Local Social Capital
Small Business Economics
21: 77–113, 2003.
2003 Kluwer Academic Publishers. Printed in the Netherlands.
ABSTRACT. We aim to contribute to the analysis of the role
that spacebound social capital plays in local/regional entre-
preneurship. We compare social capital with other forms of
capital. The conclusion is that in the main, social capital can
be analyzed in the same way as other capital but it has some
important special attributes. With these attributes as starting
point we sketch an outline model of how the spatially-defined
producer surplus and consumer surplus form a place surplus,
and of the role played by social capital in the creation of the
producer surplus. A “rereading” of Schumpeter shows that he
was aware of several aspects of what we denominate entre-
preneurship-inhibiting and facilitating aspects of social capital.
Finally, we discuss some formal economic modeling
approaches to the theoretical relationship between social
capital and entrepreneurship.
During the 1990s a new concept of capital, social
capital, has come into general use alongside the
established concepts of financial, real, and human
capital. We believe that social capital is as relevant
to the analysis of small business and entrepre-
neurship as those latter concepts of capital, and
thus we explore some of the many connections
between social capital and entrepreneurship.
Unlike the latter concepts, the idea of social
capital does not originate from the discipline of
economics but has its roots primarily in sociology.
It has been said to have originated with the
classical sociologists of the nineteenth century
(Portes and Landolt, 1996). The first explicit use
of the term in approximately its present connota-
tion seems to have been in the United States by
Hanifan (1916). Jacobs (1961) used the concept in
her celebrated book on American cities, and the
anthropologist Hannerz (1969) used the term in his
book on ghetto cultures. In Europe it is Pierre
Bourdieu (1980) who has made the concept of
social capital a familiar one, alongside his better-
known concept of cultural capital. Social capital,
according to Bourdieu, is “the sum of the
resources, actual or virtual, that accrue to an indi-
vidual or a group by virtue of possessing a durable
network of more or less institutionalized relation-
ships of mutual acquaintance and recognition”
(Bourdieu and Wacquant, 1992, p. 119). Another
scholar who has defined social capital as an
individual-related resource is Loury (1977, 1987).
Coleman’s (1988, 1990) definition of the
concept places it on a different plane from that of
the individual. In Foundations of Social Theory
(1990) he uses the figure below to explain the
distinction between human capital and social
Final version accepted on November 11, 2001
Swedish Institute for Growth Policy Studies
SE-831 21 Östersund
Figure 1. An example of the relationship between human
capital and social capital according to Coleman. “Three-
person structure: human capital in nodes and social capital in
relations.” Coleman (1990) p. 305.