The missing ingredient for business success
Following a recent study commissioned by Innovate UK into the impact of social capital on innovation, we unpack the concept and explore what it means for businesses.
By Dr Kristel Miller, Professor of Entrepreneurship & Small Business Development at Ulster University, and Abigail Stocker, Lead Specialist for Research at Innovate UK.
The recipe for business growth includes access to financial, human, and physical resources. Yet an often forgotten ingredient is the presence of social connections – also known as ‘social capital’. When growing a business, it’s not just what you know which is important, but who you know (and even who you don’t). Social capital is much like seasoning in a recipe; it may be hard to spot, but you can definitely tell when it’s missing.
What is social capital?
Social capital describes the presence of social relationships. These relationships can bring about benefits, such as access to knowledge and opportunities. Social relationships can exist on multiple levels – from the individual (e.g., relationships between colleagues within a business) to the organisational (e.g. relationship between businesses).
Often, social relationships are formed within the context of a network (a group of interconnected people). However, simply being part of a network does not necessarily guarantee the development of social capital. To create benefits, relationships must be based on mutual trust and be nurtured over time to create opportunities to access resources. For many of us, investing the time and energy into to building relationships can be a challenge, so we may need to prioritise where this effort is best spent.
How does social capital benefit business growth?
The investment of energy is worth it, though, as many studies suggest that businesses with fewer social connections find it harder to achieve their goals.[1] This is unsurprising, given the many benefits social capital has for businesses, including:
- Access to external knowledge and resources – which can enhance innovation and competitiveness.
- Improved understanding of customers– which can increase sales, market share, and lead to greater success in launching new products or entering new markets.
- Signalling legitimacy and credibility – which can help secure financial resources from funders. Our research found that demonstrating networks and social capital at the application stage would likely strengthen an application.
- Strengthened business resilience – external networks offer sources of knowledge, creativity and support during difficult times.
- Supported wellbeing of managers – which in turn enhances happiness, performance and productivity.
What can businesses do to develop social capital?
There are several different types of social capital which are useful to individuals and businesses for achieving different outcomes:
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Where is it present?
Tight knit networks of individuals with similar backgrounds and interests.Example
Many innovation funding programmes provide opportunities for beneficiaries to network and build relationships with one another, such as Women in Innovation and the Future Leaders Fellowships.What is it useful for?
The strong, trusting relationships and a sense of community allow access to resources and provide a source of emotional support over time. -
Where is it present?
Dense networks of individuals not all from the same backgrounds, such as large industry networks.Example
Innovate UK KTN runs sector-focussed events which facilitate networking and community-building.What is it useful for?
Unlocking greater breadth and diversity of contacts. This in turn may open up more opportunities, knowledge and ideas than bonding capital. -
Where is it present?
Vertical relationships across networks of different types and hierarchies, including links formed with government bodies, community organisations, and political organisations.Example
ICURe – which provides funding and training for research teams to undertake customer discovery activities.Innovate UK KTN can link innovative businesses into existing networks of companies, academics, funders and sector stakeholders.
What is it useful for?
Achieving shared goals by developing relationships with those with more power.[2]
Overall, whether you are looking to expand your personal network or that of your business, social capital is all about building trusting relationships and bonds with other people. In fact, any activity which brings people together in an organised way can create opportunities to develop social relationships. The aim is to increase the quantity and quality of your social relationships. And the more diverse the connections the better, as they can often open up new opportunities that you weren’t even aware of.
If you’re looking to improve your own recipe for success and don’t know where to start, Innovate UK KTN may be able to help. They enable businesses to tap into existing networks of likeminded people and support them to discover new partners. You can check out the range of opportunities and events they run.
If you’re interested in learning more about social capital and how it affects innovation, you can read the full report here.
[1] Robert Putnam, a Professor at Harvard University, suggests that deteriorating social bonds between people greatly impacts economic development.
[2] Adler, P. S. and Kwon, S-W (2002) Social Capital: Prospects for a New Concept. The Academy of Management Review, 27 (1), 17–40.