It’s more complicated than we think: The implications of social capital on innovation

Researchers often focus on the positive implications of social capital, not recognizing that it may put the organizations at a competitive disadvantage if it limits access to other resources or discourages action. Based on findings from a large sample of Chinese manufacturers, the current study provides a more complete picture of the extent to which and under what conditions internal social capital fosters innovation and when it breaks down to limit performance. Results suggest a curvilinear relationship between internal social capital and innovation. Results also indicate that this curvilinear effect is strengthened by the extent to which employees share in the vision expressed by leaders. A moderation effect was also found with the extent to which there is alignment between the organization’s strategy and its human resource management (HRM). Innovation was greatest when both social capital and alignment were at moderate levels; a finding that suggests the HR department’s involvement in strategic planning, while necessary, may undermine the strategic flexibility needed for innovation when alignment is too great.