Research proposal-Sample

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The Dark Side of Social Capital: Negative Influence on Knowledge Acquisition and

Innovation Performance in Marketing Channels

Research Proposal

Abstract

Numerous studies of social capital have focused primarily on its positive effects,

overlooking its negative consequences. Built upon Nahapiet and Ghoshal's three dimensions

of social capital theory, this paper investigates the negative effects of marketing channel

member’s social capital on knowledge acquisition and innovation performance in china. And

this paper intends to address the following issues: (1) summarizes the downsides of social

capital in marketing channels, (2) explores the negative consequences of social capital from

structural, relational and cognitive dimension proposed by Nahapiet and Ghoshal (1998), (3)

indicates the influences of those negative consequences on channel member’s knowledge

acquisition and innovation performance.

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1. Introduction

1.1 Problem statement

During recent years, the concept of social capital has enjoyed a sustained rise to

prominence among researchers and a number of theoretical analyses of social capital have

been published (Coleman, 1988; Burt, 1992). Social capital refers to resource that actors

derive from specific social structures and use for pursuing their own interests; it is created by

changes in the network relationship among actors (Baker, 1990). Recent research has applied

social capital in various field, including knowledge transfer and , Tsai, 2001;

Inkpen and Tsang, 2005), innovation and creativity), community issues (e.g., Alan, 2006),

value , Tsai and Ghoshal, 1998), organization behavior (e.g., Emmerik and

Euwema, 2008), as well as , Anderson and Jack, 2002; Liao and

Welsch, 2003). Although, social capital has proliferated in management study, most

literatures focus largely on its positive side, overlooking its negative consequence (Portes,

1998). Portes (1998) points out that social capital cuts both ways, it may provide the sources

of socioeconomic ascent, and among others it has exactly the opposite effect. As for the

positive functions, social capital is a source of familial support, social control, and economic

resource (Portes and Sensenbrenner, 1993); while on the other hand, it can impose constraints

and costs (Portes, 1998; Portes and Sensenbrenner, 1993). Firstly, the excessive demands on a

few successful central actors, which may take the form of “free riding”, will curtail

innovation and knowledge acquisition. Put it further, free riding may also damage

cooperation and support norms in a network. Secondly, cohesive groups or subgroups may

relatively separate themselves from the rest of the network, resulting in distrust of outsiders’

knowledge, thus prevent innovation. Finally, the normative pressures of close-knit group may

restrict accesses to newcomers’ knowledge.

1.2 Statement of the research objectives

Accordingly, this study mainly exploits the possible negative influence of social

capital on knowledge acquiring and innovation performance in marketing

following tasks will be addressed: (1) summarizes the downsides of social capital in

marketing channels, (2) explores the negative consequences of social capital from structural,

relational and cognitive dimension proposed by Nahapiet and Ghoshal (1998), (3) indicates

the influences of those negative consequences on channel member’s knowledge acquisition

and innovation performance.

1.3 Definitions of terms

Social capital: the sum of the actual and potential resources embedded within,

available through, and derived from the network of relationships possessed by individuals or

social units (Nahapiet and Ghoshal, 1998).

The structural dimension of social capital involves the pattern of relationships

between the network actors and can be analyzed from the perspectives of network ties,

network configuration, and network stability. The relational dimension of social capital

concerns the personal relationships people have developed through a history of interaction

(Granovetter, 1985). Cognitive dimension, referring to shared representations, interpretations,

and systems of meaning among parties, manifests itself as attributes like shared codes or

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language, shared vision and tacit knowledge.

Marketing channel is a set of practices or activities necessary to transfer the

ownership of goods, and to move goods, from the point of production to the point of

consumption and, as such, which consists of all the institutions and all the marketing

activities in the marketing process.

Knowledge acquisition includes all process involved in generating and development

of knowledge (Grover and Davenport, 2001).

Innovation performance refers to the proportion of newly established business and the

proportion of its sales revenue.

2. Review of the relevant literature

2.1 Social capital

The term social capital was originally appeared in community study, it used to

describe the relationships embedded in crosscutting personal ties which was useful for

personal survival and city neighborhoods (Jacobs, 1961). The first systematic contemporary

analysis of social capital is produced by Pierre Bourdieu, the French sociologist who defines

the concept as the aggregate of the actual or potential resources which are linked to

possession of a durable network of more or less institutionalized relationships (Bourdieu,

1985). Coleman (1990) defines social capital by its function as “private-owned capital

property in the form of social structural property. They consist of some aspect of social

structures, reside in interpersonal relationships and structures, and facilitate certain actions of

actors within the structure”. Portes (1998), who reviews the origins and functions of social

capital in details, defines social capital as “the ability of actors to obtain scarce resources by

virtue of membership in social networks or other structures.” This ability to obtain is not

individual property but assets gained through membership in networks. Based on “structure

holes” theory, Burt develops the concept of social capital. According to Burt, the one who

occupy the structural holes has information and resources benefits which occur in three forms:

access, timing and referrals. In other words, Burt considers individuals’ social network

constitute individuals’ social capital.

Accordingly, the term social capital has been traditionally viewed as the set of social

resources embedded in relationships (Burt, 1992; Bourdieu, 1985). Other academicians,

however, have broadened the definition of social capital, including not only social

relationships, but also the norms and values associated with them (Coleman, 1990; Portes and

Sensenbrenner, 1993). A comprehensive definition originates from Nahapiet and Ghoshal

who define social capital as the sum of the actual and potential resources embedded within,

available through, and derived from the network of relationships possessed by individuals or

social units. He elaborates three dimensions of individual’s social capital: structural,

relational and cognitive capital. According to SSCI, Nahapiet and Ghoshal' s research is the

most cited social capital article (476 hits) across business and management subjects (Lee,

2009). A number of researches has approved and applied this theoretical research (e.g., Liao

and Welsch , 2005；Tsai and Ghoshal, 1998). Consequently, this study adopts the three

dimensions mentioned above.

2.2 The downside of social capital

Portes (1998) summarizes the negative consequences of social capital as follow. First,

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the same strong ties that bring benefits to members of a group commonly enable it to bar

others from access. The group or community closure, to some extent, prevents the inflow of

new blood from the outside network, which is not advantageous to the intake of new

knowledge and information. Second, group or community closure may, under certain

circumstances, prevent the success of business initiatives by their members. While in a highly

cooperative and enjoyable community, the intimate relationship results in a substantial

problem, “free-ride”. Trust and social capital among members of group or community have

become the privileges members obtain resources from each other. Third, community or group

participation creates demands for conformity.

Kilduff and Tsai (2003) illustrates that sustaining of relationships require deliberate

investment of related resources. Riley and Eckenrode (1986) demonstrate further that

establishing and sustaining of relationships in turn would affect people’s welfare, because

some communities can’t afford such an investment of resources. Under Chinese context,

“Guanxi” evolves into the foundation of social capital accumulation, which inevitably

requires a large amount of investment In order to keep a sustainable relationship with channel

members, manufactures are required to spent time and money to maintain long-term

relationships with its valuable retailer, retailers are forced to take special effort in public

relationship management

Accordingly, this paper intends to discuss the negative consequence of market channel

member’s social capital on knowledge acquisition in three aspects: excessive inputs, freedom

constraint and creativity constraint.

2.3 Social capital and Knowledge acquisition

Organizational learning is a process of knowledge acquisition, knowledge

assimilation and knowledge exploitation (Argote, 1999). Huber (1991) indicates that an

organization learns if any of its units acquires knowledge that it recognizes as potentially

useful to the organization. Grover and Davenport (2001) illustrates the process of knowledge

management can be represented as three sub-processes: knowledge generation/acquisition,

knowledge codification and knowledge transfer. Knowledge generation includes all processes

involved in acquisition and development of knowledge, knowledge codification involves the

conversion of knowledge into accessible formants. Knowledge transfer includes the

movement of knowledge from the point of acquisition. Due to the purpose of this study, we

focus on knowledge acquisition among inter-organization level.

3. Hypothesis

3.1 Structural dimension

The fundamental proposition of social capital theory is that network ties provide

access to resources and information (Liao and Welsch, 2005). Nahapiet and Ghoshal (1998)

points out that the structural dimension of social capital is the pattern of relationships among

the network actors. Liao and Welsch (2005) illustrate that the most important facet of

structural dimension is the network ties and network structures among network actors. The

strength of ties consists of strong and weak ties and is characterized by intimacy and

interaction frequency between actors. Portes (1998) points out that strong ties restrict

innovation, resulting in network closure and preventing the inflow of new ideas from the

outside networks.

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H 1: The stronger the strength of ties, the tighter the restriction on creativity, and vice

versa.

H 2: The stronger the strength of ties, the tighter the restriction on organization

freedom, and vise versa.

Sustaining of strong ties implies the increasing intimacy and interaction frequency

between channel members, manifesting as a large amount of time, money invested in.

Consequently, this research hypothesizes that

H 3: The stronger the strength of ties, the higher the cost inputs.

In order to make sure that the investment of time and money in social networks is

worthwhile, channel members have to take the interest and emotion of other network actors

into consideration in the process of decision-making. Thus the paper proposes

H 4: The higher an organization’s cost inputs, the tighter the restriction on freedom.

3.2 Relational dimension: trust

The relational dimension of social capital concerns the personal relationships people

have developed through a history of interaction (Granovetter, 1985). It concentrates on the

particular relationships people have, such as respect, trust, and friendliness (Granovetter,

1992). Nahapiet and Ghoshal (1998) elaborates relational dimension in four essential

elements which are trust, norms and sanctions, obligations and expectations and identity.

From organizational perspective, the relational dimension refers to the relationship

organization have developed through a history of interaction among its channel members.

A mounting evidence demonstrates that when trust is built up between companies,

they are more willing to engage in cooperative activity through which further trust can be

generated (Tyler and Kramer,1996). Those cooperative activity includes knowledge sharing

among channel members. Favorable social relations are beneficial for company to establish

positive organization image, thus reinforce the knowledge acquisition process. Following

Liao and Welsch’s research, this paper concentrates on trust in relational dimension among

memberships and consequently argues

H5: The higher the degree of trust, the less the restriction on freedom.

3.3 Cognitive dimension

Cognitive dimension, referring to shared representations, interpretations, and systems

of meaning among parties, manifests itself as attributes like shared codes or language, shared

vision and tacit knowledge (Nahapiet and Ghoshal, 1998). In some cases shared norms may

create excessive expectations of obligatory behavior and may possibly result in problems of

free riding (Inkpen and Tsang, 2005). For instance, members within the network usually

enjoy priority in the process of partner selection, even though the members are not the

optimum choice. However, creativity of network members will be restricted if the cognitive

dimension of network is highly consistent. In marketing channels, if network members hold

similar values, it indeed, facilitates knowledge transfer, but with the similarity increases, it

seems to work as barriers for approaching creative knowledge and innovation. Based on this

proposition, this research argues

H 6: The relationship between cognitive dimension and freedom constraint is an

inverted U-shape

H 7: The relationship between cognitive dimension of social capital and restriction on

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creativity is an inverted U-shape.

3.4 Knowledge acquisition and innovation performance

The strength of ties don’t follow the rules that the stronger the strength of ties, the

better the results, because strong ties tend to convey redundant information, while weaker ties

can be more effective in finding jobs, communicating knowledge and offering technical

advice (Burt, 1992;

Granovetter, 1973). Portes (1998) points out that strong tie restrict

innovation, resulting in network closure and preventing the inflow of new ideas from the

outside networks. When members in marketing channel are fixed and bounded together, less

opportunity for them to obtain innovation knowledge because of the homogeneity of

knowledge shared. Simultaneously, strong ties hinder optimum decision making because the

interests and emotions of other network actors should also be took into consideration, this

constraint is especially salient in china where “face” concept is prominent. Furthermore, if

freedom constraints are accompanied with channel members, less opportunities are available

for them to choose new members which means fewer chances to exposed to new knowledge.

Finally, creativity constraint may influence channel member’s ability of knowledge

integration, thus argues

H8: The stronger restriction on freedom, the less valuable knowledge will be

acquired.

H9: The stronger restriction on creativity, the less valuable knowledge will be

developed.

H10: Knowledge acquisition is positively related to innovation performance.

Based on an extensive and critical literature review and consider the unique context of

the study, the researcher presents proposed model in Figure 1

Relational

Dimension

Excessive

Inputs

Structural

Dimension

Freedom

Constraint

Knowledge

Acquisition

Cognitive

Dimension

Innovation

Performance

Creativity

Constraint

Figure 1: Conceptual Model

4. Method

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4.1 Participants

Industry of convenience product are chosen owing to its complexity which originates

from its large customer base and intricate channel environment, marketing channel members

in convenience product industry such as manufacture, wholesaler as well as retailer are

selected. The questionnaire in this research will adopt the convenience sampling method due

to the challenge of reaching channel members. To make sure confidentiality, the researchers

would not request the full names of participants’ organization and promises to make their

responses completely confidential and anonymous. What’s more, Data is planned to collect

from three district of china, Bei Jing, GuangZhou and Shen Zheng.

4.2 Data collection plan

4.2.1 Operational definitions of all variables

Social capital: the sum of the actual and potential resources embedded within,

available through, and derived from the network of relationships possessed by individuals or

social units (Nahapiet and Ghoshal, 1998).

Liao and Welsch (2005) illustrate that the most important facet of structural

dimension is the network ties and network structures among network actors. Therefore, this

paper uses the concept of the strength of ties to measure the structural dimension of social

capital. Relational dimension refers to four essential elements which are trust, norms and

sanctions, obligations and expectations and identity. Cognitive dimension, referring to shared

representations, interpretations, and systems of meaning among parties, manifests itself as

attributes like shared codes or language, shared vision and tacit knowledge (Nahapiet and

Ghoshal, 1998).

In china, “Guanxi” evolves into the foundation of social capital accumulation, thus,

Excessive inputs refers to large amount of fund, time and energy spending to maintain the

consistence of marketing channel; Freedom constraint illustrates network participation

creates demands for conformity, thus sacrifices and constraints on freedom are the very prizes

for the benefits organization obtained from social capital (Portes,1998); Creativity constraint

refers to network closure, to some extent, prevents the inflow of new blood from the outside

network, which is not advantageous to the intake of new knowledge and information, thus

prevent the success of business initiatives.

Knowledge acquisition includes all process involved in generating and development

of knowledge (Grover and Davenport, 2001).

4.2.2 Reliability and validity of instruments

The downsides of social capital will mainly originate from our exploratory research

because little literature is available for reference. Based on Churchill’s (1979) paradigm for

developing better measures of the variables, the researcher has gone through an intensive

study of the literatures. With the help of inductive method, primary measure item pool will

emerge. After consulting three professors, the researcher will delete ineligible variables and

then conduct exploratory and confirmatory factor analysis. Later, a focus group interview will

be conducted, the researcher plans to ask the interviewees to review their past experiences,

write down the negative influence of social capital, and discuss them in details. As a result,

items of similar shades of meaning will be deleted. Further, the researchers will consult the

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findings from Nahapiet and Ghoshal (1998) , Inkpen and Tsang (2005) , and invite several

professors to assist us with content validity. Finally, By consulting the research method

proposed by Zaichkowsky and Judith (1985) to scored the items, with 1 for the “extremely

representative”, 2 for the “ representative” and 3 for the “nonrepresentative” to figure out the

most representative item.

In order to improve the content validity, all of the items in the questionnaire will

conduct back translation and ask suggestions from expert. Before the formal research, the

researcher plans to distribute initial questionnaires in order to get feedbacks from respondents.

Moreover, convergent validity, discriminant validity and reliability of all the multiple-item

scales will be tested.

4.3 Proposed analysis of the data

Partial Least Squares (PLS) is an appropriate choice for testing a research model.

Different from LISREL-type and AMOS-type structural equation modeling (SEM), which is

based on the covariance structure of the latent variables, PLS (Partial Least Squares) is a

component-based approach. Comparing with LISREL and AMOS, PLS is of the following

merits: first, PLS does not place a very high requirement of normal distribution on the source

data (Chin, 1998; Gefen and Straub, 2005). Besides, the iterative algorithm of PLS is

composed of least square method, so no problem that cannot be identified by regression

model will be generated; second, PLS is capable of handling a relatively small sample size

(Chin, 1998); third, PLS aims at examining the significance of the relationships between

research constructs and the predictive power of the dependent variable (Chin, 1998). Thus,

PLS is suitable for predictive applications and theory building. Because PLS considers all

path loadings simultaneously, which allows analysis of direct, indirect, and spurious

relationships; fourth, PLS estimates multiple individual item loadings in the context of a

theoretically specified model rather than in isolation, which also enables researchers to avoid

biased and inconsistent parameter estimates for equations (White,et al., 2003).

Consequently, the researchers choose PLS to conduct the data analyses in this study.

4.4 Time table

5. Implications and limitations

First, the research doesn’t distinguish different types of knowledge, tacit knowledge

and explicit knowledge may play different role. Furthermore, convenience product industry

owns its special feature, thus future research should address different marketing channels in

divergent industry.

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