LOCAL DEVELOPMENT APPROACH:BUILDING

SOCIAL CAPITAL BY A
WIN - WIN- WIN METHODOLOGY

Prof. Leonidas A. Papakonstantinidis

School of Management and Economics’
ex Director
Technological Educational Institute
Kalamata

Abstract: The paper deals with local development, both as a regional and social sciences
field. It has to prove that building social capital at local level mainly depends on social trust
links among local people: Social cohesion based on social capital may be measured by the
diversification Rate (R*) from strict globalization rules: From this point of view, local people
intervention should be useful, so as to diversify these “rules” at local level adjusting them to
local identity, including communication code, customs, ethics, culture. The Win-win-win
methodology [Papakonstantinidis Model] should facilitate local people to “readjust”
bargaining globalization rules locally, through a sensitization process: Community is defined
as a discrete spatial/ cultural entity at its sensitization process’ limit.

Key-words: Methodology, Bargain, Sensitization, Social Confidence, win-win-win model,

Social Trust Links, Community as a Discrete Entity.
1. INTRODUCTION: THE CONCEPT- METHODOLOGY

The aim of this paper is to prove that, (1) Social Capital as a concept of community
behavior and natural resources management, defined as the “capital that refers to
connections within and between social networks (emphasizing the social trust, in this
paper)- something of a cure-all, for the problems of a modern society” (Portes, A.,
1998) may be the base of a local development program. (2) Local Development may
be concerned as a unique diversification / declination from the globalization rules
(Papakonstantinidis, 2007) (3) The discrete entity’s “diversification rate” (R*) from
globalization/ or bargaining rules, (Walras S, 1980) may be the crucial parameter
which would define “Local Development” as a social cohesion result at local level.
(4)Local Development is concerned as the limit-end of a unique and continuous
sensitized development process, applied in a discrete spatial entity
(Papakonstantinidis, 2008/ May), (5) Local Development is achieved via GOOD
CASES rather than “good practices”, due to the unique identity each region has, as
well as its people with their own communication code, ethics, mentality, customs.
(Katseli Luca 1979), (5) A win-win-win approach may be the appropriate
methodological tool toward introducing “sensitization” in the development process. It
may strengthen social cohesion process by improving its confidential indicators (so to
trust each-other in interrelations process).

In order to meet with paper requirements it is indispensable that the appropriate

methodology be adopted, step by step : (1) A theoretical foundation is provided by
recent literature (in points), connecting “Local Development” with Social Capital/
Social Cohesion, as well as with “The Bargaining Problem”- Games Theory & the
Modern Innovation Theory (M.I.T) [Fischer M. M 2002, Kamitza R 1994, Moseley
M. 2003, Petrella R 2001 ] (2) According to the afore-mentioned theoretical
background, it is necessary to strictly define the “Bargaining Problem” (as the basis
of Globalization “rules”) by its math /philosophical validation and try to define the
“local development process” in terms of diversification (R*) from Globalization
Rules (3) Next step is to create links between the “local development process” (as a
continuous sensitization process) and the bargain in terms of diversification rate
from G. R, building “Social Trust Links- see at Swensen’ Social Confidence
Indicators, 2006 (4) Finally, the Community is included in the model as the third or
invisible part of each bargain between two persons, based on instant reflection, so
each part wins ( the win-win-win model).

Limitations are resulted, both by the Games Theory and the Modern Innovation
Theory application in social sciences and their synthesis into a social market problem
within the Community.

2. RECENT LITERATURE – IN POINTS

From the Local Development side, Kenneth Wilkinson (1991) focuses on the
endogenous local development process / “bottom-up approach” (bargain, locally) 2nd,
Friedman / Weaver – UCLA (1978) in their classic “Territory and Function” refer :
“The base of an autonomous local development may be a discrete value system, an
ideology, local people’s reaction to the dominant local principles (including local
communication code, customs, culture), creating thus the “social cohesion
environment” at local level.

From the pure Sociological side, J. Coleman (1988) as “Social Capital” describes the
cooperation processes of individuals, which minimize possible dilemma, coming
from individuals’, networks and common actions. Besides, Glen Loury (1977) used
the term “social capital” to describe a dynamic theory of racial income differences’
discrimination (women, minorities, etc). J Coleman adopted Glen Loury’s definition,
in developing and popularizing the concept Also, Putnam (2000) describes social
capital as the basis of social schemes creation (i. e networks)

In conclusion, an increasing number of recent literature in the local development field,

currently recognizes the existence of links among local development process, social
trust & capital A number of Local Development approaches toward this theme are
referred below: “ The Political Entity” (Freedman-Weaver, UCLA, 1978, the
“Selected Closed-Spatial Discrete Entity” of the Intra-Scientific Vienna Centre (Stohr
& Todtling 1980), The “S. H. I. E. L. D Model”, Papakonstantinidis, 1997, Rome)
The “Tre Italy” Model, Bagnasco, 1987, The “parallel system” and “The sensitized
Community” (Papakonstantinidis, 1998 & 2002), The “political Democracy (LSE,
Fotopoulos, 1998), the “Grass Roots” Model in Latin America (Luis Llambi, 2003)
Barquero A-Vasquez A (1991) These theoretical approaches pre-existed to the
suggested win-win-win.

3. THE BARGAINING PROBLEM

A two-person bargaining situation involves two individuals (Neuman & Morgenstern

1947), who have the opportunity, either to be competitors to each-other (win-lose)
[von Neumann-Morgenstern, 1928/1947-“zero sum two players game” Theory]
Filinis Kostas (1973), or to make coalitions, or even to create pure individual
strategies, based on bargainers’ instant reflection behavior (win-win) [Nash J. F,
1950, Arrow K 1954, Aumann Robert, 1987, Crawford V, 1997, Kottarides K, 2002,
Varoufakis Y, 1990). J.F. Nash ( 1950) focused on payoff shares/utilities
combination:

Bargain may result either in agreement or disagreement. (Kuhun H.W-Nassar S,

2001) Papakonstantinidis, 2003, 2005, Varoufakis Y, 1990) Utility expresses the
constraint or the “fear factor” of disagreement for the negotiator who desires
negotiations to be led in agreement more than the other one. Who needs more,
negotiation leading to an agreement expects more utility, but –probably there is a loss
in terms of “shares”, due to lack of risk. On the contrary, who is indifferent about
“agreement” or expects less utility /per unit, has- to win in “shares” under the dogma
“the more risk, the more profit” (Crawford V. 1997).

It is necessary to analyze the Nash “non-cooperative- instant reflection game” /or a

“win-win perception” as follow:

Non-co-operative game, is a game between two (2) players/ individuals who have
opposite interests (Aumann Robert , 1987). Each player makes his own choices, based
on instant reflections’ rational movements and his physical cleverness.

The game/ bargain is defined by the result (pay-off) and not by players expectations-
It presupposes best choices by both players towards meeting individual interests
[“winning strategies”- Harsanyi John(1973].
Players/ or negotiators do not regret, a posteriori, from their own decision taken,
based on personal choices, during the bargain. Each of the players knows a priori that
the other negotiator (or player) is as clever as he is.

During the bargain, a “mutual respect” between the two bargainers to each other’s
best choices’ is necessary.

It is recognized that “The more DETERMINED to break down the negotiation (= less
utility), the more satisfied (=better shares) – the more risk, the more profit.

Social behavior is not recognized as an acceptable one in the bargain, thus deriving
unfair results: That means, “who needs the agreement as the result of a bargain, has
to loose in shares, by accepting any result”.

Information may be the “link” between knowledge creation and the bargaining
process. In particular, “Information” is a power factor in pure individuals winning
strategies (Aumann Robert, 1987).

The more information, the better winning strategy, the more profit. Each of the
players / negotiators, starting negotiations with the other, expects to gain the
maximum profit.

Interaction, based on instant reflection individual winning strategies, is the base of the
Nash Non Cooperative Games Theory A two (2) 2–person anticipation is based on
utilities.

According to Nash Theory, a unique solution exists that maximises the product of the
participants’ utilities. There is, therefore an interaction between “utilities” and
“strategies” In particular, “utility” expresses individual choices based on individual
necessities “Strategies” express choices + will in personal level, taking into account
the interaction factor (the other’s choices) Utility is the subjective and strategy is the
objective factor of the same anticipation.

Negotiation may lead either to “agreement” or disagreement Utility expresses the

“fear factor” constraint of disagreement for those who desire the agreement, more
than the other negotiators. (Aumann 1987).
In conclusion, at any moment –according to the “N. C. G Theory”- there is only one
“equilibrium point” at which any individual–at any moment- makes the best choices
for himself, in relation with the other persons’ best choices.

3.1 The bargaining problem Utility Theory (math)

Bargaining Problem is mainly based on “Utility Theory”- a mathematical theory of

the Neo-classical School of Thought, able to satisfactory explain individual
expectations/ anticipations, of a possible outcome. Usually it is expressed in the form
of a mathematical function, f(u) = u1/2
Individual winning strategies are corresponding 1-1 to utilities U (A) and U (B)
(Chun Youngub, 1990). Utility theory of the individual is mainly based on the
“concept of anticipation”.

In the “Two-person utility Theory” there are two (2) individuals in a bargain who
have the opportunity to collaborate for mutual benefit in more than one way. In its
simple/initial version, no action, taken by one of the two individuals without the
consent of the other can affect the well-being of the other one, but in real terms there
is only ONE decision, taken by the involved in a bargain individuals.
• Utility in the bargain is a personal matter: Utility “units” are not compared.
(Kuhun-Nassar, 2001)
• Utility “units” express “fear units of a disagreement outcome”
• If “A” needs more the “agreement” to be achieved, than the payoff coming
from the bargain, then he should be ready to accept any result of agreement,
even if it is not favorable for him (loss of shares)
• If “A” has decided not to accept an agreement during the bargaining process,
then he risks more but –at the same time- has to win more from the agreement,
in terms of shares.
• The “utility range” expresses the optimist and/or the pessimist instant
reflection of each party.
• “Utility” expresses individual choices based on individual necessities and
will. It is rather a subjective than objective factor, influencing individual
behavior. On the other hand, “individual strategies” in the bargain –the
 objective factor- are defined by personal choices and “will”, resulting from the
necessity to meet personal “needs”. From this point of view, “Utility” , as a
subjective factor is expressed by “strategy” – an individual winning strategy-
in the bargain, so as to meet “Utility”. There are “links” between “Utility” and
“Strategy”: “Utility” is the ability to meet “needs” and “Strategy” is the plan –
the individual plan- to achieve this ability, step by step
• “Utility” is the subjective factor and the “Individual Winning Strategy” is the
objective factor of the same “thing”: Bargainers have needs (=utilities). In
order to satisfy these “needs”, they use “individual winning strategies”, as the
result of their “instant reflections” in the Bargain. (table 1)

ð Lim U1i(&)U2i(&)=max U1iU2i (1)

ià∞

3.2 Nash’ win-win random sharing/utilities- An example

It expresses utilities/strategies, as the interaction between two negotiators and (2)

expresses the utility function- as a shares/utility combination The bargaining problem
decision making during negotiations of A & B -Nash highlighted the “payoffs” of the
bargain, # personal expectations (Table 1):

Table 1: BARGAIN
Random Sharing between “A” and “B”

Share A Share B Utility A Utility B Utility AXB

(%) (%)
100 0 0 71 0
90 10 1 70 70
80 20 5 68 340
70 30 10 64 960
60 40 16 60 960
50 50 23 52 1196
45 55 40 31 1240
(max)
30 70 45 24 1080
20 80 50 12 600
10 90 61 4 244
0 100 80 0 0
3.3 The equilibrium point

Suppose that “winning strategies” [ Pi, Qi] are in a fine ratio with the players’
(bargainers’) UTILITY ( linear function: corresponds 1-1 to bargainers’ Utility
Function), under the dogma “the more decisive to break the contract down, the more
satisfied from the bargain leading to the contract” (Kuhun-Nassar, 2001). That is true:
Bargainers expectations are 1-1 to expected Utilities for each of them, coming from
the bargain. (Bernheim & Douglas B. 1984). On the other hand, the more
information, the more uncertainty. Bargain gets its own rules out of cooperation.
People are competitive rather, than co-operative: Winning strategies are led by
bargaining rules (rules of pure competition). Nash has described the “bargaining
problem” not by expectations, but, directly, by the results (pay-off) of the bargain.

In our example, the crucial point [the max] is 1240 (40x31) : this is the point of final
agreement led by the bargain. On that point, shares are: 40% for “A” and 60% for
“B”. On that point, personal satisfaction or utility units are 40 units for A and 31 units
for B : That’s the point of agreement, expressing “fear of breaking down the
agreement for “player” “A” and , at the same time, the risk for the “player” “B” of
breaking down the agreement. In a 2-person anticipation, each of the two (2)
bargainers may ask themselves one question, as the result of “good strategies” [instant
reflection thinking] in the bargain:

What should be the best for me, taking into account that the other
person (bargainer in a negotiation) should try for the best for
himself –thus recognizing that the other person may be as clever as
I am?

4. SUGGESTION: THE “WIN-WIN-WIN MODEL”

4.1 What the suggested win –win- win is

According to the afore-mentioned analysis, paper contribution in the scientific

thought (2008) should be summarized in introducing “the third “WIN” for the
COMMUNITY (the third-part pole).
According to my suggestion, COMMUNITY –the “C” factor must participate in any
bargain by its “bargainers’ characteristics” (shares/utilities), thus adding the THIRD
“WIN” at any two bargainers’ win-win expectation between TWO (the METRON
analysis or the THREE POLES analysis like in other fields i.e philosophy, economy,
creating an interactional flow By introducing the THIRD POLE in the bargain, then
the crucial bargainers’ QUESTION must be changed in:

What should be the best for me, taking into account that the other
person (bargainer in a negotiation) should try for the best for
himself –thus recognizing that the other person may be as clever as
I am and, at the same time, taking into account that COMMUNITY,
as the third or invisible part also participates by the “bargainers’
characteristics” (shares/utilities)

4.2 Win-win-win analysis methodology

The following methodology is adopted in points (Papakonstantinidis):

knowledge creation⇒ creating a “non conflict” behavior ⇒ inserting sensitization⇒
integrated information creation⇒ uncertainty due to negative entropy⇒ thus,
smoothing potential conflicts⇒closing differences in the competitive bargain⇒payoff-
utilities & shares, influencing behavior in the bargain /individual winning strategies
influencing by a “new behavior” ⇒in the opposite, the more decisive, the more risk
,should derive more profit in a globalizing world but ⇒ inserting sensitization in the
bargain⇒thus smoothing the conflict strategies taking into account the “C” factor ⇒
converting a bilateral “conflict” into a 3-part negotiation ⇒ leading to a “new” social
perception , the win-win-win perception, including a real cooperation between
negotiators, thus, carrying alongside a social market’s perspective- the
“INTERMEDIATE POSITION”

4.3 Information/ behavior & the bargaining problem (Knowledge

transfer, information, behavior)
Paper conception is mainly based on Games Theory – especially on its “Non-
Cooperative Games Theory’s version by J. F Nash, 1950- in relation with the Modern
Innovation Theory” - (M. M. Fischer, 2000).

M. I. T provides us with useful methodological tools as knowledge creation and

knowledge transfer (Table 2).

Table 2: Scheme: Knowledge Creation/ Information/ Types of Behavior

Type of Type of Synthesis Resulted Behavior

Knowledge-1 Knowledge-2
tacit tacit Sympathetic Socialization

tacit codified Conceptual Externalization

codified tacit Procedural Internalization

codified codified Systemic Networking

sympathetic systemic Conceptual Sensitization

systemic systemic Procedural Strategic

Papakonstantinidis, 2003

Literature (Reinsmann, Fischer,2002 & others) introduced various processes of

“knowledge conversion” based on the proven and “built” information systems
incorporated in an organization. Possible cases among different types of knowledge
produce the four (4) major processes of knowledge conversion : (1) Tacit knowledge
to tacit knowledge produces sympathized knowledge (socialization) (2) Tacit
knowledge to codified knowledge produces conceptual knowledge (externalization)
(3) Codified knowledge to tacit knowledge produces procedural knowledge
(internalization) (4) Codified knowledge to codified knowledge produces systemic
knowledge (combination). Each of these processes of “knowledge conversion”
corresponds [1-1] to a specific type of information (Papakonstantinidis 2003) i. e :
• Social Information-Sensitization
• External Information- Participation
• Internal Information-Involvement
• Combined Information-Networking

4.4 The suggested win-win-win approach

According to the above analysis, paper contribution in the scientific thought (2007)
should be summarized in introducing “the third WIN” or the third “person” in a two-
party bargain, i. e the “C” “invisible part, which should be the “ Community interest”
= “C” , thus taking part as “community” be present in every two-party bargain,
claiming its own “share” from this
Suppose that:
• Ua = Pi, Ub = Ri , Uc = Qi , ....in a mathematical approach (tables
1, 2):
• Ua = x , Ub = (100-x)k and f’ = [ x (100-x)k ]΄ = 0 , so that Ua +
Ub = max
THEN
lim Pi(&) Qi(&) Ri(&) = max Pi Qi Ri = max Ua Ub Uc = Ua + Ub + Uc
i→∞
or, how to transform a “competition” into the absolute cooperation,
taking into account the integrated information, coming from
knowledge transfer AND the sensitization process in the community,
thus maximizing bargainers utilities and the Community utility (Uc)

4.5 The “Sharing problem” in a Bargain [Utilities, Shares, strategies,

decision- choices, behaviour, Final Agreement]

Having defined: (1) How information resulting from “knowledge creation

/knowledge transfer” should contribute to what we call “social market” (2) How
sensitization should be introduced to given information, as to turn it to an integrated
information (Papakonstantinidis, 2006) (3) How “integrated information” should
influence human behaviour during the bargain, or negotiations (4) How a human
“social” behaviour could lead to a “new” perception of thinking or taking a decision,
in the bargain (see at Calvert Randall, 1995, Berger,J 2005 Cinneide M. O’ 1991,
Coleman J 1988, Yitzak Samuel 1997, Bernheim Douglas B. 1984 (5) How
socialization could influence human choices or winning strategies during the bargain,
based on instant reflection (Nash) (6) How scientific thought could transfer the
problem from “utilities” (personal perception”) to pay-offs (objective perception =
counting size) Harsanyi John(1973), then, the data of Table 2 may be transformed in
a new set of data, as Table 3.

TABLE 3: Suggesting Sharing between “A , “B” and “C”

Share Α Share Β Utility Utility Utility Share C Utility Utility
(%) (%) A B AXB (%) C AXBXC
90 4 1 71 71 6 1 71
80 13 2 70 140 7 2 280
70 22 5 68 340 8 3 1020
60 31 10 64 640 9 4 2560
50 40 16 60 960 10 5 4800
max
41 50 23 52 1196 9 4 4784
32 60 31 40 1240 8 3 3720

23 70 40 24 960 7 2 1920
14 80 50 12 600 6 1 600
(Papakonstantinidis Proposal)

Notes, as to explain the symbols :

• “C” expresses the Community (an acceptable system value at local level), as
the “third” or invisible part in the bargain- In real terms, it reflects the
“confidence indicators”, or, in other words, if and at which level each member
of the Community trusts the other, during the bargain (H. Hans 1997).
• The less shares for A+ B the more share for “ C” part.
• Utility is a personal matter: Utility units are not compared to each other. They
express the fear of breaking down the agreement.
• If “A” needs more the “agreement” than the payoff, then he should be ready to
accept any form of agreement.
• Based on this concept ( the “C” factor) then, it is concluded that
Sensitization process applied in local people has succeeded to change/
transform individual winning strategies into a NEW type of social trust
behavior (Swensen, 2006), leading to SOCIAL COHESION, at local level
(Papakonstantinidis, 2006, 2007, 2008).
 TABLE 4: Social Confidence Indicators (%)
Country Indicator (%)
2007
1 Denmark 64.5
2 Norway 63.9
3 Sweden 62.3
4 Finland 56.4
5 Netherland 53.9
6 New Zeeland 52.6
7 Canada 47.0
8 Australia 46.9
9 Indonesia 46.7
10 Iceland 45.3
11 North Ireland 43.9
12 Suisse 42.1
13 USA 42.1
14 Japan 42.0
..46 GREECE 23.7
Swensen, 2006)
 This should be the “ground” for a Flag Theme local people creation (table, below)

TABLE 5: FLAG THEME - Flow Chart

Local Leadersh
Abilitie ip Properties
s Priorities

Flag Theme

Jointing the
Active Creating a endogenous
Participation team forces on a
Roles in psychology common
planning/ among local goal

Converging individual strategies on a “common

goal”, through cooperation

Source: Papakonstantinidis, 2000 & 2007

“Flag Theme” may be concerned as an innovative idea- an “open discussion theme”

based on the sensitisation process at local level which concentrates local resources,
skills, abilities, talents, leadership as well as “priorities” and properties at local level
(Gannon Agnes, 1990, Wilkinson Kenneth, 1991).

5. CONCLUSIONS/ PROPOSALS

1. Social Cohesion –necessary for the L-D process, thus building local people
identity AND development (through the appropriate –for the place- flag
theme - may be , at the same time, the cause and the result of building the
Social Capital at Local Level
2. Building the Social Capital at Local Level, may be proved to be equivalent to
“Social Confidence”, or “Social Trust” among local people (Llambi Louis
2008, Lados M,& Lachewski Lutz (2003)
3. At the same time, Community [ the “C” factor” ] “participates” as the
THIRD or invisible part in any two-person negotiations
4. By introducing the “C” factor in any 2-person negotiation, then what should
be result, could improve individual strategies and /or behavior in the bargain,
from a pure “conflict” to round the corners of this conflict, then transforming
competitors to “instant alliances” (including the Community profit) : This is
the paper’s contribution)
5. Local Development is mainly based on this “new” perception
6. Based on this “perception” (round the conflict corners-the Community within)
it’s easy for local people to find a “FLAG THEM” (2007- S Africa) for their
L-D process: see at Flow Chart That is the win-win-win Methodology/
Papakonstantinidis Model)
7. According to win-win-win methodology, L-D process, in terms of
diversification rate, from Globalization’s Rules may be justified, creating the
Community as a discrete spatial Entity
8. Technological changes and human / social relations move in the opposite
direction-“vice versa”.
9. Introducing a three-poles dealing system may improve the “bargaining
perception” thus influencing social behavior, introducing a new bargaining
perception/ethic
10. A “new bargaining perception” including the “Community profit” as the
“third” or “invisible” parameter in a bargain between TWO persons-players
may change some Globalization negative conditions, providing them with
“rules”/ social rules through social behavior changing.
11. Reforming a bilateral contradiction in a 3-part bargain between two players
(including the Community “C” as the “invisible” part between TWO, in fact
may reverse the base of human negotiation : From “competition” to “co-
operation” Reforming the “competition” to step towards “social cohesion” ,
the “objective perception of the world” may be changed into a more
ideological: From material to a “thinking” world (Kamitza R 1994) The “C”
partner my be proved to be the key-factor, against war feelings thus
introducing the Greek philosophy’s “METRON”
12. Each of the THREE parts (A, B, & C) in any bargain, may ask itself THREE
questions, thus maximizing its own profit (economic, social, cultural,
environmental etc) :
What should be the best for me, taking into account that the other person (bargainer
in a negotiation) should try for the best for himself –thus recognizing that the other
person as clever as I, AND taking into account [at the same time] that
“Community” as the third or invisible part of negotiations between TWO, also
participates and also tries under the same conditions [ “Community” as clever as the
two bargainers] so bargainers AND the Community to be winners? - 3win Model.

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