Saturday, February 1, 2020

The role of social capital in the business start-up and Essay

The role of social capital in the business start-up and entrepreneurial development - Essay Example Capital, as stated by the economists, is a produced means of production. The expenditure incurred on capital in business is often termed as investment. This is because with the benefits of investments, an organization can generate economic surplus in future. The concept of social capital has gained importance in the contemporary business world. This concept was initially introduced by the sociologists and political scientists. In the current epoch, the concept of social capital withholds all those social relations that possess productive benefits within them. It is true that the success of growth or prosperity of an organization is derived with the help of easy access of financial or productive factor resources. However, goodwill and social relations are also important for determining factors that influence the success of a new business organization. The brand loyalty for a product can be developed by the consumers only if they are able to use the product. However, it is only social capital that can enhance the brand value of an organization at its initiation period. The business environments in the commercial marketplaces in the current era are highly competitive. In this situation, social capital acts as a core competence and helps a business to start-up efficiently. It also helps these new firms in developing and enhancing their entrepreneurial skills in business (Block, 1982). Literature Review The social capital largely helps the growth of an organization since its inception. Today at the business start up stage, the social networks of the entrepreneurs are utilized. In the later stage, the concept of networking between the business promoters falls under the context of social capital. It is true that by using social capital, the new business organizations gather human and financial capital in their business. This helps the organizations to develop their business in the contemporary competitive marketplaces. It is thus believed that in the modern days, succ ess of business organizations can only be achieved through a quantifiable amount of social capital. Unlike the concept of human and financial capital, social capital is intangible in nature and hence, it is highly difficult to measure it. It is thus true that the recent scholars face difficulty to precisely measure the exact amount of social capital required for business development. In 2001, Cote and Healy had stated that social capital relates to the norms, network and values of a business organization. Measuring the value of social capital has been considered to be one of the most primary tasks of World Value Survey in 2001. Hjollund and Svendsen had stated that the primary well-being of a new venture can only be established by the use of social capital (Stryker, 1998). In the society, social capital not only helps in the formulation of new business firms, but also facilitates the job creation activities. Thus, many economists suggest that in the long run, social capital helps to reduce the amount of unemployment. This is because social capital aids the formation of new firms or business ventures in an economy, thereby raising the employment opportunities in the same. It should also be analyzed that the rate of economic growth in a nation depends on the rate of new business formations. Thus, indirectly social capital is the underlying driving force for economic progress in a nation. In the

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