Social Capital and the Equilibrium Number of Entrepreneurs

Vicente Salas-Fumás () and J.Javier Sanchez-Asin ()
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J.Javier Sanchez-Asin: University of Zaragoza Faculty of Economics.

No 1105, Working Papers from Departament Empresa, Universitat Autònoma de Barcelona

Abstract: Social capital is viewed either as a proprietary asset that serves private interests, including those of entrepreneurs, or as a collective asset that supports trust-based transactions saving on transaction costs both in markets and within the boundaries of firms, and benefiting society as a whole. This paper explains the relative specialization between entrepreneurs and market-governed exchanges as a result of the interaction between social capital that lowers transaction costs, and the scale economies of ability in managerial jobs (Lucas 1978). The main hypothesis formulated in the paper is that higher social capital will benefit the hierarchy relatively more than the market as a governance mechanism, and therefore in economies with higher social capital, the equilibrium number of entrepreneurs will be lower and their average span of control larger than in economies with lower social capital. The empirical evidence, with data from the Spanish Autonomous Communities, is consistent with this prediction.

Keywords: Social capital; entrepreneurship; entrepreneurial skills; occupational choice; self-employment; organization of firms. (search for similar items in EconPapers)
JEL-codes: D23 J24 L26 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2011-09, Revised 2011-09
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Published in Working Papers at the Department of Business, November pages 1-43

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Persistent link: https://EconPapers.repec.org/RePEc:bbe:wpaper:1105

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