THEORETICAL FRAMEWORK

While borrowing from the social network theory, this section employs the social capital framework of Nahapiet and Ghoshal as a framework for understanding the complexity of social capital. The theory suggests that social capital can be conceived as the actual and potential resources emerging from networks of social interaction. The major constructs of social capital as identified by Nahapiet and Ghosal (1998) are relational, structural and cognitive (see Figure 2.1).

First, the relational dimension refers to the norms, expectations and levels of trust or respect that are developed through repeated interactions within the network. Here, constructs such as obligation and expectation, as well as social norms and sanctions, merge under the relational label (Nahapiet & Ghosal, 1998:244). This dimension is not of interest for the current study.

Second, the structural dimension (the current study’s area of interest) is the overall configuration of the network at hand and the access to resources that it enables. In this regard, information channels provide access to information as well as other kinds of resources that may constitute the basis for action. As Tsai and Ghoshal (1998:465) point out: “The location of an actor's contacts in a social structure of interactions provides certain advantages for the actor. People can use their personal contacts to

get jobs, to obtain information, or to access specific resources”. For ECFs, social interaction may constitute a resource, particularly when it comes to achieving competitive advantage through the sharing and creation of knowledge. The involvement of ECFs in networks reflects positively on their business performance, as they can obtain support for their activities in the domestic construction market and enhance turnover, employment, market share and profit (Džunić, 2010:144).

Finally, the cognitive dimensionencompasses the set of interpretive schemes, codes and languages that agents from the same network share and refer to in order to make sense of their behaviours and of the environment (Nahapiet & Ghoshal, 1998:244). It simply implies that possessing information about the context is not enough, as agents also need to be able to interpret it correctly and respond accordingly (Hermans &

Lederer, 2009:5; Camps & Marquès, 2011:8). This dimension is also not of interest for the current study.

In the context of organisations, social capital has been used to explain the creation and sharing of organisational knowledge. Thus, organisations are seen as social collectives and knowledge-creating entities (Hermans & Lederer, 2009:1). There are two types of knowledge: tacit and explicit. Tacit knowledge is subjective and experience-based knowledge that cannot be expressed in words, because it is context specific (Venter, Urban & Rwigema, 2012:43). In the context of ECFs, this includes cognitive skills such as technical know-how which involves how specific construction activities are carried out.

Conversely, explicit knowledge is objective and rational knowledge that can be conveyed in words, sentences, numbers or formulas (Venter et al., 2012:43).

Knowledge management is a process of generating value for an organisation and as such requires a commitment from organisations to continuously create new task- related knowledge and disseminate it throughout the organisation (Nonaka &

Takeuchi, 1995:26; Goh, 2005:6; Dahal & Adhikari, 2008:5). This implies that the greater the social capital networks in ECFs, the stronger the influence of organisational

capital on knowledge-producing capacity of ECFs. The choice of Nahapiet and Ghoshal’s (1998) social capital framework (Figure 2.1) as an analytical framework in this research, over a number of competing models, is based on the following three reasons noted by Johnson (2010:29):

(1) The framework has been developed from an organisational perspective.

(2) The combined internal and external appreciation of social capital is suited in both internal group dynamics (i.e., within a firm), and external relationships that may exist in a business community supply networks or contracted arrangements.

(3) The model offers a reasonable and comprehensive conceptualization of social capital that accommodates the major concerns of the extant literature.

Figure 2-1: Nahapiet and Ghoshal's social capital framework Source: Nahapiet and Ghoshal (1998:242)

Nahapiet and Ghosal (1998:244) acknowledge that social capital takes many forms and “each of these forms has two characteristics: (1) it constitutes some aspects of the social structure and (2) it facilitates the action of the individual within the structure”.

According to the structuration theory of Giddens (1979:17), human beings are seen as being thoughtful, knowledgeable and creative. Giddens (1979) further believes that people rarely act in self-conscious ways or perform fully conscious actions. Rather, people perform semi-conscious practices and discursive thinking does not take place with every action (Inglis & Thorpe, 2012:54). It can be argued, consistent with the structural dimension of social capital that ECFs operating within a particular structure will behave and act in a particular manner that they would necessarily not act if they (ECFs) were not members of a particular network.

Although Nahapiet and Ghosal (1998) used the terms ‘structural’ and ‘relational’

dimensions, the main components were not significantly different from the previous components discussed in Section 2.3 above. That is social networks, trust and norms are still key elements of social capital in their classification. The only difference is in the ‘cognitive’ dimension. The cognitive dimension refers to “resources providing shared representations and systems of meaning among parties” (Nahapiet & Ghosal, 1998:244; Yildirim, 2012:9).

The cognitive dimension is often represented by common language and codes that are shared only among members in a certain group or firm (Bresne, Edelman, Newell, Scarborough & Swan, 2004:17; Zheng, 2010:157). Zheng (2010:157) contends, however, that comprehensive literature reviews relevant to social capital and innovation indicated that the cognitive dimension has not been sufficiently researched and there is little agreement about it. In addition, the cognitive dimension would hardly be detected unless a study focused on the interactions and communications only among members in a group or intra-firm networks in limited contexts. In other words, if the researcher was able to confine ECFs’ networks or members to a certain context, considering the cognitive dimensions would be beneficial for a better understanding of the effect of social networks on innovation. The cognitive as well as relational

dimensions of social capital are, however, not considered for the purpose of the current study.