin (1999) argues that “social capital is captured from embedded
resources in social networks” and this will be the definition that will allow us to
measure and use the concept for additional explanations on competition. Being “a
relational asset distinct from other collective assets and goods such as norms, culture,
trust” (Lin, 1999) social capital is collectively produced; therefore it is unique and has
no alternative forms2.
The insight of Ronald Burt (1992) is interesting to this discussion because he
argues, “competitive behavior (and results) can be understood in terms of players
access to holes in the social structure. It is important to know who owns the strategic
positions”. Social capital is then a production factor and each individual invests in
social capital when he decides to spend energy in certain social relations as an
instrument to access higher returns. Hence, players in economic activity have several
capital assets. Besides the traditional physical and financial concepts of capital, each
player can invest in human capital (increasing his personal skills, based on ‘know
what’) but also in social capital (time/energy spent in social relations, based on ‘know
who’).
Actually, in concrete social life it is common to observe that some individuals
with low skills can be social or economically successful just because they use important
links and connections with strategically located people. Moreover, it is also possible
that even with few connections they can reach the major benefits. The postman and the
banker in a town are paradigmatic examples. The first has a huge number of social
connections even though he does not use them to raise his personal welfare; likewise,
the freshman banker in town can be connected to few people but suddenly improves his
bank’s profits.
“Players establish relations with others. Each player connection can be based
on trust, can be dependant, supportive or exchangeable; designing those links we will
2 There are different theoretical positions about social capital. It is a fuzzy concept while it has some
characteristics of public goods and class/club goods. Public goods are characterized by non-rivalry in
consumption and non-excludability. So far, social capital is not a pure public good while there is some
rivalry in its consumption while social hierarchy and prominence will favor some consumers against
others. Anyway we must consider that to be a public good it will depend on the good will of individual
members and thus, norms, trust, sanctions, authority will become important to sustain social capital.