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Dimitrina (Dima) Dimitrova, Ph. D. Dimitrina (Dima) Dimitrova, Ph. D.Review of 
 Social Capital Value Add: Value Based Management for the Networked Age
Michael Cayley, BPR, APMCP, MBA
 Draft July 29, 2009.
Michael Cayley has a vision: a networked world where Internet links empowered individualsand enlightened companies and where the connections between them generate social capital. He hasmade it his mission to wake up managers and investors to the implications of this new world for their work. The objective of his paper - “
 Social Capital Value Add: Value Based Management for the Networked Age”,
is to draw their attention to the rising role of corporate social capital and to propose a tool for its management.His work has two distinct parts. In the first part, he develops the argument that social capital has become the fastest growing driver of value for companies. In the second part, Michael sketches amethod for valuation of corporate social capital - Social Capital Value Add (SCVA). The focus is ona specific form of social capital, considered most important – social capital arising in the onlinerelations among individual company stakeholders.The paper incorporates arguments from the areas of social network analysis; technology andcommunications studies; marketing and value-based management. This bridging makes for acomplex discussion that illustrates well both the difficulties and the opportunities of multidisciplinary work. It also means that the paper is inevitably not an in-depth discussion butrather a bricolage that draws support from Cayley’s business experience and a wide variety of sources to serve a particular purpose. A wealth of ideas are put forward in the paper: this review islimited to the ideas directly related to the concept of social capital.
Part 1: The Importance of Corporate Social Capital
It is worth distinguishing here between established concepts and recent ideas. Theunderstanding that economic action is affected by the informal relations within and betweenorganizations is captured in the term “embeddedness” which social scientists have studied for decades (Granovetter and Swedberg, 1991; Uzzi, 1996). Similarly, the concept of social capital - theidea that social relations bring benefits, including hard cash - has been around just as long as“embeddedness” (Burt, 1997; Lin, 1999; Coleman, 1988).However, the “embeddedness argument” of organizational performance has been at the periphery of economic theory while social capital has typically been applied to individuals andcommunities rather than organizations. It is only recently that academics and practitioners havestarted looking at how social capital applies to organizations. To put it differently, the concept of corporate social capital (CSC) has been slow in coming. When it finally arrived, however, it becameheavily used. Researchers link the concept to strategic management (Leenders et al. 2001), strategicalliances (Todeva and Knocke, 2001), reputations (Weidman and Hennigs, 2006), and a host of other issues ranging from R&D collaboration to labour contracts (Leenders and Gabbay, 1999). Inshort, Michael is in good company, and he is staking his place in a field that is rapidly being populated.Part One of the paper demonstrates the importance of specific form of social capital, in whichMichael is interested. All his arguments are familiar from the existing literature but they come fromdifferent fields and are rarely, if ever, put together. The embeddedness arguments from economicsociology and network analysis start the discussion: economic action is embedded and1
 
organizational performance is contingent on the characteristics of social networks. One of the waysto view this impact of social relations on organizations is through the concept of corporate socialcapital, which focuses on the resources that are accessed through social relationships and that caneither facilitate or impede the attainment of organizational goals.The second key argument suggests that broadband technology and the Internet have empoweredindividuals and dramatically increased the importance of social capital, particularly social capitalarising online. Technology tremendously expanded access to information. It enabled individuals tocreate content online - capabilities previously reserved for broadcasting companies - and thusexpanded their influence over others. In turn, games and recent forms of social networking serviceson the Internet increased interaction and the role of online networks in the certification of socialcredentials and in the reinforcement of identity and recognition.Finally, the third argument draws on marketing literature to show that social capital has replaced brand as the fastest growing source of corporate value. Symbolic branding was important inconditions when space was limited and communications expensive; its goal was to distillinformation and to convey the maximum information in the least amount of space and time.However, in online marketing space is unlimited and what matters is findability. Symbolic brandingis inappropriate under such conditions. The awareness of these changes has led to memetic branding, which aims at creating a corporate message that resonates across diverse audiences (or their idea habitats) and spreading corporate presence online. It is this new marketing strategy thatMichael Cayley links to corporate social capital. In order to be successful in their branding,companies need to reach their customers and other stakeholders through online social networks.This is where Michael stakes his claim; this is his niche among researchers and consultants of social capital. His main focus is on the type of social capital embedded in online relations. Thecentral concept in his work is
 scaled-up social capital 
(SC*), i.e. social capital that is amplified by broadband and Internet technology. Further, while the consultants trying to put a dollar value ononline connections focus on employees and managers, Michael examines customers and other stakeholders. He is interested in exchanges and influence processes among individuals who actsimultaneously as producers and consumers. He refers to this social capital as
 Individual asMedium
(
 I.A.M.) oriented social capital.
His ideas are thus an unusual mix: they highlight theimpact on corporate goals of online rather than traditional face-to-face relations, individual rather than company level interactions, and outside stakeholders rather than company staff.Some of the discussion requires more conceptual clarity and precision. For instance, at the heartof the argument is the concept of corporate social capital, but the term corporate social capital isnever used. Partly, this is because the starting point of the argument is Nan Lin’s (1999) theoreticalframework, and partly because the focus is on individual level activities and interactions that affectcorporate performance and not on group or organizational interaction. As a result, the focus of theargument and the level of analysis are in places unclear. Such problems might be fewer if thediscussion utilized the conceptual framework of corporate social capital instead of developing thearguments from the more general concept of social capital (Pennings and Lee, 1999, Lee andGuthrie, 2008; Krebs, 2008). Many sociologists will wince at the claim that corporations are “aform of individual”: the anthropomorphic model of organizations is hotly debated.We have to recognize that the term social capital is notorious for taking different meanings. Thetheory is still being developed. There are serious differences even among those analysts committedto its social networks roots. Some of these problems come back as conceptual issues in the second part of the paper but they do not undermine the main argument in Part 1: technological advances2
 
have amplified social capital, broke the dominance of broadcast marketing, and increased therelevance of online interactions among organizational stakeholders for organizational performance.
P art 2: Measuring Online Corporate Social Capital and Its Impact
The second part of the paper is the first stab at developing a method for measuring andmanaging the specific type of social capital, in which Michael is interested – the method is calledSocial Capital Value Add (SCVA). Admittedly, this is only the beginning: the method is not yetdeveloped and the paper only outlines the key ideas and major steps. The discussion below exploresthe us of the concept of social capital and leaves the rest of the ideas for other experts to examine.The objectives of the proposed method are two: first, it aims to show the extent, to whichcorporate earnings are affected by interactions among stakeholders, whether positively or negatively, and second, it seeks to capture the specific impact of these online interactions throughsocial network analysis. Most of the discussion refers to the first objective.The logic is as follows: each company has online presence, i.e. there are numerous company-related materials available at websites, blogs, forums, or emails. A portion of this content is created, broadcast and controlled by the company. This part of online content is not considered an indicator of interaction with organizational stakeholders, their connections, or embedded resources. Bycontrast, the second portion of online content is created either in the interactions between thecompany and organizational stakeholders or in the interactions among organizational stakeholdersthemselves. Such interactively created content indicates the existence of connections that affectcompany performance, whether positively or negatively, and therefore it indicates the existence of corporate social capital. By its very nature, such interactions cannot be fully controlled by thecorporation although they can be to some extent manipulated and managed. It is the authors (or “identities”) of this interactively created portion of online content that the method seeks to track.In turn, not all online authors are equally important for the company performance. Some of theauthors already interact (or have interacted) directly with the company: for instance, an individualwho post comments in an online consumer discussion group and at the same time is a member of company customer lists. In such cases, the company already has a connection to the individual andthe opportunity to influence him or her. The big unknown and one of the major risks for thecompany (besides the negative online content, of course) are authors of online content, who do notinteract directly with the company. The gap between the known authors and all the authors isinterpreted as an indicator of the risk coming from social relations, which the company does notcontrol.This logic demonstrates how the method will capture the extent, to which company performanceis exposed to online social capital. It is only after this exposure is examined, that the specific impactof social capital on company performance can be addressed, including capturing the positive andnegative impact of online social relations on corporate performance. The last step of the methodswill be to measure and analyze social capital through the traditional social network methods.In short, the proposed method is a marriage of valuation, online media monitoring, and socialnetwork techniques. Most of the discussion in the second part focuses on capturing the exposure of earning to the impact of social relations. The social network analysis part is only briefly touchedupon – its development as part of the method is in the future. Yet, this leaves open a number of conceptual questions. For SNA analysts, the most important questions the approach raises are thenature of the network and the nature of the relations under investigation.3
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