Can Social Capital Explain Business Performance in Denmark?

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Abstract

Motivated by the limited evidence on the positive link between social capital and firm performance, this paper explores this potential driver of firm performance at the firm rather than macro-level by employing a novel approach: we capture social capital at a community level rather than focus on the narrow aspect of entrepreneurs’ own social network. Using principal component analysis to aggregate various trust, norm and network-related variables to construct social capital variables with more than 150,000 firm-level observations for firm performance variables, this paper identifies an overall positive and significant effect of social capital on firm performance in Denmark. These effects are robust to firm-level social capital measures, different sampling years and alternative measures of firm performance (return on asset, current ratio, solvency ratio and profit margin) and network perspectives (Putnam and Olson).
Original languageEnglish
JournalEmpirical Economics
Volume59
Issue number4
Pages (from-to)1-20
Number of pages20
ISSN0377-7332
DOIs
Publication statusPublished - Oct 2019
MoE publication typeA1 Journal article-refereed

Fields of Science

  • 512 Business and Management
  • social capital
  • firm performance
  • Denmark
  • Border regions
  • Rural-urban divide

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