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The Importance of Social Capital in Colombian Rural Agro-Enterprises

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Type: Working Paper
Author: Johnson, Nancy; Suarez, Ruth; Lundy, Mark
Date: 2002
Agency: CGIAR System-wide Program on Property Rights and Collective Action, International Food Policy Research Institute, Washington, DC
Series: CAPRi Working Paper, no. 26
URI: https://hdl.handle.net/10535/3736
Sector: Social Organization
Region: South America
Subject(s): social capital
collective action
business and finance
social networks
Abstract: This paper characterizes and measures the contribution of social capital to the performance of 50 agroenterprises in Colombia. Using qualitative analysis we document how social capital performs a variety of functions in firms, including providing access information via networks of contacts, reducing transactions costs in contracting via trust, and sustaining capacity for collective action. To estimate social capitalÂ's contribution to firm structure and performance, quantitative indicators of firm-level use of social capital are developed based on the number and strength of relationships that firms maintain. Econometric analysis finds that firm-level returns to relationships are high, higher than to physical or human capital. The results suggests that while firms can increase their economic performance by investing in social capital, institutional and technological innovations that ameliorate the effects of the market failures that lead to use of social relationships for business purposes could also improve both equity and efficiency.

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