Social Capital and Innovative Performance in Developing Countries The Case of Ugandan Entrepreneurs

Abstract

2 Abstract This paper examines the relationships between the characteristics of networks of small scale entrepreneurs and their innovative performance in a developing country context. It is based on a survey of entrepreneurs held in Uganda in May 2008. Networks represent social capital that can contribute to economic success and innovative performance. But sometimes networks can also act as obstacles to innovation. In the literature there are two opposing strands. The line of research initiated by Coleman points to the advantages of being embedded in tightly knit networks, which provide trust, support and access to innovation. Burt emphasizes the disadvantages and constraints of closed and dense networks, where many relationships are redundant and actors are isolated from the outside world. This paper applies these theories in a developing country setting, where they have so far not been studied. It provides an empirical synthesis between the Burt and the Coleman perspective. The relationship between network constraints and innovative performance is found to be curvilinear. Increasing density and constraint initially has positive effects on innovative performance, but beyond an optimum negative effects start to prevail. Network size and human capital have positive effects on innovative performance.

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