Japanese Management for a Globalized World by Satoko Watanabe

Author:Satoko Watanabe
Language: eng
Format: epub
Publisher: Springer Singapore, Singapore

Inward- and Outward-Oriented Social Capital

Several studies have shown that social capital and the trust on which it is built can have a positive effect on economic results. 16 Studies have also suggested that building relationships of trust can directly contribute to improving a company’s profits. Frederick Reichheld, for example, has drawn on examples of many successful companies to show that relationships of trust are ultimately linked to company profits. 17

However, as Putnam and others who have studied social capital have shown, there are various dimensions to social capital , not all of them positive. It can also have a negative impact on social development and welfare. In discussing social capital, it is therefore necessary to categorize its effects and identify which ones have a positive effect on helping companies to grow and economies to expand.

Social capital works to the advantage of economy and society when it facilitates cooperation with external resources, mutual support, and information diffusion, and inspires trust and reciprocity on a broader scale. Social capital that produces these positive effects can be referred to as “expansive” or “outward-oriented” social capital . This type of social capital gives organizations or individuals the energy and drive to move forward and expand. In Japan, the relationships of trust and the norms of reciprocity that developed from the ie system went beyond the family unit and became part of the culture of modern corporations, making an important contribution to companies’ growth, as we have seen. This is a good example of how outward-oriented social capital can function effectively.

By contrast, we can use the term “inward-oriented social capital ” for the type of social capital that serves to strengthen bonds among group members and promotes homogeneity and uniformity within the group. In some circumstances, this type of social capital can have a negative impact on social development and welfare.

Social capital thus can be categorized into outward- and inward-oriented social capital , depending on how it functions. Because these two types of social capital can produce opposite effects, it is vital to differentiate between them. A number of previous studies have discussed appropriate ways of categorizing social capital ; Putnam cites a work by Ross Gittel and Avis Vidal as the oldest study known to him to categorize and label the different types of social capital. 18

Inward-oriented social capital helps to stabilize specific networks of reciprocity that can help enhance solidarity for collective action or mobilize support for unfortunate members of the community who have fallen on hard times. However, its inward-looking orientation tends to reinforce in-group bonds, often producing an exclusive identity that strengthens the homogeneity of the group. Inward-oriented social capital can sometimes be misused for exclusionist or antisocial purposes. Examples include extreme political or nationalist groups, factions , and criminal organizations, which are often kept together by the exclusive bonds and antagonism toward outside groups based on inward-oriented social capital. It is possible that this type of social capital, increasing the cohesiveness of interest groups, can be used to promote particular vested interests and can consequently have a negative effect on society.

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