Social Capital within the Urban Small-Firm-Sector in Developing Countries: A Form of Modern Organization or a Reason for Economic Backwardness?

Abstract

"This article explores the role of social capital created by social network membership in the small-firm sector in developing countries. Some empirical studies find that social capital hampers economic performance by creating market segmentation and inducing rent-seeking activities. Other studies observe that social capital is an important prerequisite for productive interaction among small firms. This paper offers a model of social capital governance based on the New Institutional Economics which distinguishes between inclusive and exclusive social capital. It argues that inclusive social capital furthers economic performance while exclusive social capital may not. Two case studies are included."