Social Capital in International Business Networks: Confirming a Unique Type of Governance Structure

Abstract

The primary objective of the study was to explain experiential market knowledge acquisition in international business relationships. One important way of learning is to learn from your international business relationships. International Business can be defined as an exchange process that involves relationships between actors located in different countries. In these relationships social capital emerges. Most research on social capital has focused ties on inside the firm. However, this study argues that business networks play an important role in tying a focal actor to other actors. Accordingly, activities link heterogeneous resources by combining them with other resources, and new knowledge emerges (Håkansson 1987, Håkansson and Johanson 1992). Focusing on external relations international exchange links a focal actor to its foreign partner and these business relationships increase opportunities to acquire knowledge. Social capital theory was used as a tool because it focuses on the significance of relationships as a resource for social action (Nahapiet and Ghoshal 1998, see also Baker 1990, Bourdieu 1986, Burt 1992, Coleman 1988, 1990, Putnam 1995). The original dimensions of social capital were applied in this research in a network setting (IMP) and analysed rigorously. Apart from the three dimensions of social capital, which are the structural, the relational, and the cognitive, this study emphasized the relational dimension as a two-dimensional construct, comprising trust and commitment. Experiential market knowledge consists of experiential business and institutional knowledge. Based on the discussion of social capital, the network approach and the concept of the knowledge of the firm, the following main arguments were put forward: (1) Networks as governance structures are conducive to the development of social capital. (2) Social capital increases experiential market knowledge.

As the study deals with different concepts that stem from different research traditions, an integrated framework was needed. Hence, the phenomenon under investigation was modelled and tested empirically. The interrelations between social capital and experiential knowledge acquisition were analysed with a sample of 280 Finnish exporting firms. The data were analysed with LISREL 8.5 (Jöreskog and Sörbom 1993), which is a statistical structural method. In the first stage, factor analysis provides a confirmatory measurement model that specifies the properties of the constructs. Then the causal relations between the constructs were analysed. In the LISREL program these separate analyses were conducted simultaneously.

The results indicate that (1) networks as a unique type of governance structure proved to be conducive to experiential market knowledge acquisition. This means that the means of communication are relational; actors develop business relationships through exchange. As a result of these relationships, the environment is shaped and mutual interests fulfilled. This interacted and enacted environment means that markets must be seen as dynamic networks. (2) The empirical part indicated that the main constructs are commitment and cognition and experiential business and institutional knowledge. Commitment plays an important role in international business relationships. Commitment and cognition have a positive influence on experiential business and cognition on experiential institutional knowledge. However, an unexpected result was obtained as the construct of trust was not significant. Nevertheless, commitment and trust are correlated, and collinearity was demonstrated between them