Stakeholder Social Capital





Stakeholder management, introduced in the early 1980s, was later enriched by stakeholder theory, which “is a theory of organizational management and ethics” (Phillips et al., 2003, p. 480). Although there are studies in which this theory is presented as descriptive and instrumental, they rely on ends and values that are implicitly assumed. Actually, “stakeholder theory is distinct because it addresses morals and values as a central feature of managing organizations.”(Phillips et al., 2003, p. 480).

Most approaches in stakeholder theory have focused on the stakeholder itself, that is, any group which affects or is affected by the firm's activity (Freeman, 1984). However, scant attention has been paid to the nature of stakeholder-firm relationships or to the relational data (Butterfield et al., 2005) and, when such relationships have been considered, they have been seen in terms of threads, conflicting powers or social control. The consequent strategy for managing stakeholders basically derives from the stakeholder's potential to harm the organization or to promote a good reputation of the firm (Savage et al., 1991; Rowley, 1997).

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To some extent, it contains a conception of the role of the business in society. Several examples of ‘normative core' focusing on this central feature have been proposed for stakeholder theory, including Libertarian (Freeman and Phillips, 2000), the principle of stakeholder fairness (Phillips, 1997, 2003), Feminist Ethics (Burton and Dunn, 1996; Wicks et al., 1994), Common Good (Argandoña, 1998), and Integrative Social Contract Theory (Donaldson and Freeman, 1999). Another possible normative core could be social capital which implies reciprocity and cooperation and its focus is the relationships themselves. This is our aim here.

Although literature on stakeholder theory based on reciprocity, collaboration and cooperation is not abundant (exceptions are Heugens et al., 2002 and Butterfield et al., 2004), cooperation with stakeholders has been mentioned as a way to achieve a competitive advantage for the firm (Jones, 1995; Hart, 1995; Rodríguez et al., 2001; Sharma y Vredemburg, 1998). This is the case, for instance, of investing in infrastructure in the same local market as the firm's competitors (Hart, 1995; Sharma and Vredenburg, 1998), or in involving clients in planning and designing the product or in designing a flexible production system together with suppliers (Lado and Wilson, 1994; Martin Mitchell and Swaminathan, 1995; Mudambi and Helper, 1998).

Putman affirms that “cooperation is fostered by social capital” (1993: 167). The ‘social capital' concept has already been introduced in organizational studies (Leana and Van Buren, 1999; Alder and Known, 2002; Tsai y Ghoshal, 1998; Shaw et al., 2005; Dess and Shaw, 2001) and findings show the relevance of this concept. Additionally it has been found that social capital favors alliances between organizations (Koka and Prescott, 2002; Gulati, 1995; Gulati, 1998; Ahuja, 2000). These results suggest that social capital may also be relevant in the firm-stakeholder relationships and in stakeholder networks.

This article focuses on social capital, and, as the stakeholder network is relevant to Stakeholder Theory in the present panorama (Rowley, 1997; Neville and Menguc, 2006), it applies the concept to the relationship between the firm and its stakeholders. This perspective leads us to defining the concept of ‘Stakeholder Social Capital' (SSC) and applying it to stakeholder theory, obtaining a new vision of this theory, which seems to have potential for future development.

The structure of this paper is as follows. Firstly, we discuss the concept of social capital, its two conventional paradigms and their limitations. Secondly, we present a relational paradigm of social capital proposed by Donati (1995; 1991), which overcomes the above-mentioned limitations. Thirdly, we present the concept of ‘stakeholder social capital', SSC, considering its components and benefits and we articulate a stakeholder theory based in this concept SSC.

The concept of social capital

The concept of social capital refers to an advantage created by a certain structure of relationships in which an individual or a group is found. The term is formed of both ‘capital' and ‘social'. It is ‘capital' in a sense similar to that of financial capital or human capital, but with an essential difference. While financial capital lies in funds and human capital in knowledge and skills, social capital lies in social relationships and not in individuals themselves (Portes, 2000; Nahapiet and Ghosal, 1998), as the human capital.

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A great number of definitions of social capital have been proposed (Adler and Kwon, 2002). In these definitions, social capital appears as a multidimensional concept (Putman, 1993; 2000; Nahapiet and Ghosal, 1998), although there is no agreement about the number and contents of those dimensions. Thus, Putman (1993) identifies civil network and trust as components, while Nahapiet and Ghosal (1998) consider that social capital has three dimensions: the structural, cognitive, and relational. There is also certain confusion about the role of trust in generating social capital as in some theories, trust is seen as its antecedent and in another, trust is the only component of social capital (Fukuyama, 1995).

In spite of there being so many definitions of social capital, most of them can be included within two mainstream paradigms, the first one, the instrumental-individualist in which social capital is seen as a tool kit useable by individuals (Bourdieu, 1980; Coleman, 1990) and the second one, the communitarian-holistic in which social capital is considered as a communitarian resource which fosters civic and communitarian actions (Putman, 1993; Fukuyama, 1995). Thus, the first shows an approach both instrumental (it is for individual benefit) and individualist (based on individual goals). The second is more collectivistic (it is for the collective benefit) and holistic (systemic and structural goals of the group). Moreover, there are three main differences between the two paradigms; the first, motivation - the instrumental or expressive resource, the second, the role of the relationships that are the connector or bridge, and the third the locus of the benefits - the individual and the collective. In the next section we continue with a concise clarification of the respective features, differences and limitations of the paradigms, we then move on to discuss the relational perspective of social capital, adopted here, which we believe overcomes the limitations of the two fore mentioned mainstream paradigms.

Main paradigms of social capital

Bordieu, an outstanding author of the Instrumental-Individualist paradigm, defines social capital as “the aggregate of the actual or potential resources which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance or recognition” (1985, p. 248). In this paradigm, social capital is instrumental, since it is useful for other ends not directly connected with the relation. Individuals take part in social groups with the main objective of obtaining gains (Portes, 1998). This paradigm considers social capital as an asset of each individual within a structure of relationships, an asset which is used to pursue individual goals. In other words, it is a resource possessed by individuals, a private good. In this paradigm social capital acts as an external link, as a connector between individuals and social groups. It can be termed as bridging.

In contrast to the previous paradigm, proponents of the Holistic-Communitarian paradigm focus on collectivity. Putman defines social capital as those aspects of social organization - networks, norms and trust- “that improve efficiency of society that foster the coordination of activities” (1993, p. 167). Thus, social capital is seen as a useable resource valuable in itself, rooted in the relation. At the same time, social capital is the stock possessed by a social group or a community through their structural relationships, and which facilities cooperation and collective action. In this paradigm, social capital is a public good and its benefits are collective.

From this perspective, the research on social capital is centered on evaluating networks, trust, and norms of reciprocity, which foster cooperation. Social capital generates incentives, reduces uncertainty, crime rates, and corruption, and at the same time improves community governance. All of this is produced at the level of community (Putman, 1993). This paradigm focuses on knowing the specific conditions to foster voluntary actions within communities.

Francis Fukuyama (1995) follows a similar line to Putman. He defines social capital as the resource produced by the prevalence of trust in a society or in a part of it (families, a group in a town or in a nation). He believes that civil society is not what produces social capital, rather social capital produces civic society. He adds that not all the existing norms common to two individuals are a source of social capital, but only those which lead to cooperation, among them the norms related “with the traditional virtues like honesty, the keeping of promises, the expectation of the meeting of duties in a reciprocal form,..” (Fukuyama, 1997,p. 2). Fukuyama emphasizes the normative aspect of social capital and its religious or symbolic origin (cultural traditions, historical experience, and other factors). Norms are beyond the total control of any individual and also of any government or public institution. Most studies on this paradigm are centered on knowing how social capital is generated in a group and the influence of social capital on the welfare of a group[1].

Limitations of the paradigms

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Several limitations have been identified in literature in the field. The main question is the confusion existing over the intangible and multidimensional character of social capital, which often means that definitions cannot be distinguished from its effects, or its causes or its locus. (Portes, 1998; 2000). In this sense, Portes (1998) argues that Putman confuses social capital with its effects and. Coleman's functional definition does not distinguish the mechanisms that generate social capital from their consequences.

Another important problem is known as the micro-macro link, and refers to the manner of connecting a level of analysis to a higher level[2]. This problem is common to both paradigms mentioned. In the case of the instrumental-individualist paradigm, the step from the individual level to the group level and, in the case of the communitarian- holistic paradigm, the step from the collective level to that of the individual (Lin, 2002; Portes, 2000). This lack of suitable transition in the paradigms denotes preeminence, of either the individual or of the group, in the explanations of where the social capital resides.

In the instrumental-individualist paradigm, the problem lies in the fact that the micro-macro link has been conceptualized as the mere aggregate of behaviors of the individual parts to constitute the whole. Oh et al expresses the situation “most researchers have limited their view of social capital to discrete levels of analysis, including individuals (Burt, 1992), organizations (Leana and Van Buren, 1999), communities (Putnam, 1993), industries (Walker et al., 1997), and nations (Fukuyama, 1995), without taking on the more difficult task of integrating different levels of analysis when discussing social capital” (Oh et al., 2006, p. 569). This means, according to Oh et al. (2005), forgetting the interactions and links that can be produced between the parts; forgetting the systemic behaviors that take place through the interaction and that go beyond will of the parties, these links are not properly captured.

Another question is the motivation. This vision corresponds with a vision of the human behavior caharacteristic of the utilitarian vision, the one that draw an individualized man to reduce to the resources (power and reputation) to the others to the individual has acces to the direct or indirect of the interaction with the other. In this paradigm “the action that leads to the social structure through the mobilization of resources. Social capital is reduced to the resources (wealth, power and reputation) of others to which the individual has access through direct treatment (dyadic) or indirect interaction with the other. Burt (1997) offers a vision of such egoism and interest when he affirms that social capital occurs when the ‘alter' is treated explicitly as a source of competitive advantage to obtain a dominant position. For Burt (1997), social capital is only an instrument for the interest of “homo economicus” like an “ego” that is to “alter” to interchange ideas and goods in its own interest.

In the communitarian-holistic paradigm the passage from the group to the individual is also problematic. In this case, the preferences or individual interest remain without a suitable formulation in the generation of the social capital; social capital is only explained by the presence of social norms and reciprocity. This reduces the individual's motivations to the social values internalized and to the solidarity of group (Fukuyama, 1995). This, according to Portes (2000), causes circular arguments, as we have seen.

So, we suggest the need for a new foundation; one which articulates suitably the passage from the individual to the group (the micro-macro link), and in which the vision of man is able to include other motivations than those of self interest, and all the while without falling into social determinism; that is to say, a vision of man without reductionisms, more global than the positions of both paradigms.

In order to overcome the limitations of conventional paradigms, some authors (Leana and Van Buren, 1999: Nahapiet and Ghosal, 1998) have looked for complementarities of paradigms, but these efforts have resulted in a superposition of approaches, without providing a new foundation for social capital. This superposition of approaches has contradictory effects since both paradigms diverge, as we have seen, in the basic assumptions of the individual and the society and in the method of investigation.

Portes (2000) gives an example of paradoxical effect in the case of inside information. The use of inside information has been identified as social capital, as resources from individual brokering. However their effects implies, however, a loose of trust and collective action to the level of the collectivity. The broker has used information for its own benefit so it has take advantage towards the members of the group. Thus, if a suitable link between the individual and the society is not solidly-based, paradoxical situations can occur in which the individual social capital destroys the social capital at communitarian level or group level[3]. The individual-instrumental social capital has identified precisely as the capability to undermine the collective action of the group.

These limitations and questions need a new vision of social capital. In order to present this new vision that summarize the former limitations, is necessary following Sandefur and Lauman (1998) a new approach that root the conception of social capital.

In the new conceptualization is possible, following Donati (2006a), if it possible to overcome the strong economicism that underlies both paradigms. That is to say, a concept of the social relationship that considers the relationship as a good as itself beyond of resources things as social resources to obtain benefits for the level of the individual and the level of the community.

We propose an approach that could solve these problems: an approach based on the relational theory. The relational theory is focused in the relationship (Donati, 1991;Donati, 1995; Donati, 2006) being its main category of analysis the relationship (Donati: 1991:2006). So, according to Donati (2006), social capital is a quality of the relationship. It is not a quality of the actors. Donati (2006) argues that these ambiguities come from the fact that social capital has been seen between the parties of the relationships and within relationships but not as relation itself.

The Relational Paradigm of Social Capital

The relational theory implies a different approach to the social capital as considers that the social phenomenon is intrinsically relational and suggests that the starting point is the social relationship[4] (Donati, 2006; 1991). Donati Relational theory has a newness approach to relationship on which social facts are seen as relationships. The clue of the relational theory over the relational question resides on the adequate foundation of the components of the relationship, not articulated on the binaries categories “individual” or “collective”. Donati (1991) has rooted the concept of relationship in several questions presented in classical authors (Durkheim y Weber) on which the concept of relationship that overcomes the structural-fuctionalism (Parsons) and its followers ( Luhamn).

The key of the relational theory over the individual-collective dichotomy, underlies on the adequate fundamentation of the components of the relationships; which has not been articulated in the binary individual-society, in which all the explanations fall in the individual or society level.

The relational approach is not then, articulated in the binary categories individual/collective, or in the relation between individual and society; in that all the explanations must fall either on the side of the individual or of the side of the society. Donati notes that “The individual and the group have different ways of being observed and of observing themselves. They are not on the same plane but on different planes in both speech and reality” (Donati, 2006:56). Donati (1991;2006) distinguishes two perspective that help us to understand the relationship as an interaction and the relationship as context. From the point of view of the relationship as interaction is produced both as the individual aspects (the social relationships emerges from the initiative of the individuals) as collectives (the social interaction is produced in a social interaction) in the emergent phenomena. The emergent phenomena that arises is what come from of the rel-lation, in our case from the social capital, which cannot be possesed neither completely from the individual neither from collectivity as consists of dynamic relationships from the individual through collectivity. Regarding the micro-macro link, the concept of relation in Donati is formed as much by individual aspects (the social relation arises from an initiative of the individuals) as collective (that individuals interact inside a social structure). So, the emergent phenomenon that arises from the interaction of is not reduced to the sum of the individual actions, but is the result of the interaction. That is to say has an effect in both, individual and collective has to be considered for whatever analysis of the social capital. (Donati, 2006)

The second perspective, the relationship as a context. Donati (2006) distinguishes the internal and external components of the relationship. The relationships can be analysed itself, as internal components and can be analysed as relationship as other relationships, as external components. The distinction between internal and external components, implies from the relational perspective, the social capital always can be considered as twofold; first, the relationships among members, the internal components, that analyses the relationships among the members, el social capital bonding, and the relationship among what are not members, the social capital bridging, that implies the analysis of the external components of the relationships. If it is internal or external depends of the point of view, of the moment and the situation. In Donati (1991; 2006) exists a correspondence between the internal and external components of the relationships: implies that exists on the relational social capital, a correspondence between the social capital bonding and social capital bridging.

The external components precisely indicate in the degree of dependence to other relationships and the degree of instrumentality of the motives (instrumental and expressive). To this point, the relational social capital overcomes another dichotomy of instrumental and expressive (Portes, 1998; Portes, 2000). The instrumental of motives implies a continuum of instrumental more autonomous (expressive) and the establishment of the conditions that is done one (for example, as instrumental motives and other expressive motives).

Capital Social Relational. Donati defines the relational social capital is a quality of the relationship nor individuals. The social capital appears as a relationships in symbolic means of donationa nad reciprocity that generates of relational goods. The social capital from the relational perspective is capable of a) connect structural with other members, following norms and resources b) connect of a symbolic means in terms of helping mutuality c) capable of generate relational configurations of creation and distribution relational goods.

In order to understand the relational paradigm of the social capital, it is necessary to take into account the following two aspects:

Specificity of relationships.

As Adler and Kwon (2002) suggest social capital is generate in relationships different from the market and from the (based on exchange of products by money) and from government-citizen relationship (based on political norms). In the relational approach, social capital emerges only from relationships based on reciprocity, that is, by exchanging favors and gifts. Genuine relationships which generate social capital are informal networks of friends, families and those who participate in voluntary associations, e.g., NGOs. However nowadays in the market can appear together and mixed with the market and authority relationships.

Relational goods.

One aspect new in the Donati (1996) social capital is the presence of relational goods. Relational goods are neither private nor public but are possessed by those who share the relationship. They depend on the will of each party and cannot be imposed, obliged or bought and both parties participated (Donati, 2005; Gui, 2000). In other terms, relational goods are not the sum of individual goods. Neither are they a public good, because those who do not participate in the interaction of the relationship are excluded from such goods. Donati's general definition is that it is a “good that can only be produced together, and from which those who participate in its production cannot be excluded, non-divisible, and not conceivable as a sum of individual goods…it depends on the relationship that the agents establish with each other and can only be enjoyed if they behave correspondingly (Donati, 1991, pp. 72-3). Relational goods bring about learning in individuals who take part in the relationship, and create relational knowledge and skills, which increase human capital of such individuals. This learning fosters new similar relationships in the future (Gui, 2000, p. 9). The correlation between social and human capital had been pointed out by Coleman (1988; 1990) and later empirically verified (Dess and Shaw, 2001; Pennings et al., 1998).

The presence of relational goods means having to consider two senses of social capital. The first understands the social relation as something which can be a resource for any end, individual or of the community. In contrast, the second sense means understanding social capital as a social relation which encourages or discourages certain actions of individuals but has in itself a value as it produces a co- indivisible good, a relational good from which other ends can be derived as secondary effects, the traditional benefits of social capital for example information or resources (Donati, 2006).

Stakeholder Social Capital

Based on the relational paradigm of capital social discussed in the previous section, we define Stakeholder Social Capital (SSC) as a quality of the relationship established between the firm and its stakeholders, symbolic exchanges based on reciprocity, suitable to structurally connect stakeholders with the firm and to provide relational goods for both the firm and its stakeholders.

Let us explain this definition. Symbolic exchanges basically refer to communication processes regarding culture and information. These exchanges differ from economy, which comprises primarily of material exchanges, and politics, which consists of the exchange of power, authority and legitimacy. Symbolic exchanges require a common language and the same categories of perception and appreciation (Bourdieu, 1998, p. 121).

SSC is based on reciprocity as is understood in Donati's relational paradigm of social capital, which include ‘gratuity'. Reciprocity “refers to a symbolic exchange which take place in a loop of donations in both directions” (Donati 1978, p. 360). That means that the donation may be equal or different for each party in the relation. Its place is intermediate between market exchanges and altruistic donations. Actually, reciprocity is a central category in any paradigm of social capital (see e.g., Coleman, 1990 and Putman, 1993), although the meaning can be a little different from other authors, which give reciprocity a more utilitarian interpretation. Thus, Kolmo (1994) describes relationships of reciprocity as a set of bilateral transferences, voluntary at the beginning and compulsory afterwards, since those who receive the service are obliged to offer a similar service to those who gave the first. As Goulder (1960) pointed out, reciprocity helps to maintain the system stable in situations in which there is not a clear structure of authority or a formal definition of obligations. This is precisely what happens in firm-stakeholder relationships which go beyond clear legal and contractual obligations.

The structural capacity of connecting stakeholders with the firm means the possibility of interacting to create consistent structures. This aspect is related to Granovetter's (1985) ‘structural embeddeness', which describes the overall pattern of connections between actors (in our case stakeholders) -that is, who you reach and how you reach them (Burt, 1992). Among the most important facets there is the presence or absence of network ties between actors (Wasserman and Faust, 1994); network configuration (Krackhardt, 1989) or morphology (Tichy, et al., 1979).

Relational goods are relational conditions which foster a proper human society. In SSC, relational goods can only be produced in and through relationships between the firm and its stakeholders. A proper human society is a society in which the relations enhance autonomy for the achievement of goals which can contribute to the human development of their members. Thus, in a group of Mafiosi, the relationships do not generate relational goods, and therefore there is no SSC because the effects of Mafia relationships do not foster a proper human society.

Components of Stakeholder Social Capital

Following Donati's relational theory[1] we can distinguish four components in each social relationship, which can also be identified in the SSC concept: intensity, meta-purpose, rules of reciprocity and the contribution to the ‘proper human society'. The four components are close to the three components given by Nahapiet and Ghosal (1998): structural (related to intensity), relational (related to rules of reciprocity) and cognitive (related to meta-purpose). Although in our case we added a four component: the contribution to the ‘proper human society', a dimension which mainly expresses values involved in the social relationship. This new dimension is important for both the stakeholder theory and the business and society field(Swanson, 1995).

The four components of Stakeholder social capital:

a) Intensity of firm-stakeholder relationship

Intensity is a structural element of SSC. Intensity refers to the capacity to connect the firm and its stakeholders and highlights the description of the pattern of linkages among firms and its stakeholders. It increases when the relationship is frequent and varied. Several measurements have been introduced to evaluate this component, such as density, connectivity, and multiplexity (Wasserman and Faust, 1994)

b) Meta-Purpose

Symbolic exchange can shape a mutual understanding between the firm and its stakeholder and their respective needs. Although objectives of the firms are different to the objectives of its stakeholders, both the firm and the stakeholder can achieve a common vision and an agreement in accepting some objectives of its counterpart. We call these objectives of both firm and stakeholders meta-purpose. Since each stakeholder can have different interests and objectives, there will be a meta-purpose for the relationship between the firm and each of its stakeholders. A meta-purpose can emerge for spontaneous interactions between the firm and its stakeholders, but can also be fostered for a more formal process of dialogue and negotiation with stakeholders. In the literature on the subject, the process of arriving at the meta-purpose is related to the ‘stakeholder dialogue' or stakeholder engagement (Kaptein and Van Tulder, 2003).

c) Rules of reciprocity

We have noted that reciprocity is one of the key dimensions of social capital. In groups of voluntary association there are certain rules of reciprocity over which social capital is present (Putman, 1993; Coleman, 1990). This is also true for the firm-stakeholder relationships, in which some formal or informal norms of reciprocity are established. As has been said, rules of reciprocity are not reduced to a strict ‘I give because you will give' (do ut des, according to a classic Latin aphorism), at least if you consider donations and returns as a strictly equivalent in quantitative terms. However in the social responsibility field, some donations will perhaps never be complete compensated by the corresponding return, or maybe the return will be greater than the donation. This is what happens in some corporate activities of social responsibility towards the community or in corporate philanthropy, although in reciprocity, expectations for a fair return generally exist. Reciprocity is more like equity than an arithmetical exchange.

d) Contribution to a ‘proper human' society

The fourth component refers to values in the relationship. This can be considered the normative element of the SSC. It is related with the role of the firm in society, this component points out what is specific of the firm-stakeholder relationship, beyond contractual links (if we compare this to other types of relationships that the company may have). A business is born in a society, uses means provided by the society and also establishes different types of relationships with several groups within the society. A relational perspective necessitates an analysis of the relational patterns and relational configurations on which business and society are connected in the context of ‘a proper human society'.

Following the Nahapiet and Ghosal (1998) argument, who differentiated two components on the relational embededdeness: the relational dimension and the cognitive dimension. The Cognitive dimension refers to those resources providing shared representations, interpretations, and systems of meaning among parties. Nahapiet and Ghosal (1998) have justified the distinction of this dimension based on the importance of the set of assets not yet discussed in the mainstream literature on social capital in the strategic view and knowledge view of the firm (Conner and Prahalad, 1996; Grant, 1996; Kogut and Zander, 1992). The same argument, in our case, the concept of value is important for the social responsibility field has its own separated component.

This normative core is the difference between a relational paradigm and other paradigms and theories of social capital, in which values are considered in a very different way (e.g., Coleman, 1990; Nahapiet and Ghosal, 1998). Other paradigms of social capital see values as a given cultural system; as a matter of fact a values system provides a manner of predicting and of integrating behaviors into the society; “values collectively held in a society can be kind of social capital benefits the society as a whole, even in the absence of specific links between individual members of the society” (Coleman, 1990, p352)[2]. The role of the values system is then to make possible that individuals act beyond their personal interests and pursue the collective interests or the interest of the society at large.

The relational approach is different, SSC points to a normative reference. The normative reference ‘proper human society' involves considering the processes and the structural relations that operate under ‘human or not human' it order to determine whether such relations operate in a proper human way, that is, whether they are centered on people or, on the contrary, the relations are centered on power, money or influence. In business and society the paradigm has always highlighted not only ‘what is', but also what ‘ought to be' (Swanson, 1995). How to integrate both sides is known as the ‘integration dilemma' (Jones and Wicks, 1999). Here, we study separately descriptive and normative aspects in order to achieve a more accurate analysis, but both aspects are actually integrated within the concept of SSC.

To sum up, the stakeholder social capital, the value dimension should be separated from the traditional cognitive dimension; on which we introduce a normative value to the stakeholder social capital which implies foster ‘proper human society', which implies to the consideration of models and relational configurations under the light of ‘a proper human society'.

Benefits of the stakeholder social capital

Benefits of social capital usually mentioned, such as information and knowledge (Powell and Smith-Doerr, 1994; Podolny and Page, 1998; Uzzi, 1997), influence, control and solidarity with the group (Sandefur and Lauman, 1998), are also present in the SSC. However, as has been said, in the relational paradigm, social capital is primarily a social relation, with its relational goods.

In other words, SSC has two values: a primary value, which is an intrinsic value, and a secondary value, which is instrumental. The primary value is made up of relational goods which foster future ‘relationability' by creating trust and reciprocity. The secondary aspect comes from the presence of primary value and is real ‘capital'. From relational goods arise knowledge, influence and solidarity which can be used as an instrument, as ‘capital', and produce economic rents.

SSC also produces learning to the firm and its stakeholders. Two different types of learning come out in the relationship between the firm and its stakeholders. The first is specific of the each relationship and emerges in the interaction between the firm and the specific stakeholder. The second is related to future relationships and the corresponding interactions with other similar stakeholders. For instance, the SSC generated between the firm and a client does not only develop learning in the firm, which helps in dealing with this client but also favors future relationships with other clients. Thus, learning in SSC entails that the firm: 1) increases the quality of the relationships with its stakeholders, and 2) increases its potential for future relationships with other stakeholders.

Three perspectives of Stakeholder Theory

Donaldson and Preston (1995) have argued that any stakeholder theory, at least implicitly, contains three different perspectives: descriptive, instrumental and normative. Although there is a debate about whether or not these aspects can be interweaved (Jones and Wicks, 1999), such a distinction seems interesting for clarification purposes. Stakeholder theory is descriptive, since it describes empirically how a corporation behaves. It is also instrumental because it establishes a framework for examining the connections between the practice of stakeholder management and the achievement of various corporate performance goals “The principal focus of interest here has been the proposition that corporations practicing stakeholder management will, other things equal, be relatively successful in conventional performance terms (profitability, stability, growth, etc.).” (Donaldson and Preston, 1995, p. 67) A normative perspective gives philosophical and moral bases for stakeholder management. Donaldson and Preston (1995) present these three perspectives as concentric circles, the normative in the center −as the core of the theory−, then the instrumental and, in the periphery, the descriptive. They conclude that “the three approaches to stakeholder theory, although quite different, are mutually supportive and that the normative base serves as the critical underpinning for the theory in all its forms.” (Donaldson and Preston, 1995, p. 66)

Descriptive Aspect

Traditionally, this approach, in describing what a firm is, in an empirical sense, has seen the firm as “a constellation of cooperative and competitive interests possessing intrinsic value.” (Donaldson and Preston, 1995, p. 66). Certainly one can find such constellations, but SSC has a different perspective. It primarily sees the firm in its connections with groups that share interdependence with the firm, and, to some extent, interdependence between themselves. Having a relationship with the firms is here what defines the condition of stakeholder.

The stakeholder social capital perspective of stakeholder theory primarily describes the quality of the relationships between the firm and its network of stakeholders, in terms of reciprocity, considering also the relational goods which emerge from these relationships. Only secondarily does it consider stakeholders themselves, and their respective interests.

The descriptive approach entails mapping relationships between a firm and its stakeholders and the entire stakeholder network, and the quality of such relationships.

Instrumental Aspect

The instrumental aspect of the SSC approach analyzes the influence of stakeholder management on economic performance. This means determining whether stakeholder management based on stakeholder social capital can bring about a better performance than alternative manners of understanding stakeholder theory. Although the instrumental aspect needs empirical verification, there are similar findings which suggest that SSC produces competitive advantages and therefore better performance, other things being equal.

These similar findings are based on the relational view of the firm, an approach which analyzes and studies the relevant features of inter-organizational relationships which generate ‘relational rents' (Dyer, 1996; Dyer and Singh, 1998; Dyer and Noboka, 2000; Dyer y Hatch, 2006), that is, “rents which produce a super-normal profit jointly generated in the relations of exchange which can neither be generated by the firm nor generated in isolation and can only be created through the joint efforts of the partners.” (Dyer and Singh, 1998, p. 662). Proponents of the relational view argue that “Firms which combine resources in unique ways can establish an advantage over other firms which have the same resources but are incapable of doing this. Then, these idiosyncrasies can be a source of relational rents and competitive advantage.” (Dyer and Singh, 1998. p. 661). Preston y Donalson, (1999) and Prior (2006), following the relational view, developed that actually stakeholder relationships produce competitive advantages through ‘relational rents'.

Some drivers found in the relational view might be found in stakeholder social capital. Prior (2006) have identified four drivers: investment in what is called specific relational assets, development of routines for a better transmission of knowledge, reduction of transactional costs, and fostering effective governance. These drivers should be explored in a further development of our approach.

Normative Dimension

The normative dimension of stakeholder theory has a rational grounding. Donaldson and Preston suggested that “the normative basis for stakeholder theory involves its connection with more fundamental and better-accepted philosophical concepts.” (1995, p. 81). As we have seen, the SSC concept has as its normative component on social capital, that points out the patterns and models of relationships that foster ‘a proper human society'. But, what is ‘a proper human society'?

The literature on Social capital and the relational theory comes from sociology, so, the word “human” emerges from sociology. In traditional sociological approaches, such as Functionalism and Neo-Functionalism, ‘human' is diluted within ‘social', while in the relational approach human is different from social.

So in the relational approach, a human society, for the mere fact of being a society of human beings, is not a proper human society. From relational theory, society is complexes interweave of relations (Donati, 2006) not only a collection of individuals. Society is a configuration of relationships that emerge, reproduce, change and disappear with time. The relationship is concept for an understanding of a ‘proper human society'. The main sense of ‘a proper human society' is sociological, relationships, although points out certain ethical aspect, the dignity.

So, relational theory introduces the ‘human aspect' in society, in our case, in relationships. So, it has to be considered whether or not relationships operate in ‘a proper human' way. In other words, if they are centered on the persons or, on the contrary they are centered on power, profit or influence. Therefore, a ‘proper human society' presupposes the distinction between what is properly human and not human. “A proper human society is that which is generated within social life as a result of the distinction human/not human, which is introduced in every social relation” (Donati, 2006, p. 263). The concept ‘human or not human' has intrinsically key anthropological aspects, considering ‘what is human' refers to human dignity (Donati, 2003). In fact, several ethical theories present the dignity of every human individual as keystone for ethics. What does “dignity” mean?. Analysis of dignity might be by its etymological root - the Latin dignity translated as “worth” (in French valeur). One lexical meaning of dignity is “intrinsic worth”. But, what does ‘intrinsic worth' mean? Several answers have been given, eg. the Kantian, however in our paper we follow a more personalistic definition of dignity[3], (Maritain, 1971). So ‘a proper human society' should consider dignity as the ultimate reference. (Donati, 2003).

The dignity has however a relational sense as what is properly ‘human', that is, dignity, should be achieved through relationships. Donati has described the “society of the human” as ‘a group of social relationships that must be continually re-legitimized, motivated, conducted without mechanical techniques or systems which might serve to guarantee automatically their existence” (Donati, 1993: 34).

In practical terms, Donati (2006) describes a ‘proper human society' where a greater well-being of a society is achieved when groups and institutions of such society are more and more connected and linked, with a greater social autonomy, and relation goods, based on donation and reciprocity, are generated. Therefore, there is a societal logic in which well-being is achieved as a consequence of individuals who address themselves to others, seeking fair connections for the sake of well-being itself, which appears as a relational good (Donati, 1992; 1997). The normative aspect of stakeholder theory prescribes organizing things in accordance with ‘a proper human society'. This means an impulse to modify relationships to produce relational goods.

Relational contracts

According to Jones, “The contract is the appropriate metaphor for the relation between the firm and its stakeholders. The contract can take the form of exchange and/or delegation of decision-making as well as of formal legal documents.” (Jones, 1995, p. 407). Many stakeholders can have a conventional contract with the firm (employees, a labor contract; suppliers and buyers a contract of sale, and so on), but the stakeholder social capital approach emerges from a different type of contract that can be called the ‘relational contract'. A relational contract is a contract based on social relations, with outputs and outcomes are social relations. Relational contracts foster relational goods which promote flexibility, solidarity and autonomy (Donati, 2002). Stakeholder social capital is fostered then by ‘relational contracts'.

In a practical way, relational contracts are intended to modify the reality that acts on relationships; inducing changes of context and in the behaviors of the stakeholders through the modification of the existent relationships. This is about activating the natural potential of social networks: in our case, that of the stakeholders and the firm: relational goods must be promoted. The intervention must use mixed formulas to establish relations, in other words, combine relations that are formal and informal, primary and secondary, cooperative and conflictive.


Stakeholder social capital has been defined based on the relational approach of social capital proposed by Donati (1995, 2006). This permit overcomes the main problems and limitations regarding other vision of the social capital, as we have discussed above.

The concept of stakeholder social capital proposed here permits us to propose a new view of the stakeholder theory which considers relationships based on reciprocity and cooperation. As any other Stakeholder theory, this new approach includes three aspects: normative, instrumental and descriptive (Donaldson and Preston, 1995).

The unity of analysis is not primarily stakeholders, but the relationships between the firms and its stakeholders, and its level of analysis is the corresponding network between firm and its stakeholders. This entails considering the quality of these relationships, how they are embedding and the effects they brig about. Consequently, the descriptive aspect should start by mapping the network of relationships and determining the quality of each relationship from the social capital perspective.

Considering the instrumental perspective, we suggest that stakeholder social capital can generate relational rents for the firm and become a source of competitive advantages. Normative aspect is based on the concept of a ‘proper human society', which gives a reference to guideline the relationships, which have to be based on donations and reciprocity. A key concept in this new approach is the consideration of the relational goods. They are characteristics of the relationships between the firm and its stakeholders and only can be produced by the relationships and through them. Thus, they are not imposed or obliged. They only depend on the will of the counterparts and the type of relation established.

Relational goods make that social capital has a double sense, primarily as social relation or ‘relationality', and secondary as stock. The former provides elements for a shared vision and a meta-purpose, which integrate objectives of both firm and stakeholder. It requires an evaluation to known whether contribute to a proper human society. The latter sense (stock) is a means for economic ends. Thus, relational goods make possible to achieve well-known benefits of social capital, such as information, knowledge, influence or control and solidarity.

Further research would develop the stakeholder theory outlined here and compare the advantages of the model presented in relation to others purposes. In addition, empirical research is required to test our models in both its descriptive and instrumental aspects.


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[1] Donati (1991), inspired by Parsons although with noteworthy differences, identifies four components in each relationship: resources, goals and rules and values. They are related with four interconnected problems in any action system: 1) the problem of mobilizing of resources from the environment and then distributing them throughout the system, which requires adaptation to environment; 2) the problem of establishing priorities among system goals and mobilizing system resources for the attainment of the goals; 3) the problem of coordinating and maintaining viable relationships among system units and 4) the problem of assuring that the actors in the social system display the appropriate values. This entails motivation and other characteristics (pattern maintenance) and dealing with the internal tensions and strain of the actors in the social system (tension management). That means preserving the basic structure of the system and to adjust to changing conditions within the framework that the basic structure provides. According to Parsons hese problems necessitate four requisites or imperatives for the maintenance of a social system: adaptation (A), goal attainment (G), integration (I) and pattern maintenance or latency (L).

[2]Coleman explains with an example the role of values in social capital: the example of social capital in Jerusalem where the adults can be confident that the children can be in the street with no preoccupation, as any adult will look after them. The value that the adult will look after the children in the street means that parents do not worry about letting their children be in the street, knowing that they will be looked after. The role of value in social capital that makes behaviours predictable and lowers the cost of control and influence.

[3] Abundant literature has been provided

[1] Specifically, various studies of the World Bank have analyzed the influence of social capital on the income in communities (Narayan and Prichet, 1999; Grootaert, 1999), and on democracy (Paxton, 2002) and on the development of economic policy (Woolcock, 1998).

[2] In the debate about the “micro-macro link”, the underlying features are the form of understanding society, and a wider methodological debate: the so-called “Methodstrait” (individualism and methodological holisticism) (Donati, 2006).

[3] For example, through privileged information, which in spite of producing individual benefits involves a loss of trust and collective action from the group if the advantage is seen as an advantage of information. In brokering “the appropriate connections allow certain people access to beneficial regulations. Individual social capital in such cases consists precisely in the capacity to mine collective social capital- defined as civil spirit.” , . (Portes, 2000: 4).

[4] Relational theory is a sociological theory where all social action is understood as relation. (Donati, 2006; Donati, 1991) and has been widely investigated in phenomena Duch as citizenship (Donati, 1995), work (Donati, 2000) public policy (Donati, 1995) and the politics of work-family conciliation (Donati, 2003).