Calvin A. Kent (Presenter) and Lorraine P. Anderson

Social Capital and Social Entrepreneurship: A Preliminary Inquiry

Dr. Kent's paper explores the concepts of social capital and social entrepreneurship, including their relationship and how they are being taught in business related courses at the collegiate level. Dr. Kent laments that the study of entrepreneurship has thus far mostly been limited to technology and the ventures that produce it. He argues that innovation is more than new products and processes for production. Entrepreneurs can be the change agents for creating social as well as material progress.

Dr. Kent begins by citing Cohen and Prusak's definition of social capital as "the stock of active connections among people; the trust, mutual understanding and shared values and behaviors that bind the members of human networks and communities and make cooperative action possible." Dr. Kent further explains that social capital has both an internal and external dimension. Internally, social capital increases the effectiveness of the organization by establishing a workplace where workers are encouraged to create. Externally, social capital increases the effectiveness of social institutions, towards greater social harmony, through an interdisciplinary approach which combines sociological, political and economic issues.

In the following section, Dr. Kent argues that social capital has an economic value, because knowledge creates a competitive advantage. He makes an important distinction between information and knowledge: the former being sterile data which can easily be transformed; the latter being the human skills necessary to understand the data, assimilate it and apply it in new and creative ways. Dr. Kent further argues that social capital depends foremost on trust, and trust necessarily comes from human interaction. Social capital therefore has an economic value because transaction costs are reduced when people trust each other.

In the next section, Dr. Kent highlights the strong relationship between social capital and entrepreneurship. The stronger a social community is, the greater the level of trust there is between its members. Trust encourages risk taking by reducing the fear of failure. Risk taking in turn yields greater innovation and more entrepreneurship. Dr. Kent asserts that successful businesses are built on trust between company and customer, employer and employee, and employees and their colleagues.

Next, Dr. Kent describes the relationship between leadership and social capital. He first makes an important distinction between management and leadership: the former tending to yield consistent results or the status quo; the latter having the potential to produce dramatic change. Effective leadership requires the ability to develop a vision for the future and to motivate others to work towards the accomplishment of that goal. Dr. Kent highlights Robert Greenleaf's concept of "servant leadership" in which leaders think of themselves as working for their employees in terms of supporting whatever they need (e.g. materials, training, encouragement, rewards, recognition). Dr. Kent further argues that leaders need to be honest with their employees, praising them for their accomplishments while providing them with honest feedback. Similarly, entrepreneurs need to give as much attention to their co-workers as they do to a new idea. An effective entrepreneur leader understands that through strong relationships built on trust, great accomplishments naturally follow.

Dr. Kent concludes that the curricula of business schools should include social capital to a greater extent. They should emphasize the value of developing social communities based upon shared values and goals. Shared values lead to trust which in turn leads to innovation and economic growth. Consequently, entrepreneurship educators would do well to teach their students to value people's thoughts, abilities and needs.

Summary of Questions & Answers and Suggestions for Modifications/Enhancements

Ms. Holman asked, in light of Dr. Kent's thoughts on social capital, what are the implications for education and educational reform? What would it look like and who would need to be engaged so that we could finally give rise to more innovations? Dr. Kent responded that for innovation to occur, people's fears of failure need to be negated. He points out that academic tenure was supposed to encourage innovation by making professors less afraid of taking risks, but in reality this has not been the case. Dr. Kent also used the recent scandal with Arthur Anderson accountants and Enron as an example of how fear paralyzes people, as evidenced by the number of accounting majors being halved nationwide.

Dr. Walstad suggested that Dr. Kent use Herman De Soto's work to inform his discussion of unlocking social capital.

Dr. Wilson suggested that Dr. Kent look at the formation of social capital in America's inner cities. Dr. Wilson pointed out that community-based organizations are great examples of social capital. There are tremendous opportunities for entrepreneurship in inner cities. Dr. Wilson further suggested that Dr. Kent examine the model of the virtual CEO, in which a CEO assesses the consumers' perceptions by understanding the point of view of the employees. Dr. Wilson concluded his comments by offering that the problem with the concept of social capital is that we do not know its true potential for stimulating innovation, because we have not assessed organizations as the bases of creativity.

Dr. Hentschke asked how human capital interacts with social capital and how they can be developed in urban settings. He also commented that he saw human capital, "what's between our ears," as flowing rather than being static. Dr. Kent responded that he too viewed human capital as being as fluid as money. He commented that social capital has the potential of counterbalancing the increasing mobility of people in society. The more skills people have, the more freedom they have to move from one organization to another, but the more social capital there is in an organization, the more interconnections there are between people, and the more likely people are to stay. In other words, an organization is more likely to retain its workforce if it makes its employees feel as if they are contributing to the organization in an important way. In many cases, job satisfaction can make up for lower wages. Dr. Kent suggested that urban communities adapt this lesson - making it attractive for people to put down their roots and commit to these communities.