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Abstract

Motivated by the limited evidence on the positive link between social capital and firm performance, this paper explores this potential driver of firm performance at the firm rather than macro-level by employing a novel approach: we capture social capital at a community level rather than focus on the narrow aspect of entrepreneurs’ own social network. Using Principal Component Analysis to aggregate various trust, norm, and network related variables to construct social capital variables with more than 150,000 firm-level observations for firm performance variables, this paper identifies an overall positive and significant effect of social capital on firm performance in Denmark. These effects are robust to firm-level social capital measures, different sampling years and alternative measures of firm performance (return on asset, current ratio, solvency ratio and profit margin) and network (Putnam and Olson groups).

Item Type:	Article
Authors/Creators:	Wang, C and Steiner, B
Keywords:	social capital, firm performance, Denmark, border regions
Journal or Publication Title:	Empirical Economics
Publisher:	Springer
ISSN:	0377-7332
DOI / ID Number:	10.1007/s00181-019-01731-3
Copyright Information:	Copyright 2019 Springer-Verlag GmbH Germany, part of Springer Nature. This is a pre-print of an article published in Empirical Economics. The final authenticated version is available online at: https://doi.org/10.1007/s00181-019-01731-3
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