Lecture Notes/Bipin K Acharya/Sociology/BBA/NCC/March 2017

Notes Prepared for

UNIT 10: Sociology of Management
Bipin K. Acharya, PhD
Asso. Prof., TU (Anthropology)
BBA Program, Nepal Commerce Campus
10.1 Background

According to The Concise Oxford Dictionary of Sociology, management is "either the

process of supervision, control, and coordination of productive activity in industrial and
other formal organizations, or the persons performing these functions. As a process,
management is conventionally divided into the line or general management of the main
goals of the organization, and staff or specialist management dealing with support roles,
such as personnel, legal matters, or research and development."

Sociology was emerged in 19th century in order to address the issues of industrial and
complex formal organizations and associated problems vis-à-vis relationship, structure,
order, and functioning. This makes it clear that sociology has been, since its emergence,
encompassing the issues of management, business administration, public administration,
bureaucracy and organization.

The Sociology of Organizations and The Sociology of Management are two newly
prospered sub-disciplines. For instance, many sociologists were inspired by FW Tylor's
classical book entitled -The Principles of Scientific Management (1911). Sociologists like
Max Weber, Warwick, Etzioni have extended the scope of sociology to these fields of
expertise. Melville Dalton's book Men Who Manage (1959) is regarded as an excellent
example of sociological discourse on management after Max Weber's writings on
bureaucracy. Mike Reed's Redirections in Organizational Analysis (1985), The Sociology
of Management (1989), The Sociology of Organizations and Rethinking Organizations:
New Directions in Organization Theory and Analysis (1992), Beyond the Iron Cage? The
Dynamics of Organizational Control in Modernity (2004) should be regarded as one of
the milestones.

Obviously, sociologists have long been focusing their research on organizations, business
administration, bureaucracy and related issues. They have shown their keen interest on
the management of culture within work organizations, management of knowledge and
power, management of knowledge capital, social capital and culture capital. Some of the
sociologists are found interested also in analyzing the history of managerial revolutions.
Some are working on The Sociology of Mass Media and dealing with its bureaucratic and
corporate nature of organization.

10.2 Understanding Organization: A Sociological Perspective

"Our society is an organizational society. We are born in organizations, educated by

organizations and most of us spend most of our lives working for organizations. We

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spend much of our leisure time paying, playing and praying in organizations. Most of will
die in an organization and when the time comes for burial, the largest organization of all-
the state- must grant official permission" (Etzioni, A. Modern Organizations 1970).

What are organizations?

Organizations develop out of a conscious decision on the part of an individual or a group

to achieve certain goals through the bringing together in a disciplined fashion of human
and material resources. It can be distinguished from social institution that the term
institution is generally applied to aspects of social behavior regulated by well-established,
easily recognized and relatively stable norms, values and laws. Social institutions may be
hierarchically organized, they may embody codes of behavior and systems of sanctions,
but the manner in which these operate lacks the distinctive characteristics of
organizations.

Organization involves bringing together human beings and physical resources in a

coordinated and controlled mechanism in order to achieve certain objectives, otherwise
impossible. It is not simply at one particular point in time and space; it has a past and a
future, which may simultaneously exist across different spatial areas.

Sociology has always been centrally concerned with the relationship between individuals
and the social structures in which they live. The central issue in the Sociology of
Organization is precisely the tension between actors as individual subjects with their own
goals and interest and the organization as a structure of control and coordination that is
trying to guide those actors to act 'for' the organization as a system. Sociology therefore
has a specific contribution to make to the understanding of organizations that
differentiates it from disciplines such as economics and psychology. The sociological
imagination focuses on the dialectic of control between systems and actors as they have
emerged in the context of contemporary industrial societies.

10.3 Approaches to the sociology of organizations

 Classical (Grand Theory) Approach

Karl Marx's view on the study of organizations is both about the vast expansion in
productive forces brought about by capitalism and the social cost of the process in
generating class struggle. All organizations need to be understood in terms of the
underlying conflict of classes that occurs in capitalism. Max Weber's authority
structures to characterize organizations in terms of the authority relations within
them. This stemmed from a basic concern with why individuals obey commands,
why people do as they are told. To deals with this problem, Weber made a
distinction between power, the ability to force people to obey, regardless or their
resistance, and authority where orders are voluntarily obeyed by those receiving
them.

 Analytical (Middle-range Theory) Approach

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Robert K. Merton, A Gouldner, Selznick, P M Blau developed quantitative

approach for the analytical study of particular organization.
 Critical Approach
Silverman, Cooper, Burrel and Morgan proposed the real sociology of
organizations and advocated the need of radical humanist, radical structuralist and
interpretive alternatives to the predominance of fuctionalism.

According to Steward Clegg and David Dunkerley (Organization, Class and Control-
1980) there are four major sociological approaches in comprehending the organizations:

 Typologies of organizations (involving attempts to classify organizations

according to a variety of key characteristics)
 Organizations as social systems (based on structural-functionalist theory of
action)
 Organization as empirically contingent structure (based on scaling and factor
analysis to relate measures of organizational performance)
 Organizations as structures of action (focus on the circumstances determining the
actions of individuals in organizations)

O'Donnell in Introduction to Sociology-1997 describes that organizations are a pervasive

feature of modern life and there is renewed debate about how they affect us or how
people organize and coordinate their lives. We spend our working lives with large or
medium or small size organizations and if do not learn to "manage" them they will
certainly manage us. According to him, sociologists do not only examine the structure
and functioning of organizations but who has power and control within them, and also
whether more democratic organizational systems are possible.

In today's late modern or postmodern society, the sociology of organization has to look at
organizations in a wider context and as subject to changing and different forces. The
context and forces affecting organizations are global or international in scope and
consequently, organizational boundaries are widened and organizational structures are
less stable.

10.4 Theoretical Perspectives on Organizations

Sociology since its foundation has been dealing with the issue of human social
organizations as one of the characteristic feature of modern life. Though there are many
organizational theories built by sociologists, (O'Donnell 1995) has broadly categorized in
four main groups.

 Bureaucratic or Mechanistic Theory

Max Weber is regarded as the founder of this classical or bureaucratic model of
organizational theory. He maintained that bureaucratic is the most functionally
efficient form of organization. He further constructed an ideal type of bureaucracy
with the following characteristics: a) Specialization, b) Hierarchy, c) Rules, d)

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Records, e) Officials, f) Impersonality and g) Governance through publicly stated

rules.

 Systems Theory
Organic Systems Theory: Termed by Burns and Stalker (1961) which is characterized
by a less rigid division of labour than the bureaucratic/mechanistic ones; they are less
rule-bound, less hierarchical and more open to the influence of the informal group(s).

Scientific Management Theory: Frederick W Taylor in his famous book Scientific

Management discussed that the efficiency of industrial organizations can be best
obtained by task specialization and standardization and the centralization of decision-
making power at the top of the hierarchy. He proposed to remove the mental work
from the workshop and to put in the hands of management. Such a principle treated
the worker as an extension of the machine or organization. Taylor's approach is often
referred to as mechanistic theory.

Human Relations Theory: Emerged as a reaction against Taylor's scientific

management theory. Human relations theory argues that people also need the security,
companionship, identity and guidance of the informal peer group because in modern
large-scale organizations, work is a collective experience.

Socio-Technical Systems Theory: This theory attempts to combine both the technical
and social factors affecting work so as to bring about the most effective overall
performance.

Functional Systems Theory: Talcott Parsons combined elements of Weberian

bureaucratic theory with those of other systems theory. According to Parsons,
organizations are more flexile and capable of adaptation. The various parts of
organizations are interdependent, they certain needs that they have to meet for
survival, they have goals and the whole (organization) is something more than the
sum of all the individuals who are members of the organization.

 Social Action and Interactionist Theory

David Silverman, Alvin Gouldner, Ralph Glasser are notable sociologists who
contributed to these types of theories. They say that it is people, not the organizations,
have goals. They also combine a sense of historical and institutional context with an
understanding of the meaning actors (workers) attach to their behavor (work). They
have discussed on the importance of understanding how human behavior, particularly
in its emotional rather than its rational aspects, can affect organizations. Stanley
Cohen and Laurie Taylor have extended their concept of resistance to more everyday,
as distinct from totally bureaucratic situations. They give examples of how at work
and in schools, people attempt to "manage" their own situations, despite of constraints
imposed by the organized environment.

 Conflict Theory

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T Parsons tends to see power in organization as being used for necessary purposes in
the common interest in maintaining law and order. Whereas Marx and Weber see it as
being used by groups or classes mainly in their own interest. Weber feared the abuse
of power by bureaucrats on their own behalf, and Marx on behalf of the capitalist
class. Clegg and Dunkerely were concerned to how private troubles arising in
organizations can be related to public issue. They also discussed about control of
workers by employers, extreme fragmentation of the labor process, difference
between buyer and sellers of labor, exploitation of labor, etc. Immanuel Wallerstein
gives the broadest dimension possible to organizational analysis. He suggests that
national societies are inadequate units for economic and social analysis and that they
should be seen as one organizational level within the capitalist world economy.
Specific organizations, like national-state or MNC/TNCs, operate within the capitalist
world system. There are both radical and liberal conflict theorist who have discussed
about the economic and organizational structure of advanced societies, whether
capitalist or socialist.

Richard H. Hall in his book Organizations: Structures, Processes and Outcomes (1997)
has classified the theoretical approaches in five different models:

 The Population-Ecology Model: also known as natural-selection model.

Assumes that the direction of change in organization is simply toward a better fit
with the given environment.
 The Resource-Dependence Model: also known as political-economy model.
Main premise is that decisions are made within the political context organizations
as per the environmental conditions it has been adapted in.
 The Rational-Contingency Model: also known as goal-based approach.
Assumes that our purposes, goals would be equally as important as the
environment and political context.
 The Transaction-Cost Model: explains the existence and operation of
organizations, particularly in the private sector. This models starts with the
transaction or exchange of goods and services.
 The Institutional Model: contains a healthy dose of concern for environmental
issues but basically turns our attention more inward on ways in which practices
and patterns are given values and how interaction patterns and structures are
legitimated.

10.5 Organizational Structure

At some point in human history, new kinds of formal and complex organizations were
created in order to deal with larger number of people and more complex tasks linking
together non-kinship groups in hierarchies of authority. Formal organizations are operated
on the basis of established rules by appointed personnel, to achieve specific goals.
Organizations such as factories, schools, office complexes, supermarkets, etc. are formal
structures. Whereas informal organizations are freely created social group relationship
outside or inside formal organizations.

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Organizational structures can be thought of as "parts" of organization. Organizational

structures can be considered as the arrangement of organizational parts. These are
continually changing as they are influenced by successive waves of members,
interactions among the members, and incessant environmental pressures. Hence,
organizational structure can be defined as the distributions, along various lines, of people
among social positions that influence the role relations among these people.

According to Hall (1996), organizational structures serve three basic functions:

 Organizational structures are intended to produce organizational outputs and to
achieve organizational goals
 Organizational structures are designed to minimize or at least regulate the
influence of individual variations on the organizations. So structures are imposed
to insure that individuals conform to requirements of organizations, and
 Organizational structures are the setting in which power is exercised, decisions
are made and organizational activities are carried out.

Organizations are composed of multiple structures. There are structural differences

between work units, departments and divisions. These differences occur as per the levels
in the hierarchy. Intra-organizational variation is found both across organizational units
and up and down the hierarchy.
Organizations do have multiple forms. Weber has described about the ideal type
bureaucracy. Burns and Stalker have talked of multiple organizational forms. Jerald Hage
in his book Axiomatic Theory of Organizations has noted three types of structural
characteristics of organization: Complexity, formalization and centralization.

 Complexity: in terms of horizontal differentiation, vertical or hierarchical

differentiation and spatial dispersion, also in terms of extent of coordination and
control.
 Formalization: the rule and procedures designed to handle contingencies faced
by the organization. There are maximal and minimal formalization. It is linked
with other organizational properties like power relations, changes in programs and
use of technology.
 Centralization: the distribution of power within organization. The nature or
extent of centralization is determined by size of organization, technology, and
environmental relations.

Major factors affecting organizational structure are:

 Contextual factors: the situation in which an organization operates. Such

situation may be within and beyond the organization's control. Contextual factor
includes organizational size, technology, internal culture or organizational
climate, the environment, and national cultural factor.
 Design factor: includes strategic choice factor and the institutional factor.

Amitai Atzioni provided a useful typology of formal organizations in modern societies.

These are:

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 Voluntary Organizations: in which members can freely enter and leave the
organization. They are not paid, although when the organizations get large, there
is a salaried professional staff, which organized bureaucratically.
 Coercive Organizations: which separates members from the society and tightly
regiments their activities under the ever-present threat of physical coercion.
 Utilitarian Organizations: where people enter the bureaucratic structure for some
practical reason and where, in rational choice theory's terms, they have calculated
the costs of entering with the rewards to be received.

According to David Silverman (The Theory of Organization-1970), sociologists view

formal organizations as:
 Formal organizations arise at an ascertaining moment in time
 They exhibit patterns of social relations which are less taken for granted than
those in non-formal ones and which organizational participants seek to coordinate
and control, and
 Planned changes in these organization occur and nature of social relation also
occur
Some organizational theorists are beginning to question the established framework of
their discipline. Michael Reed in his book Scripting Scenarios for New Organizational
Theory and Practice (1991) has commented that organizations are not a single coherent
category of entities but vary greatly and change rapidly. Similarly, French
poststructuralist Michel Foucault discards the notion that organizations have fixed
normative structures and sees them instead as the outcome of power and ideas in practice.

The Ecology of Formal/Complex Organizations

Every organization exists in a resource niche-a particular set of clients, members,

customers, government subsidies, technology, expertise, or any other resource that
enables the organization to survive. Organizations potentially compete with each other
for the resources available in a niche. The whole population of organizations, like species
in biosphere, emerges to exploit resource niches and then die or at least decline in
numbers when the niche is overexploited. The notion of niche density further helps
explain the competition between or among the organizations. The collapse or revival or
merger of the organizations is also analyzed from organizational ecological point of
view.

Internal Dynamics of Organization

 The informal system/process: generating a set of more personal and informal

relations
 The formal system/process: generating a set of more impersonal and formal
relations
 Authority and Conflict: Hierarchies, differences and inequalities in authority
 Tasks and authority: Nature of organization's tasks and the kind of technology
influences the structure and hierarchy of the organization

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 Control and authority: supervision and monitoring of tasks

 Organizational culture: The nature of tasks, authority, and control greatly
influences the culture of an organization or the symbol systems (values, beliefs
and norms) guiding role behaviour
 Worker/Employee's Behaviour: Workers try to appear busy to justify their job
which is merely wasting time and limits the efficiency of the organization
 Promotion and Demotion (Reward and Punishment)
 Ritualism
 Alienation

10.6 Application of Sociology in Diagnosing Organizational Problems

Organizational problems and dilemmas are the lifeblood of sociology. We have acquire
new and extended knowledge and understanding of human behavior and organization in
order to collect, analyze, and interpret data on human populations and to provide advice
on how to resolve the innumerable organizational problems and dilemmas that confront
our Nepali society.

The following are the real, immediate and relevant sociological issues for the
understanding of the ways in which people are organized:

 How are we to reorganize public corporations and private companies in Nepal in

the face of global economic competition?
 How can we create work settings that are more meaningful for the workers?
 How can we transport people to work in a less congested way?
 How can we render welfare services best?
 How do we organize educational and health services in a less costly way?
 How can we educate our children better in the age of global economic
competition?
 How can we house everyone?
 How are we to reduce poverty?
 How can we mitigate caste/ethnic tensions?
 How are we to plan more efficiently the growth of municipal areas?
 How is bureaucracy and local governance bodies to be more efficient and less
unwieldy?
 How can we conserve and sustain ecology?

We can probably see sociologists working as data analyst, office heads, sales directors,
labor management facilitators, eligibility workers in the welfare system, heads of travel
and trekking agencies, city planning directors, police inspectors and superintendents,
tourism liaison officers, community organizers and social mobilizers, management
consultants, advertising executives, film directors, political leaders and so on.

At this very short listing of job options underscores, the provision of many different kinds
of human and organizational services will be the avenue of sociological invasion. In all

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these jobs, knowledge of organizational dynamics, human behavior, and cultural diversity
is essential. Sociological training in Management and Business Administration is the
result of the transformation of economy and, bureaucracy. Both in industrial and
postindustrial economy, increment occurs in employment of people in manual and non-
manual jobs. This demands more productive activities dealing with people, clients,
government agencies, civil societies, and other corporate units. These functions are
sociological in character because they involve providing human services and coordinating
activities.

Sociological knowledge helps diagnose the following organizational problems:

 Problems associated with the inequalities in the distribution of authority
 Problems associated with the development informal ties within the formal
hierarchy
 Problems associated with the control and authority revolving around the patterns
of internal and external supervision and workers' commitment
 Problems associated with the technological gap and difference in socialization
 Problems associated with the socioeconomic and cultural diversity

The following are the steps to be followed to diagnose the organizational problems as a
kind of lockstep march to truth and knowledge from sociological point of view:
 Statement of the organizational problem
 Research question or hypothesis or set of assumptions
 Collecting secondary and primary forms of data using appropriate sociological
tools and techniques
 Analyzing the data
 Drawing conclusions with respect to the needs of concerned client(s).

10.7 Ethnography of Organizations

Ethnology is the study of culture on the comparative basis and the theory of culture. It is
distinguished from ethnography as being more inclined toward theory and the
comparative studies of institutions. Similarly, ethnography is defined as the study of
individual cultures. It is primarily a descriptive and non-interpretive study of the peoples,
as the prefix "ethno" denotes to the people and "graphy" denotes to description.
Ethnology is concerned with patterns of thought and behavior, such as marriage customs,
kinship organization, political and economic systems, religion, education, folk art, music
and with other ways in which these patterns are embedded in past and contemporary
societies. The ethnographer who usually spends a year or so living with, talking to and
observing the people whose culture he or she is studying. The ethnographer not only tries
to describe the general patterns of their life but also may suggest answer to the following
questions: How are economic and political behavior related? How may the culture of the
people be adapted to changed environment?

Sociologists and other intellectuals have realized the importance of comprehensive and
holistic accounts of the organizations. Some organizations have been doing so in the
name of Personnel Information System (PIS). They are found hiring sociologists and

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anthropologists for carrying out such ethnographic account of organizations. Sociologists

and anthropologists have been found involved in organizational ethnographies with keen
interest. One of the organizational characteristics which strongly influenced the levels of
such organizational learning is that of "organizational culture" only emerged relatively
recently in management studies. It is also seen as reaction to the earlier predominant
"engineering model" of management, which tended to conceptualize organization as
essentially rational and similar and offered simple common sense definition of
organizational culture. Ethnography of organizations is done because organizations are
communities and mini-societies rather than machines. It is natural to expect that each
community will have its own taste and flavor, its own way of doing things, its own habits
and jargon, its own culture.

Ethnography of organizations are done in order to distinguish four different types of

organizational cultural styles which helps categorize the ways in which people within
organizations believe they should work. These include: Power culture, Role culture, Task
culture, and Person culture. Understanding of these four styles of organizational culture
has been influential in both business and development management fields and can be
used to help analyze what goes on within civil society and non-governmental
organizations.

Sociologists (and anthropologists, too) are inclined to argue that their skills in
organizational understanding transcend those of economists and that they could therefore
get under the crude questions of cash flow and marginal rate of return to the deeper social
and cultural realities. Let's now observe the basic features of organizational
ethnographies:
 General, holistic and open-ended in relation to organizational problem definition
 Adding to theoretical discussion
 Not limited to one particular problem or issue but ranging widely across topics
 Some quantitative information sought but great deal of qualitative data and great
deal of interpretation
 Favors thick description and completeness in documentation
 Problem focus is optional
 Great deal of help in preparing database
Ethnography of organization, whether it be of formal or informal organization, simple or
complex organization, governmental or non-governmental organization, profit making or
not-for-profit (service-oriented) organization, is helpful for exploring, analyzing and
interpreting the features of a given organizational niche. Such ethnography in the form of
description of the people living and working together within organizations helps in needs
assessment, program formulation, policy changes, restructuring and in fulfilling other
different types of organizational management.

10.8 Need of Understanding Social Values and Norms for Managing People and
Culture in an Organization
We know that social values are the systems of symbols organized into abstract moral
ideas about good and bad, appropriate and inappropriate, and right and wrong. Values cut
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across diverse social and cultural situations. Similarly, norms are the systems of symbols
informing individuals about how they are expected to behave and interact in a given
social and cultural situations.

Values and norms are the inseparable elements of culture and these are often talked of
being complementary to each other. These all are prone to change. Changes in culture,
values and norms are sometimes hard to identify. They involve changing the prevailing
style, attitude and organizational 'common sense'. Such change examples include altering
how an organization treats its members or users or encouraging local managers to make
decisions without constant reference back to their superordinates.

Within an organization, such type of changes can connect up. If an organization does not
react quickly enough to such changes in values, norms and culture, it may have to deal
with some organizational crises. This is why; organizations start working on strategic
planning and management to avoid spending all their time simply reacting or dealing
with changes. For a new organizational success, a change in culture, values and norms
and how organization operates is essential.

Since cultural change in an organization is about the changing the values, attitudes and
outlooks that are played out in its day-to-day work, it can be hard to define or peoples
with different cultures can exist in different parts/units of the organization. The make up
of an organization's culture and value systems are deeply ingrained in its history, past
experience and traditions.

Organizations cannot survive in this age of wide competition unless it develops

appropriate adaptive mechanisms. Such a cultural mechanisms of adaptations demands an
effective focus on behaviors than on beliefs. Managers should identify the cultures
(composed of value systems and norms) by highlighting their impact on what the
organization does and delivers. They need to take the lead in describing how they see the
current culture, its impact and then how they would like to see it change. Managers as
individuals sharing and learning such culture must be prepared to change their behavior
and action first.

The following are some of the examples of value systems and cultural patterns found in
many of the organizations, which needs better understanding especially in the case of our
organizations:
 "It's not my job, it's other's"
 "It's always abc's fault, not mine"
 "We (already) know best about your problem"
 "Wait until it becomes urgent or a crisis"
 "Come tomorrow"

People in an organizations share common as well as distinct social values, norms and
culture. Modern complex organizations thus necessarily represent the cultural plurality.
The sociological understanding of such cultural diversity does not only uncover the
cultural worlds but it makes possible for us to engage with each other. An organization, in

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this sense, is a cross-cultural encounter and a protracted negotiation. Sociology dealing

with these matters helps ensure that different cultural worlds that come together within an
organization do so in ways that are mutually acceptable and satisfactory.

Because values and norms are parts of culture create a world for people that is very real
and because different value systems and cultures embody different worlds, it is important
to understand what happens when different cultural worlds encounter one another.
Organizations are therefore, in essence, situations of cross-cultural encounter. A person
capable of understanding these sociological issues can better move between cultural
worlds and facilitate their interaction through forms of social and cultural brokerage
which, ultimately enables the individuals in an organization make efforts to achieve
outcomes that are mutually satisfactory.

10.9 Dynamics of Social and Culture Capital

Both the economists and sociologists have constituted a revisionist analysis of the
functioning of economic systems. As a result, the concept of social capital is converged.
The concept of social capital is a tool to aid in the analysis of social systems proper,
including but not limited to economic systems, and to do so without discarding social
organization in the process.

If we begin with a theory of rational action, in which each actor has control over certain
resources and interest in certain resources and events, then social capital constitutes a
particular kind of resource available to an actor. Social capital is thus defined by its
function. It is a variety of different entities, with two elements in common: they all
consist of some aspects of social structures and they facilitate certain actions of actors -
whether persons or corporate actors-within the structure. It inheres in the structures of
relations between actors and among actors because purposive organizations can be
corporate actors just as persons can, relations among corporate actors can constitute
social capital for them as well.

10.9.1 Physical Capital, Human Capital and Social Capital

According to J S Coleman in his article Social Capital in the Creation of Human Capital
(1999), development in the economics of education in the past thirty years has been the
idea that the concept of physical capital embodied in tools, machines, and other
productive equipment can be extended to include human capital as well. Just as physical
capital is created by changes in materials to form tools that facilitate production, human
capital is created by changes in person that bring about skills and capabilities that make
them able to act in new ways. Social capital comes about through changes in the relations
among persons that facilitate action. If physical capital is wholly tangible, being
embodied in observable material form, and human capital is less tangible, being
embodied in the skills and knowledge acquired by an individual, social capital is less
tangible yet, for it exists in the relation among persons.

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10.9.2 The Relation of Social Capital to Other Forms of Capital

Paul S. Adler and Seol-Woo Kwon (1999) have discussed the relation of social capital to
other forms of capital in the article entitled -"Social Capital: The Good, the Bad and the
Ugly". According to them, we have to start with the commonalities and progressively
with the differences in order to discuss such relations. The commonalities and differences
are:

 Like all other forms of capital, social capital is a resource into which other resources
can be invested with the expectations of future, albeit uncertain, returns.
 Like all other forms of capital, social capital is appropriable and convertible, for
example, one's network of friendship can be used for other purposes such as
information or advice. Pierre Bourdieu has discussed that social capital is less liquid
than economic capital.
 Like other forms of capital, social capital can be a substitute or a complement to other
resources. For example, social capital helps improve the efficiency of economic
capital by reducing transaction cost.
 Like physical capital and human capital but unlike financial capital, social capital
needs maintenance. This is because social bonds/relations have to be accordingly
renewed and reconfirmed otherwise they lose efficacy.
 Like human capital but unlike physical capital, social capital does not have a
predictable rate of depreciations. There are two reasons behind this: First, while social
capital may depreciate with non-use, i.e. it does not depreciate with use. For example,
trust/friendship developed today will be reciprocated and amplified tomorrow.
Second, while social capital is sometimes rendered obsolete by contextual changes,
the rate at which this happens is typically unpredictable.
 Like clean air and safe streets but unlike many other forms of capital, social capital of
aggregate actors is a collective good, in that it is not the private property of those who
benefit from it. It takes mutual commitment and cooperation from both parties to
build social capital, a defection by only one party will destroy it.
 Like all other forms of capital, social capital is located not in the actors but in their
relations with other actors. In other words, no one player has exclusive ownership
rights to social capital.

10.9.3 Forms of Social Capital

According to J S Coleman (1999) has discussed the forms of social capital extensively as
follows:

 Social Structures: This form of social capital depends on trustworthiness of the social
environment, which means that obligations are repaid and, the actual extent of
obligations held. Anthropologist Clifford Geertz has also discussed how the rotating-
credit associations oof Southeast Asia serve as efficient institutions for amassing
savings for small capital expenditures, an important aid to economic development.
 Information Channels: This form of social capital inheres in social relations. As
information is important in providing a basis for action, it can be acquired by use of

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social relations. For example, a social scientist who is interested in being up-to-date
on research in related fields can make use of everyday interactions with colleagues to
do so, but only in a university in which most colleagues keep up-to-date.
 Norms and Effective Sanctions: This form of social capital is also powerful when a
norm exists and is effective, though it is sometimes fragile. For instance, effective
norms that inhibit crime make it possible to walk freely outside at night in a city and
enable old person to leave their houses without fear for their safety. In other words, a
prescriptive norm within a collectivity that constitutes an especially important form of
social capital is the norm that one should forgo self-interest and act in the interest of
the collectivity.

10.9.4 Sources of Social Capital

E. Ostrom (1994) in his article entitled -"Constituting Social Capital and Collective
Action" has identified four key sources of social capital: networks, norms, social beliefs
and rules. Later, Paul S. Adler and Seol-Woo Kwon (1999) have added formal institutions
along with rules. In the organizational research literature, Nahapiet and Ghoshal (1998)
have discussed three dimensions of social capital. They are: a) Structural: which includes
network ties, network configuration, and appropriable organization, b) Relational: which
includes trust, norms, obligations and identification, and c) Cognitive: which includes
shared codes/symbols, language and narratives.

Networks: Social capital is essentially about the relationships between individuals and
groups. Social networks of individuals, groups and organizations are thus considered as
the crucial source of social capital. There is variation in the meaning of networks
provided by researchers like Putnam, Ostrom, Brehm and Rahn, etc. All of them have not
missed to focus on internal ties within a society. According to network theorists, social
networks influence a focal actor's social capital both through the actor's direct ties and
through the indirect ties afforded them by virtue of the overall structure of the broader
network within which they are embedded. Such social ties may be both formal and
informal.

Norms: Sociologists have emphasized the role of shared norms and beliefs in
determining the amount of social capital embodied in the content of social network ties.
They have focused on the norm of generalized reciprocity. This type of reciprocity,
according to R D Putnam (1993) involves not 'I'll do for you, because you are more
powerful than I,' nor even 'I'll do this for you now, if you do that for me now, but 'I'll do
this for you now, knowing that somewhere down the road you'll do something for me.'"

Beliefs: Though the role of beliefs has received relatively little attention in the literature
confined to social capital, contributions of Nahapiet and Ghoshal (1998) and Portes
(1988) can be regarded as milestones. Nahapiet and Ghoshal argue that beliefs, in the
forms of shared strategic visions, interpretation, and systems of meaning, play a critical
role in the generation of social capital. Beliefs, according to them are both theoretically
and practically distinct from normative value orientations. Portes argues that shared
experiences and common beliefs that typically result from these experiences contribute to
social capital because they create a strong sense of community and solidarity.

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Rules: Formal institutions and rules have a powerful indirect effect on social capital via
their influence on the first three (above mentioned) sources. They can also have a
significant direct effect. First, formal rules and institutions can shape the network
structure and the content of ties. Formal organization shapes and determines much of
informal organization because many ties become with positions and are not voluntarily
chosen. Second, formal institutions can influence norms and beliefs. For example, strong
government responsive to people's needs plays a direct role in building social capital in
community. Formal organizations can have both positive and negative impacts according
to 'enabling' and 'coercive' forms of bureaucracy within them.

Trust: Though many literature describe trust as one of the forms of social capital, it is
both a source and an effect of social capital. Trust is a psychological state of individuals,
whereas social capital is feature of social structure. However, trust and social capital are
mutually reinforcing because social capital often generates trusting relationships and trust
generated will in turn produce social capital. Trust in people is found correlated with
civic norms. Brehm and Rahn (1997) have discussed that the more citizens participate in
their communities, the more that they learn to trust others; the greater trust that citizens
hold for others, the more likely they are likely to participate. Interpersonal trust in society
or organizations is the result of familiarity, shared norms, and calculations, and it is
buttressed by system trust. Hence, there is a close relationship between the sources of
trust and the sources of social capital.

10.9.5 Benefits/Effects of Social Capital

First we have to discuss what benefits we get from social capital. Benefits of social
capital are:

 Information access: for the focal actor, social capital facilitates access to broader
sources of information at lower cost. Interorganizational networks have a
considerable benefit in helping firms acquire new skills and knowledge and such
social embeddedness allows firms to exchange fine-grained information. Social
capital between independent units within a multinational corporation facilitates
the transfer of information and weak ties/network facilitates the cost-effective
search for new information and tacit knowledge.

 Power: Power and influence facilitate the completion of tasks. Power in the
positive sense enables people to lead others toward a common gal and facilitates
collective action. For example, the board of directors in an organization has power
and decisive role and this body can act as more effective legislative body than an
ideal type egalitarian-collegial organization because some of its actors have
accrued more power and can thus play a leadership role.

 Solidarity: Strong social norms and beliefs, associated with a high degree of
closure of the social network, encourage compliance with local rules and customs,
and reduce the need for formal controls. For example, the effectiveness of a rural

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saving credit group illustrates this solidarity benefits. The organizational culture
literature have also discussed similar phenomena with strong culture and
solidarity. Intergroup ties characteristic of frequent interactions permits faster
dispute resolution and prevents the accumulation of grievances and grudges. Trust
networks thus transmit more sensitive and richer information that other types of
networks because of its solidarity benefit.

Besides these, information diffusion, social welfare, and civic community/organization

are the external and broader benefits of social capital.

The effects or consequences of social capital are plural. Most of the research have been
conducted in the area of school attrition and academic performance, children's intellectual
development, sources of employment and occupational attainment, juvenile delinquency
and its prevention, and immigrant and ethnic enterprise. Literature that are confined to
the empirical analysis of social capital have distinguished three basic functions of social
capital.

 As a source of social control, social capital acts as a means of rule

enforcement. For example, the social capital created by tight community networks
is useful to parents, teachers, and police authorities as they seek to maintain
discipline and promote compliance among those under their charge.

 As a source of family support, social capital acts as a source of parental and

kin support. For example, children possess more social capital benefits from a
joint or extended family than a nuclear family. Parental intellectual and other
resources contribute to the forms of family capital useful in facilitating positive
children outcomes.

 As a source of benefits through networks, social capital acts as a source of

gaining assets through membership in networks. Examples of such networks can
be seen both at interpersonal and intergroup or interorganizational linkages or
partnerships. NGO federations, student federations, cooperative federations, etc.
are some of them.

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