Turning Public into Private: How Local Social Capital Amplifies Entrepreneurs’ Network for Innovation
This paper explores the effects of local social capital and entrepreneur’s social capital on firms’ innovation. We conceive local social capital as a collective asset that represents the level of social interaction within a given geographical area. Entrepreneur’s social capital is an individual asset and characterizes the investment that the entrepreneur makes in order to build his or her own social network. Using a unique data set, which combines public data with survey data, we show that both local and entrepreneur’s social capital foster firms’ innovation. In addition, we demonstrate that there is a complementary effect of local social capital and entrepreneurs’ social capital in affecting firms’ innovation. Being located in an area characterized by a high degree of local social capital increases the effectiveness of entrepreneur’s social capital on innovation. At the same time, entrepreneur’s social capital amplifies the effects of entrepreneur’s social capital on innovation.