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Turning public into private: how geographically bound social

It is well-known that entrepreneurs entree resources and cognition for invention from external beginnings including users, providers, rivals, universities, etc. ( Rosenkopf & A ; Nerkar, 2001 ) . Inventions most frequently require the coincident usage of different accomplishments and cognition which may non be available within the house boundaries ( Rosenberg, 1982 ) . The early Schumpeterian thought of the lone enterpriser bring forthing inventions has been overtaken by representations of multiple histrions working together on iterative procedures of test and mistake ( Freeman & A ; Soete, 1997 ; Schumpeter, 1942/87 ; Shan, Walker, & A ; Kogut, 1994 ; von Hippel, 1988 ) . As Van de Ven ( 1986:591 ) argues, ‘while the innovation or construct of advanced thoughts may be an single activity, invention ( contriving and implementing new thoughts ) is a corporate accomplishment ‘ . This statement is in line with the unfastened invention paradigm that states that openness Fosters the debut of new merchandises by uniting the attempts and resources of a big and varied pool of persons with entree to heterogenous and complementary cognition.

Previous research shows that enterprisers use societal capital to entree resources and cognition ( Baron & A ; Markman, 2003 ; Stam & A ; Elfring, 2008 ) and capitalise on societal ties to obtain bank loans ( Uzzi, 1997 ) and private equity ( Shane & A ; Cable, 2002 ) , or market information ( Birley, 1985 ) . There is besides grounds that persons with high degrees of societal capital are more likely to get down new ventures ( Aldrich, Elam, & A ; Reese, 1996 ) . Given the importance of societal ties in the invention context, the inquiry arises about how entrepreneurs capitalise on societal capital to develop invention capablenesss.

Social capital can profit communities ( a collective-good position ) , but it can besides profit persons ( a private-good position ) . Coleman ( 1990 ) , Putnam et Al. ( 1993 ) and Fukuyama ( 1995 ) argue that societal capital is a public good and each person in a given societal community can work the societal capital in their peculiar context. Bourdieu ( 1980 ) , Burt ( 1992 ) and Lin ( 1999 ) , on the other manus, emphasis the private nature of societal capital, and underline the different entree granted to different persons.

This differentiation determines the attack societal capital, that is, either single attack or structural. The single attack identifies societal capital as the merchandise of single investing in a web of relationships ( Burt, 1992 ; Lin, 1999 ) . Specifically, in this survey, following the entrepreneurship literature ( Larson and Starr, 1993 ; Stuart and Sorenson 2003 ; Shane and Stuart, 2002 ) , I adopt an enterpriser ‘s position look intoing the function of an enterpriser ‘s societal capital for house outcomes. The structural attack defines societal capital as a public good embedded in the house ‘s external context. It considers societal capital to be a geographically edge phenomenon that is a community instead than a individual histrion plus ( Putnam et al. , 1993 ) . The construct of geographically bound societal capital refers to Coleman ‘s ( 1990:302 ) position of societal capital, which conceptualizes it as an endogenous phenomenon within societal dealingss, that varies from context to context. Topographic points have alone histories and civilizations and, hence, alone societal capital. Following this attack, this chapter aims to show that geographically bound societal capital is a cardinal external eventuality for the houses located in a peculiar topographic point.

This chapter consistently integrates these two attacks to societal capital in order to build a new and more comprehensive model that relates societal capital to the house ‘s grade of invention. Using an original database, I investigate the effects of societal capital on grade of invention in a sample of Italian fabrication houses. The Italian instance is peculiarly appropriate for this survey since Italian parts differ in their ‘availability ‘ of societal capital. Italy figures conspicuously in the argument on societal capital and was the context foremost studied by sociologists and political scientists interested in the effects of societal capital ( Banfield, 1958 ; Putnam et al. , 1993 ) .

I combine informations on societal capital for 6 states with a information set on advanced activities in a representative sample of 124 fabrication houses to analyze the consequence of enterprisers ‘ and geographically bound societal capital on the house ‘s grade of invention in footings of the debut of incremental and extremist inventions ( Dewar & A ; Dutton, 1986 ; Elfring & A ; Hulsink, 2003 ) . Gatignon et. Al ( 2004:1107 ) note that incremental invention involves ‘improving and working an bing technological flight ‘ , while extremist invention refers to a ‘disrupt [ ion in ] an bing technological flight ‘ .

I find that enterpriser ‘s societal capital positively affects the house ‘s grade of invention, and that geographically bound societal capital represents an external eventuality that increases the effectivity of enterprisers ‘ societal capital on the house ‘s grade of invention. These consequences hold after commanding for a set of house features and local variables.

The chapter is organized as follows. The following subdivision reviews the literature on societal capital and invention, describes the theoretical concepts employed in my survey, and presents the research hypotheses. In the subsequent subdivisions, I present the research methods and empirical context, the sample choice procedure, and the steps and econometric techniques. The concluding subdivisions set out the empirical findings and depict the parts and deductions of the analysis and some suggestions for future research.


The importance of societal variables for economic results is good established. Granovetter ( 1973 ) depict how societal connexions are grounded in the history of markets and high spots their part to the results of economic determinations.

The influence of societal capital on public presentation has been studied at several degrees of analysis, runing from persons and little groups ( e.g. Moran, 2005 ) to larger organisations and inter-firm confederations ( e.g. Gulati, 1995 ; Nahapiet & A ; Ghoshal, 1998 ; Tsai, 2000 ) , metropoliss ( e.g. Jacobs, 1961 ) and parts ( e.g. Beugelsdijk & A ; Schaik, 2005 ; Maskell, 2000 ; Putnam et al. , 1993 ) and full states ( e.g. Knack & A ; Keefer, 1997 ; Zak & A ; Knack, 2001 ) .

At the beginning, the term societal capital was used to depict the relational resources included in the personal ties exploited in the development of societal organisations ( Jacobs, 1961 ; Loury, 1977 ) .The first of import conceptualisation of societal capital was provided by Bourdieu ( 1980:2 ) who defined societal capital as ‘the amount of the resources, existent or practical, that accrue to an person or group by virtuousness of possessing a lasting web of more or less institutionalised relationships of common familiarity and acknowledgment ‘ .

Lin and Dumin ‘s ( 1986 ) and Burt ‘s ( 1992 ) work focuses on the nature of the resources that are embedded in societal webs. This work addresses the function of societal interactions, and develops tools for placing and quantifying web construction. Nahapiet and Ghoshal ( 1998:243 ) rely on this attack, which focuses on the resources embedded in webs and defines societal capital as ‘the amount of the existent and possible resources persons obtain from their relationships with others ‘ . While this research provides some utile tools for analyzing enterpriser webs, it does non see the features of the context in which single webs are formed and ignores the societal and cultural features of geographical infinites.

The structural attack to societal capital considers societal capital as the bing stock of societal relationships in a society where societal capital is a multidimensional entity and a characteristic of the societal construction ( Coleman, 1988 ) . Woolcock ( 1998 ) is one of the first efforts to plan a incorporate conceptual model for societal capital. He analyses embeddedness as a signifier of societal capital, foregrounding that embeddedness can take different signifiers including societal ties, cultural patterns and political contexts, which place persons in different circles. These circles or groups of persons are powerful in the defining chances and restraints in the chase of economic promotion ( Zukin & A ; DiMaggio, 1990 ) .

The literature on economic geographics recognizes the importance of topographic points for house behavior. Several surveies focus on analysing local fight, in which societal capital is seen as a important component ( Cooke, 2001 ; Hauser, Tappenier, & A ; Walde, 2007 ; Saxenian, 1994 ) . Harmonizing to Marshall ( 1920 ) , the factors that generate local fight are held together by something ‘in the air ‘ . Marshall ‘s intuition can be considered one of the earliest recognitions of the function of societal capital.

Porter ( 2001 ) considered societal capital to be a cardinal determiner of bunch formation ; Storper ( 1995 ) discusses the function of trust and cooperation, and local systems of norms and conventions.

Geographically bound societal capital is used to explicate several phenomena. Knack and Keefer ( 1997 ) relate societal capital to economic growing, Guiso et Al. ( 2004 ) exploit it to explicate fiscal development.

In this chapter, I relate societal capital to the house ‘s grade of invention by sing the function played by: ( I ) enterpriser ‘s societal capital, defined as a private plus that captures the enterpriser ‘s entree to sets of persons from heterogenous cognition spheres ; and ( two ) geographically bound societal capital, conceptualized as a public good, a corporate plus that is available to all members of a given community.


Entrepreneur ‘s societal capital and house invention

Firms are oriented towards the find of new chances that may affect the debut of new merchandises and researching of new markets ( Shane & A ; Venkataraman, 2000 ) . The success of these enterprises is attributable largely to the capablenesss and accomplishments of enterprisers. Scholars try to understand why some enterprisers are more successful than others in footings of detecting chances.

The enterpriser ‘s societal web has become the topic of research and is developing into a dominant construct explicating enterprisers ‘ public presentation ( Aldrich & A ; Zimmer, 1986 ) . Entrepreneurs socially good connected to other histrions, will be more likely to be able to entree external resources. Batjargal ‘s ( 2003 ) survey of Russian enterprisers in the post-Soviet epoch shows that enterprisers who have entree to legion societal ties and are able to work their contacts to obtain fiscal resources, for illustration, obtain the highest grosss. In the instance of new houses, Hansen ( 1995 ) claims that personal societal capital is one of the most valuable assets that the house laminitis brings to the new house. Florin et Al. ( 2003 ) show that societal capital provides of import benefits by leveraging the productiveness of a new venture ‘s internal resources.

In the context of invention, since enterprisers need to pull on several cognition spheres to bring forth new combinations of bing cognition ( Rosenkopf & A ; Nerkar, 2001 ) , societal ties may be a definite advantage ( Shane & A ; Cable, 2002 ; Stuart & A ; Podolny, 1996 ) . The attack in this chapter is to see enterpriser ‘s societal capital in footings of web diverseness, which enables entree to distinct and different pools of cognition ( Reagans & A ; McEvily, 2003 ) based on societal ties embracing a assortment of cognition pools. I identity three elements of enterpriser ‘s societal capital: societal interaction, societal certificates and societal duties. These elements produce distinguishable benefits for the enterpriser which facilitate house invention.

Social interaction promotes communicating and enables the diffusion of information and cognition. To pass on with strategically positioned histrions warrants better entree to external cognition spheres in the short term ( Adler & A ; Kwon, 2002 ; Burt, 1992 ) . For case, enterprisers in frequent communicating with university research workers are likely to larn earlier about new engineerings that can be commercialized ( De Carolis & A ; Saparito, 2006 ) . They may acquire entree to potentially valuable engineerings before they enter the populace sphere. Low degrees of societal capital make it more hard to pass on with other histrions including faculty members, based on the differences in linguistic communications, codifications, ends and premises, for case ( Davidsson & A ; Honig, 2003 ) .

Social credibleness is based on acknowledgment that the person is portion of a peculiar societal group, on the footing of which entree to certain resources is enabled. For an enterpriser, societal capital is cogent evidence of societal certificates, which are the passport to accessing cognition and resources. Besides, societal certificates provide houses with legitimacy ( Aldrich & A ; Fiol, 1994 ) .

Social capital creates societal duties between histrions, which finally result in more generous behavior ( Gulati, 1995 ) . Uzzi and Gillespie ( 1999:33 ) depict how societal connexions ‘interject outlooks of trust and reciprocality into the economic exchange that, in bend, activate a concerted logic of exchange. This logic promotes the transportation of private information and resources and motivates [ both parties ] to seek for integrative instead than zero-sum results. In this manner, embedded ties both create new collaborative chances and induced the common instead than selfish distribution of wagess ‘ . Under conditions of uncertainness and information dissymmetry, direct ties can be advantageous to those seeking fiscal and other resources ( Podolny, 1994 ) .

Based on the statements rehearsed above, it can be seen that the enterpriser ‘s societal capital is the primary beginning of new thoughts and cognition, which increase the house ‘s capacity to deploy assorted cognition spheres ( Hill & A ; Rothaermel, 2003 ) and which, in bend, could be expected to increase invention. I conjecture that entrepreneurs that rely on a wide web of histrions find easier to get external cognition and acknowledge new chances. This leads to the hypothesis that:

Hypothesis 1. The broader the enterpriser ‘s societal capital, the grater will be the house ‘s grade of invention.

Geographically bound societal capital and houses ‘ invention

As already mentioned, geographically bound societal capital is a corporate good embedded in the house ‘s environment ( Knack & A ; Keefer, 1997 ; Putnam et al. , 1993 ) . This is an recognition that regional associations and informal ties constitute a fertile context for cognition sharing ( Putnam et al. , 1993 ) and that societal capital is a mechanism that operates locally.

In line with Laursen et Al ( 2007 ) , I would propose that houses located in parts with high degrees of societal capital benefit from several advantages. First, societal capital supports societal interaction among the histrions by linking otherwise disconnected groups of histrions. A high grade of connection increases the chances for informal talk and the possibility to entree assorted cognition beginnings ( Jaworski & A ; Kohli, 1993 ) . These connexions, which produce a rich set of communicating channels, may enable boundary crossing hunt, frequently seen as necessary for successful invention ( Fleming & A ; Sorenson, 2001 ; Rosenkopf & A ; Nerkar, 2001 ; Sorenson & A ; Audia, 2000 ) . Connection increases the possibility to unite bing cognition and develop new invention capablenesss ( McFadyen & A ; Cannella, 2004 ) . Additionally, societal capital reduces the inclination for economic histrions to act opportunistically since it contributes to modifying the system of single inducements, working the societal constituent of actions ( Dasgupta, 2005 ) .

Innovation undertakings involve information dissymmetries and require possible moral jeopardy jobs to be taken into history ( Pisano, 1990 ; Williamson, 1979 ) . High degrees of societal capital addition transparence for the histrions involved in invention and render determination doing less dearly-won. In high societal capital scenes, enterprisers do non hold to put in look intoing the veracity of their spouses claims ( Zak & A ; Knack, 2001 ) , which frees up resources for investing in other economic activities. Social capital reduces information dissymmetries by enabling the constitution of trust-based relationships ( Adler & A ; Kwon, 2002 ) through repeated societal contact ( Gulati, 1995 ) . Therefore, I posit that geographically bounded societal capital positively affects houses ‘ invention capableness.

Hypothesis 2. The higher the degree of geographically bound societal capital, the grater the house ‘s grade of invention.

The moderating function of geographically bound societal capital

Here, I suggest that geographically bound societal capital increases the effectivity of enterpriser ‘s societal capital on house invention by increasing the benefit generated by the elements of enterpriser ‘s societal capital.

Social interaction has been shown to be an component of enterpriser ‘s societal capital that enables cognition sharing. However, in the procedure of invention, when spouses interacts, the features of the house ‘s environment, such as the market imperfectnesss in footings of information dissymmetries and possible moral jeopardy jobs, have to be considered ( Pisano, 1990 ; Williamson, 1979 ) . High degrees of geographically bound societal capital facilitate communicating among spouses and increase their leaning to portion valuable cognition by cut downing dealing costs and moral jeopardy jobs in the house ‘s environment.

In footings of societal certificates, since a broad assortment of cognition is indispensable for invention ( Metcalfe, 1994 ) , greater credibleness enables coaction which provides entree to a wider scope of external cognition. This enables inventions based on new combinations of engineerings and cognition ( Laursen & A ; Salter, 2006 ) . Social certificates cut down the demand to put so to a great extent in seeking external spouses and look intoing their trustiness ( Zak & A ; Knack, 2001 ) . Firms located in high societal capital scenes are more likely to prosecute in profitable coactions since geographically bound societal capital reduces the hunt and confirmation costs and do it easier for houses to signal societal credibleness.

Finally, geographically bound societal capital may spread out the scope of support mechanisms related to societal duties. Coleman ( 1988 ) finds that geographically bound societal capital prevents timeserving behaviors based on consciousness that such behavior will go public cognition and consequence in loss of repute. High societal capital scenes increase the effectivity of societal duties between spouses by making the conditions under which these duties between are respected. These statements lead to the undermentioned hypothesis:

Hypothesis 3. Geographically bound societal capital positively moderates the consequence of enterpriser ‘s societal capital on house ‘s grade of invention.



In order to prove these hypotheses, I built an original database based on study informations and informations collected by the Italian Institute of Statistics. The study informations were gathered from a sample of Italian houses in Abruzzo and Umbria, two parts in the Centre of Italy. Regional outgo on R & A ; D as a per centum of these part ‘s GDP is merely below the mean national outgo of 1.1 per cent. In the five-year period 2000-2005, investing was comparatively stable. Abruzzo ‘s investing in R & A ; D increased somewhat from 0.9 per cent of GPD to 1.0 per cent of GPD, while investing in Umbria reduced somewhat from 0.9 per cent in 2000, to 0.8 per cent in 2005. My pick of two parts with R & A ; D outgo somewhat below the national norm was to supply farther support for my statement that societal capital benefits houses, independent of the types of cognition available in the part. The selected empirical contexts may be farther verification that extremely connected houses with high degrees of geographically bound societal capital may be more advanced regardless of the regional outgo on invention. Data aggregation was promoted and sponsored by both parts.

The sample includes a big group of houses, extracted from the list of houses registered at the local Chambers of Commerce, and industries, in order to maximise the fluctuation in the variables and to increase the generalizability of the consequences. The undermentioned NACE industry codifications are considered: 27, 28 and 29 ( mechanical technology ) ; 15 ( industry of nutrient merchandises and drinks ) ; 24 and 25 ( chemical industry ) ; 72 and 74 ( service houses ) and 17 ( industry of fabrics ) . The sample is stratified by size based on the classs: 9 to 49 employees, 50 to 99 employees, and 100 to 250 employees. The concluding sample includes 300 houses.

Interviews were conducted in 2008. To increase response rates, letters were addressed to and mailed straight to the highest-ranking executive ( normally the president ) of each of the 300 houses. The letters briefly explained the intent of the research and asked the receiver to lend by finishing the questionnaire. The letters gave confidence that the informations collected would be protected by statistical confidentiality and personal informations protection statute law. Respondents were told they would have a individualized study benchmarking its house ‘s strategic determinations against a representative sample of houses.

Respondents were offered two ways of finishing the questionnaires: a ego reported on-line questionnaire, or a telephonic interview. Reacting to the study online involved replying the questionnaire that was made available on a intent built web site, for telephone interviews, a reciprocally convenient clip was agreed.

Two hebdomads after the letters were sent, I made follow-up calls to supply some more information on the research. Respondents who agreed to utilize the online questionnaire were given a watchword to entree the web site. Telephone interview respondents were asked the inquiries over the phone in a call that lasted around 20 proceedingss. Most respondents ( 85 % ) opted for a phone interview. For the 15 per cent of respondents that completed the questionnaire online, I made a follow up calls to clear up certain points.

The entire figure of houses interviewed was 152, a response rate of 50 per cent. The concluding database was obtained by unifying the study informations with secondary informations collected by Italian Institute of Statistics. The concluding sample, after canceling for losing values, was 124 houses. The attendant informations set contained really elaborate information about societal capital and invention input and end product.

To mensurate geographically bound societal capital, I used informations from a provincial degree nose count collected by the Italian Institute of Statistics in 2001. The informations were aggregated into 103 states, a degree that corresponds to the Terminology of Territorial Units for Statistics degree 3 ( NUTS 3 ) .


Entrepreneur ‘s societal capital

The societal capital of an person can be described in footings of his or her societal web and refers to the intrinsic resources in the web ( Bourdieu, 1980 ; Coleman, 1988 ) . Several methods are available to roll up informations on societal webs, including whole web and egoistic attacks.

A whole web attack has several benefits, such as designation of the structural belongingss of the web ( e.g. centrality, group, coteries ) . However, this method requires designation of the web boundaries. In world, for the bulk of webs, there is no identifiable boundary. Because measuring of enterpriser ‘s societal capital requires placing the cognition accessed by the enterpriser in big and non definable webs, an egoistic attack was preferred.

An egoistic web is a web focused on a cardinal histrion ( self-importance ) and consists of all the histrions ( alters ) that the self-importance has direct dealingss with. In the instance of the present survey, the self-importance is the enterpriser who was asked to depict the dealingss with alters with entree to valuable cognition ( Burt, 1997 ; Rytina & A ; Morgan, 1982 ) .

In specifying enterprisers ‘ societal capital, I adopted the position-generator technique, an original ego-network sampling technique proposed by Lin and Dumin ( 1986 ) .

The place generator technique is used widely in sociological surveies since it provides a step of the respondent ‘s web by inquiring whether he/she knows person in a list of places. This technique was implemented through a series of stairss. The first consisted of placing a list of relevant places that the person might hold entree to. I selected places likely to supply entree to information utile for invention. Von Hippel ( 1988 ) high spots that invention requires houses to organize ties with clients, providers, universities and even rivals. Trusting on old surveies working the place generator technique to mensurate an enterpriser ‘s self-importance web ( Batjargal, 2003 ; Chiesi, 2007 ) , I selected the undermentioned places: strategic providers, strategic clients, rivals, advisors, experts in technological inventions, university researchers/professors, policy shapers, fiscal people/funders, people connected to public disposals, presidents of public or private industry associations, employment bureaus.

Table A4.1 in the appendix illustrates how the place generator technique was used in this survey.

[ Insert Table A4.1 about here ]

In the 2nd measure, respondents were asked to stipulate whether they knew person in any of the places listed. Since invention is mostly determined by the enterpriser ‘s ability to entree multiple beginnings of cognition ( Renzulli, Aldrich, & A ; Moody, 2000 ) , I estimate enterprisers ‘ societal capital in footings of web diverseness ( Marsden, 1987 ) . Using the place generator technique, I measured an enterpriser ‘s societal capital based on the figure of direct ties with persons in the different places and therefore in different cognition spheres.

The possibility to entree to varied beginnings of cognition is one of the most acute benefits of societal capital ( Lane & A ; Lubatkin, 1998 ; Yli-Renko, Autio, & A ; Sapienza, 2001 ; Zahra, Ireland, & A ; Hitt, 2000 ) .

Geographically-bound societal capital

As discussed above, geographically bound societal capital includes a scope of interactions and societal attitudes. The complex nature of the construct makes it hard to mensurate. Nahapiet and Ghoshal ( 1998 ) acknowledged the multidimensional nature of societal capital, proposing that societal capital should be articulated harmonizing to three chief dimensions: structural, stand foring the construction of the web, relational, that is, the influence that a societal relationship exerts on an economic action, and cognitive, which relates to the resources that enable common systems of representation and reading ( Nahapiet & A ; Ghoshal, 1998 ) .

This chapter focuses on the structural dimension of societal capital, and considers different facets of the societal construction. Geographically bound societal capital is determined the step proposed by Laursen et Al. ( 2010 ) which is based on the choice of up to four provincial variables. The variables considered represent engagement in societal associations ( figure of not-for-profit houses, figure of unpaid workers in not-for-profit organisations, figure of employees in not-for-profit houses ) and societal inclusion ( figure of foreign occupants ) . Table 4.1 presents the societal capital variables. The four provincial variables were used for factor analysis, which is a widely used statistical method that enables the research worker to depict the variableness among the ascertained variables in footings of a smaller figure of unseen variables, which are called factors. In this instance, the fluctuations in the four observed variables chiefly reflect the fluctuations in a individual unseen latent variable that I used to mensurate geographically-bound societal capital. The factor analysis provides an appraisal of the grade to which it is possible to place a common implicit in construction in the four variables selected. The analysis suggests that the variables to be interrelated can be expressed in a common dimension ( eigenvalue=2.59 ) . Table 4.1 shows the factor burdens of the factor analysis.

[ Insert Table 4.1 about here ]

I measure societal capital at the minimal degree of collection possible for my informations ( NUTS 3 ) . This degree of collection is utile in supplying a local step of geographically-bound of societal capital, but limits the figure of variables that can be selected to supply a more consistent step of the phenomenon being investigated.

Explanatory variables

The dependant variable is an ordered variable ( from depression to high ) that offers a step of the house ‘s grade of invention. In mensurating steadfast degree of invention I distinguish between incremental and extremist inventions. Extremist inventions are major transmutations of bing merchandises or engineerings that frequently make the prevailing product/service designs and engineerings disused and alter the old cognition into something wholly new ( Chandy & A ; Tellis, 2000 ) . Incremental inventions are betterments to bing merchandises and are based on bing cognition. Incremental inventions are implemented to polish bing merchandises or engineerings ( Ettlie, 1983 ) .

In this analysis, the dependant variable takes the value 0 if, during the three old ages 2004-2006 the house did non present any invention, the value 1 if the house introduced a new merchandise that incorporates a alteration in the province of the engineering in the company or a new merchandise that enables the house to obtain new clients, and 2 if the house has introduced a new merchandise that creates a new market or a new merchandise that incorporates a well different nucleus engineering relation to the old merchandise coevals.

Control variables

The grade of invention depends on several factors, including the enterpriser ‘s features, house behavior and strategic orientation, and other context-specific factors that may act upon the house ‘s invention leaning. Previous surveies point to the importance of the enterpriser ‘s human capital in the procedure of designation, find and execution of new chances ( Mosey & A ; Wright, 2007 ; Shane, 2000 ) , a procedure that requires a set of single accomplishments and penetrations. Therefore, I control for enterpriser ‘s instruction, measured as first grade, college grade, university grade.

Anterior surveies show that the degree of the enterpriser ‘s experience accumulated over the old ages, is an of import determiner of hisher beliefs, values and knowledges ( Stuart & A ; Abetti, 1990 ) . Therefore, I control for enterpriser ‘s experience, with a variable that takes the value of 1 if the enterpriser has worked in the company for less than 1 old ages, the value 2 if the enterpriser has been in the company more than 1 twelvemonth, but less than 5 old ages, 3 if the length of clip in the company is between 5 and 15 old ages, and 4 if the clip in the company is between 15 and 30 old ages. In all other instances it takes the value 5. I control besides for enterpriser ‘s age.

I besides include a set of steadfast degree variables to command for house size, house age, house human capital, house group and house export orientation. The extant empirical research states that the advantages of size for house ‘s invention capablenesss are equivocal ( Cohen, 1995 ) . On the one manus, larger houses may hold greater fiscal resources and be favoured by economic systems of graduated table and range, which may increase the profitableness of their invention schemes ; on the other manus, smaller houses are more flexible and less bureaucratic, which may increase invention efficiency. I measure steadfast size by the figure of employees in 2004.

I control for house age since this variable is likely to act upon invention capablenesss, even though its effects are hard to specify: on the one manus, older houses normally rely on a slightly broader base of cognition for invention ; on the other manus, younger houses ‘ greater flexibleness may enable them to be more advanced.

Firms with extremely skilled employees with graduate instruction may be more advanced. Therefore, I control for house human capital measured as the per centum of employees with a grade.

I include steadfast group to mensurate whether or non the house is a member of a corporate group. Firms that belong to corporate groups are more likely to hold experience in collaborating with other organisations and are likely to hold entree to more information.

I control for house export measured as a silent person variable that takes the value of 1 if the house has exported its merchandises or services in the three old ages 2004-2006 and 0 otherwise. Firms that compete in foreign states have more incentive to introduce ( Basile, 2001 ) .

I besides control for degree of entrepreneurial activities in the house ‘s state, measured as the differences between houses that enter the market and houses that exit, over the mean entire houses in the state. Finally, I control for population measured as the figure of people in the house ‘s state. This gives an thought of the size of the state.


The dependant variable ( house ‘s grade of invention ) is an ordered variable coded as back-to-back whole numbers from 0 to 2. Although the variable is coded it is non possible to analyze an ordinal result utilizing a additive arrested development theoretical account ( LRM ) since it violates the premises of the LRM, which can take to inaccurate decisions ( Long, 2006 ; McKelvey & A ; Zavoina, 1975 ) . With ordinal results the usage of theoretical accounts that do non presume that distances between classs are the same, is recommended. Therefore, I use an ordinal arrested development theoretical account ( ORM ) to prove my hypotheses. ORM is nonlinear and the alteration in the result chance for a given alteration in one of the explanatory variables is influenced by the degrees of all of the independent variables ( Long, 2006 ) .

Table 4.2 presents the descriptive statistics and the correlativities among variables. The correlativity matrix does non demo any distressing collinearity among the variables.

[ Insert Table 4.2 about here ]

Models I and II in Table 4.3 present the consequences of the ordinal arrested development theoretical account. The parametric quantity for enterpriser ‘s societal capital is positive and important, which suggests that enterpriser ‘s societal capital influences the house ‘s grade of invention. This determination provides support for Hypothesis 1 ( the broader the enterpriser ‘s societal capital, the grater will be the house ‘s grade of invention. ) .

The parametric quantity for geographically bound societal capital is positive and important in explicating the dependant variable. Therefore, Hypothesis 2 ( the higher the degree of geographically bound societal capital, the grater the house ‘s grade of invention ) finds verification. This consequence is in line with the survey by Laursen et Al. ( 2007 ) formalizing the relevancy of geographically bound societal capital for house invention.

I besides assume that geographically bound societal capital should chair the relationship between enterpriser ‘s societal capital and house ‘s grade of invention. The moderator term in Model II ( geographically bound societal capital*entrepreneur ‘s societal capital ) is positive and important in explicating houses ‘ grade of invention. This means that as the degree of geographically bound societal capital additions, so does the effectivity of enterpriser ‘s societal capital on the house ‘s grade of invention. This consequence confirms Hypothesis 3 in this chapter ( geographically bound societal capital positively moderates the consequence of enterpriser ‘s societal capital on house ‘s grade of invention ) .

[ Insert Table 4.3 about here ]


This chapter examined the interaction effects between enterpriser ‘s societal capital, defined as a private plus that capture the enterpriser ‘s entree to a set of persons that belong to heterogenous cognition spheres, and geographically bound societal capital, defined as a public good, a corporate plus that is available to all members of a given community. The consequences of this survey suggest that both enterpriser ‘s societal capital and geographically bound societal capital have a positive consequence on the house ‘s grade of invention. Besides, geographically bound societal capital positively moderates the relationship between enterpriser ‘s societal capital and house ‘s grade of invention. The empirical analysis was conducted on a sample of Italian houses. The treatment of consequences is presented under deductions for theory and deductions for pattern.

Deductions for theory

Overall, the findings in this chapter provide support for the premiss that societal capital influences houses ‘ invention.

This survey expands the entrepreneurship literature by look intoing the function of enterpriser ‘s societal capital as the foundation of house invention. The enterpriser ‘s investing in a wide societal web appears to hold a positive consequence on the house ‘s ability to get and work external resources. Entrepreneurs with wide societal capital presume a cardinal function in the coevals inventions since societal capital facilitates the designation of new engineerings and acknowledgment of the market potency of new merchandises.

Besides, this chapter contributes to the entrepreneurship literature by back uping through empirical observation that geographically bound societal capital positively moderates the effects of enterprisers ‘ societal capital on houses ‘ invention. Previous literature investigates the function of enterpriser ‘s societal capital concentrating on the benefits that the house obtains from the enterpriser ‘s investing in a web of relationships ( Larson & A ; Starr, 1993 ; Stuart & A ; Sorenson, 2003 ) . While there is some consensus in the literature on the importance of enterprisers ‘ societal webs for houses ‘ success, a set of good web dealingss on its ain does non vouch success. This survey complements this literature clear uping the part of geographically bound societal capital in determining the relationship between enterpriser ‘s societal capital and house invention. Result indicate that geographically bound societal capital ( in the signifier of a corporate plus ) increases the effectivity of enterpriser ‘s societal capital on houses ‘ invention, assisting the enterpriser to place new chances and mobilise valuable resources.

The findings in this chapter have important theoretical deductions for the argument on the effects of regional societal construction on steadfast invention. Prior research argues that the nature of the external environment influences steadfast invention ( Zahra, 1996 ; Zahra & A ; Bogner, 2000 ) . I demonstrate that geographically bound societal capital favors steadfast invention by supplying conduits for cognition and expertness sharing.

In acknowledging the value of connexions, the consequences of this survey are in line with the watercourse of research that explores the importance of assorted signifiers of communicating and interaction within parts among the histrions that contribute to the creative activity of invention ( Agrawal & A ; Henderson, 2002 ; Rosenkopf & A ; Almeida, 2003 ) . This chapter contributes to this watercourse of research by proposing that for innovating houses, geographically bound societal capital is utile to increase the effectivity of enterpriser ‘s societal capital on the chance of presenting an invention.

This chapter besides adds to our apprehension of the construct of house context. Several surveies rely on context to explicate what other variables are non able to explicate with respect to houses ‘ behaviour. Firm context is used as a residuary variable. This survey on the importance of geographically bound societal capital provides empirical anchoring to the societal dimensions of geographical context.

Furthermore, the findings of this survey are in line with the unfastened invention paradigm, which states that in the context of invention openness fosters the debut of new merchandises by uniting the attempts and the resources of a big and heterogenous pool of persons with entree to different and complementary cognition. Therefore, new chances are progressively the consequence of a procedure that breaks down the conventional boundaries to the house and allows thoughts, information and cognition to flux ( Chesbrough, Vanhaverbeke, & A ; West, 2006 ) . The literature on unfastened invention does non look at the interaction between geographically bound societal capital and enterprisers ‘ societal capital in relation to the efficiency of presenting inventions. The part of this chapter is in foregrounding that societal capital affairs for houses ‘ grades of invention.

Deductions for practicians

Entrepreneurs ‘ investing in societal capital appears to hold a positive consequence on houses ‘ invention. To leverage this investing efficaciously, it may be imperative for houses to develop invention capablenesss.

This chapter provides empirical support for the importance of geographically bound societal capital in advancing houses ‘ invention. Entrepreneurs and directors need to be cognizant of the function of geographically bound societal capital for foretelling invention capablenesss. This means that location in a context with high degrees of societal capital increases the opportunities that houses will be able to capture external cognition to better the quality of their merchandises and services and enlarge their client base. This determination has deductions for enterprisers and directors, who need to take history of this variable in their location determinations. For the enterpriser, location is a strategic pick that may enable entree to diverse and valuable information.

Restrictions of the survey and way for future research

This survey has some restrictions. First, I use cross-sectional informations that do non let commanding for the effects of experience. If houses have been engaged in invention activities in the yesteryear, this is likely to impact their hereafter schemes. Besides, cross-sectional informations make it hard to the full to confirm causal statements. Future research should analyze the relationship between societal capital and invention utilizing longitudinal informations.

Another restriction is that this survey considers a sample of Italian houses. While most research on societal capital considers Italy based on its apparent regional differences in this respect, there may be state specificities that might restrict the generalizability of the findings. Future research should prove the hypotheses in this chapter utilizing a sample of houses located in other states, which would be enlightening about different state forms.

Furthermore, this chapter explores the relationship between societal capital and houses ‘ grade of invention in footings of incremental and extremist inventions. Future research should look into how enterprisers ‘ and geographically bound societal capital impact the houses ‘ chance to present merchandise and procedure inventions. Product invention involves the creative activity of technologically new merchandises, whereas procedure invention involves new elements introduced into an organisation ‘s production or service activities in footings of undertaking specifications, work and information flow input factors, and machinery used to fabricate a merchandise or present a service ( Abernathy and Utterback 1975 ; Freeman and Soete 1997 ; Rosenberg 1976 ; Tushman and Anderson 1986 ) . Product invention requires extended procedures of exploratory hunt and interaction with many different internal and external beginnings of cognition ( Brown and Eisenhardt 1995 ) . In contrast, procedure invention has been described by Tushman and Rosenkopf ( 1992: 313 ) as “ the most crude signifier of invention ” and typically requires less search outside the organisation. Procedure inventions are frequently the consequence of learning-by-using and learning-by-doing, as a effect of the organisation ‘s experience of utilizing new engineering ( Hatch & A ; Mowery 1998 ; Rosenberg 1982 ) . Consequently, procedure inventions are the result of managerial determinations about how best to form the house to optimise the efficiency of its internal processs and modus operandis. As a consequence, procedure inventions are frequently non licensed or sold to other organisations ( Arora et al. 2001 ) . Furthermore, given the troubles in specifying procedure inventions exactly, secretiveness is in general more effectual to protect the return from procedure invention instead than merchandise invention ( Cohen et al. 2000 ; Levin et Al. 1987 ) . Obviously, the function of secrecy reduces the range for external interaction in the invention procedure. In amount, these statements lead to the speculation that societal capital increases the likeliness of houses presenting merchandise invention more than procedure invention.

Laursen et Al. ( 2007 ) make an effort to look into the effects of geographically bound societal capital on houses ‘ merchandise and procedure invention. They find that procedure invention is affected by geographically bound societal capital as distinct from no invention, and the parametric quantity for merchandise invention is higher and distinct from no invention and procedure invention. However, in this survey, the writers do non see the function played by enterpriser ‘s societal capital in act uponing the houses ‘ chance to present merchandise and procedure inventions.


, I focus in this chapter on the positive effects generated by societal capital. It is of import to underscore that societal capital may hold some negative effects if the implicit in interactions become excessively intense. While societal capital theoreticians, such as Coleman, highlight the benefits of societal capital, really intense and sole societal interactions could hold negative effects including excepting foreigners, doing inordinate claims on group members, curtailing single freedoms, and building downward levelling norms ( see Portes 1998: 15, for a elaborate treatment of these effects ) . While the proposed step of geographically bound societal capital can be considered a placeholder for regional societal construction, I can non through empirical observation disentangle strong from weak ties. Future work might seek to make this in order to analyze the possible negative effects of societal capital in the signifier of ‘overembeddedness ‘ ( Uzzi, 1997 ) . Such an analysis would be hard due to the deficiency of handiness of informations that provide an accurate description of the phenomenon.

This survey has of import deductions that enhance and polish the turning interdisciplinary work on societal capital: it appears that the grade of a house ‘s invention is linked inextricably to the enterpriser ‘s societal capital. The part in this chapter consists of a two-level position on societal capital. To the best of my cognition, this is the first survey that explore how enterpriser ‘s societal capital and geographically bound societal capital interact. The effects of interaction between these two variables demands to be explored farther to increase our apprehension of the function of societal capital on house public presentation.


Table 4. 1 Description of the variables included in the chief constituent analysis at provincial degree.


Description of the variables

Factor Loading

Not-profit houses

Number of non-profit organisations over entire population


Number of unpaid workers in not-profit

Number of unpaid workers in non-profit houses over population


Number employees of not-profit houses

Number of employees in not-profit houses over population



Per capita legal protests for non regard of duties


Foreign Residents

Number of foreign occupants in the state in 2001


Table 4. 2 Descriptive Statisticss and correlativity matrix.




Std Dev














Firm ‘s grade of invention




Entrepreneur ‘s societal capital





Geographically bound societal capital






Entrepreneur ‘s instruction







Entrepreneur ‘s experience








Entrepreneur ‘s age









Firm size










Firm age











Firm human capital












Firm group













Firm export














Population of the state ( in million )















Entrepreneurial activities in the state















Table 4. 3 Econometric Models.


Firm ‘s grade of invention

Ordinal arrested development theoretical account

Model I

Model II



Std. Err.



Std. Err.

Entrepreneur ‘s societal capital



( 0.112 )


( 0.167 )

Geographically bound societal capital



( 1.645 )



( 2.340 )

Entrepreneur ‘s societal capital*geographically bound societal capital



( 0.357 )

Entrepreneur ‘s instruction



( 0.403 )


( 0.401 )

Entrepreneur ‘s experience


( 0.170 )


( 0.172 )

Entrepreneur ‘s age


( 0.022 )


( 0.022 )

Firm size


( 0.009 )


( 0.009 )

Firm age


( 0.025 )


( 0.025 )

Firm human capital


( 0.021 )


( 0.021 )

Firm group


( 0.692 )


( 0.704 )

Firm export


( 0.435 )


( 0.437 )

Population of the state ( in million )


( 0.000 )


( 0.000 )

Entrepreneurial activities in the state



( 74.676 )



( 75.268 )

N. of Ob.



Log likeliness








Pseudo R2







Notes: Two-tailed trials for controls, one-tailed trials for hypothesized variables. Coefficient important at 0.1 % *** . 1 % ** . 5 % * . 10 % aˆ . Standard mistakes in parenthesis

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