A theoretical analysis of the relationship between social capital and corporate social responsibility: concepts and definitions

Abstract

The paper studies the relationship between social capital (SC) and Corporate Social Responsibility (CSR) by investigating the idea of a virtuous circle, between the level of SC and the implementation of CSR practices, that fosters socio-economic development by generating social inclusion and social networks based on trust and trustworthiness. Following the literature on SC that stresses its multidimensional character, both a cognitive and a structural idea of SC are considered. The first one essentially refers to the dispositional characters of agents that affect their propensity to behave in different ways. The latter refers to social networks connecting agents. With regard to the concept of CSR, a contractarian approach is adopted and CSR is considered as an extended model of corporate governance, based on the fiduciary duties owed to all the firm’s stakeholders. Among stakeholders, a original distinction between “strong” and “weak” stakeholders is introduced. The key element that allows to distinguish between strong and weak stakeholders concerns the consequences that the break in the relationship with the firm produces both on the stakeholder and on the firm. Both these two categories have made specific investments in the firm. However, strong stakeholders are precious for the firm because they bring in strategic assets. On the contrary, weak stakeholders do not bring strategic assets into the firm and firms have material incentives at defecting in the relationship with them. Considering the notions of cognitive and structural SC, a contractarian approach to CSR and the distinction between weak and strong stakeholders, the paper shows that: a) the level of cognitive SC plays a key role in inducing the firm to adopt and observe CSR practices that respect all the stakeholders; b) the decision of adopting formal instruments of CSR contributes to create cognitive SC that is endogenously determined in the model; c) the level of cognitive SC and the decision of adopting CSR practices creates structural SC in terms of a long term relationship between the firm and the weak and strong stakeholders.Social capital, Corporate Social Responsibility, Social network, Ideal utility, Cooperation, Trust.