The paper 'Impact of Social Capital and National Innovation System' is a good example of a Macro and Microeconomics Case Study. The current world economy is knowledge-based. Any organization that is not able to fit within this context is likely to face stiffer circumstances. One of the core competencies that organizations require to be competitive in this globalized economy is innovative power. The path towards sustaining innovation is through knowledge management so as to produce industrially relevant technology. From a systems view approach, no one can claim to be highly knowledgeable in one area.
The key is to accumulate and share this knowledge with various actors. For an international corporation, this would be within internal boundaries and through external linkages. Apart from these, knowing the social environment is critical. This influences aspects like international human resource management. There are various theoretical propositions and models which have been used to explain how the flow of information and trust among the interested parties can be shared. The two critical concepts that come into the forefront are social capital and national innovation system and how they are significant in strategy and decision making for multinational corporations in the context of today’ s knowledge-based economy.
The critical aspect is that national innovation systems examine ‘ flow of technology and information flow among people enterprises and institutions so that they can be innovative’ (OECD, 1997, p. 7). On the other hand, the social capital theory argues that ‘ the essence of organized action inheres in the capital creation, maintenance, and utilization of relationship and from this relationship base emerges the potential for action and competitive advantage’ (Fussel et al. , and, p.98).
Marketing is about building relationships. In this context, the ability of firms in knowing their social environment and build effective relationships becomes a resource. The nexus between the two and the impact on MNEs is the flow/ communication within the structures. The aim of this discourse is to evaluate the impact of social capital and national innovation systems on MNEs' strategies and decision making in the context of today’ s knowledge-based economy. 2.0 The concept of Social Capital Various literature points out how different people have conceptualized the term social capital.
Ostrom (n. d, 176) sees it as “ shared knowledge, understanding, norms, rules, and expectations about patterns of interactions that a group of individuals brings to a recurrent activity” . He notes that people engaged in joint venture accomplishes much per unit time. This statement is correlated with network building or relationship building, and then they form the basic requirements of the later. On the other hand, World Bank (1998 cited in Ramzi, 2012, p. 450) sees it as “ institutions, relationships, views and values that rule in action and interactions among people and have a contribution in economic and social development” .
This can also be viewed as a form of institution building outside the formal frameworks. The basis of social capital as being enshrined in the structure of relationship is affirmed by Ponthieux (2004). Coleman (1988, p. 188 cited in Ponthieux 2004, p. 5) presents another interesting paradigm by stating that the concept can’ t be defined but can be seen when individuals act with social structures. Siisiainen (2000) reviews two important works of Robert Putnam and that of Pierre Bourdieu. Putnam (1993, p. 6-7 cited in Siisiainen, 2000, p.
2) understands the concept in terms of social allegiance and alignments. The basis of his inference is derived from the studies done in Italy whereby he looked at the preconditions for building a prosperous society. The observation made by him was that civic society is the basis for a prosperous society as seen in Northern Italy which was successful as compared to the southern one. He postulates that engagement by citizens in public activity leads to mutual cooperation, vital social networks, equal political relations, and citizen participation. Siisiainen (2000, p.
3) posits that social capital is like moral resources that are manifested through trust, social norms & obligations, and social networks of citizens’ activity in voluntary associations.
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