Human Resources Management

Social capital as a motor for innovation

June 9, 2016 | 4 min read

The interdependence and connectivity between employees' talents, or social capital, is just as important for innovation as is economic capital. Here is a task for organizations: they need to strengthen their social capital. Dr. Michiel Schoemaker, teacher in the Masterclass Strategic Management at TIAS, puts forward three ways of tackling this.

The modern organization is a network organization. An increasing number of people work in flexible labor organizations. Reacting quickly and creatively to market demands, to clients' changing requirements, has become the motto. During the past decades, this has altered the structures of many organizations as organizations demand more flexibility of their employees. Organizing employees' talents is the central issue and staff management is often focused on the individual.

And so organizations ignore one important problem, namely the creation of interdependence in the organization. Organizing employees' talents is good and flexibility is necessary. But if management becomes focused too much on the individual, if steering is focused too much on flexibility, then interdependence  is at risk of being lost.

Football team

There is an increasing awareness from these experiences that talent management alone is not enough. Interdependence and connectivity between all that talent is also needed. The football team metaphor is evident here. You can have so much talent on the field, but if they don't play together properly (or ideally "play together blindly"), then you will not win the competition. Social capital is in this field of interplay.

In a modern organization, it is not just about forming networks in structures and systems, but also and primarily about forming networks between people. This focus on forming networks between people is reflected in the ideas behind social capital. In their book In Good Company, Cohen and Prusak provide a beautiful definition of social capital:

“Social capital consists of the stock of active connections among people: the trust, mutual understanding, and shared values and behaviours that bind the members of human networks and communities and make cooperative action possible” (Cohen & Prusak, 2001).

Trust and mutual understanding

Social capital emphasizes the importance of relationships between people, between the employees themselves and also between employees and clients in order to function successfully as an organization. In an organization, these relationships are of great importance for successful "production", but also for successful innovation. The durability of these relationships is based on trust, mutual understanding and shared norms, values and behavior that connect people with each other.

In particular, connectivity founded on trust and mutual understanding is crucial in innovation. After all, in inventive processes people use their talents, knowledge and experience in order to innovate, whether it be a product or a service. The desire to make use of those talents, to share that knowledge and experience with others for the benefit of innovation, depends on trust and mutual understanding. If trust and mutual understanding is lacking, then people will be less willing to use their talents, knowledge and experience.

This makes social capital an essential condition for innovation, meaning that social capital is on an equal footing with economic capital. After all, economic capital is often necessary for successful innovation. These two forms of capital, economic and social, can reinforce each other in the realization of innovations.

Strengthening social capital

If social capital is just as important as economic capital in realizing innovations, then organizations have the task of shaping and strengthening social capital. Social capital can be strengthened by paying attention to:

  • profiling networks;
  • shaping the organization as a working community;
  • focused working on trust and mutual understanding.

These three points are explained briefly below, as ingredients for increasing the innovative strength of organizations.

1) Profiling networks

The stock of active connections[HW1] that Cohen and Prusak refer to in the above definition, concerns peoples' social networks. These networks can take on different forms. Cross and Parker (2004) and Baker (2012) speak (ideal-typically) of closed and open networks. One individual has a more closed network that is very dense with numerous mutual relationships; another individual has a more open network with numerous contacts, in which mutual relationships are not always present.

It is important for individuals and organizations to know the form and quality of these networks. The form and quality of these personal networks are valuable in innovation, where connecting with the right people is often involved. Who needs what I have - and who has what I need? That is a crucial question for making personal networks function effectively. The same applies to innovation. The strength of innovation lies at the nodes of networks. Profiling networks is the first building block for innovation.

2) Shaping the organization as a working community

A working community is a network of individuals whose behavior is based on common values, norms and codes of conduct. So they form a group in which individual talents are able to develop, social capital can flourish, the group's membership is arranged and a specific organizational identity is created (Schoemaker, 2006).

In this context, individuals see the membership of an organization as a way of developing their personal identity. An individual must want to do this. Membership and also using and developing talents do not happen by themselves. They cannot be imposed from the outside. The individual is the actor here. Forming a working community is a process in which individuals become involved with each other. The working community then becomes a driving force for effective innovation. After all, if an individual is a convinced "member" of an organization, he/she will be committed to the organization, its targets and continuity.

There is of course a danger here, namely that the working community is or becomes so close that innovation no longer takes place or that creativity and flexibility disappear and the organization becomes rigid. Organizing innovation apparently demands a proper balance between a (too) closed and a (too) open working community.

3) Focused working on trust and mutual understanding

Focused working on trust and mutual understanding is in line with the previous point. This is of course a part of shaping working communities but it does demand separate attention. Because trust and mutual understanding are created by collaboration between people. This collaboration takes place increasingly flexibly in space and time (the New Way of Working). More trust and mutual understanding is usually created by meeting. Overdoing the new way of working may interfere with meeting.

Organizing meetings, seeing the organization as a "meeting place" where people like to come, demands extra attention from managers. Stimulating people to meet each other, strengthens social capital. The best of innovations can be created from this collaboration in trust and mutual understanding. 

Related articles