Chapter 4: Human Capital, Social Capital and Firm Dissolution
4. Human capital, social capital and ﬁrm dissolution INTRODUCTION Many authors, expressing the view that the modern world is becoming a ‘knowledge society’, have discussed the importance of organization-level human and social capital for organizational performance and survival (for example, Kogut and Zander, 1996; Pfeﬀer, 1994; Uzzi, 1996). However, only a few studies have examined this relationship empirically, looking at the eﬀect of founders’ human and social capital on organizational performance, and particularly, organizational survival (for example, Bates, 1990; Brüderl et al., 1992; Uzzi, 1996). Similarly, studies of the role of CEO characteristics have revealed that CEOs’ human capital features have an impact on organizational behavior and performance (for example, Boone et al., 1996). As was expected, in those studies higher founder or CEO human capital was shown to enhance organizational performance. But although founders’ and CEOs’ human and social capital are important to organizational success, other organization members’ human and social capital also play a critical role in organizational performance. This chapter attempts to deepen understanding of the determinants of organizational dissolution by introducing ﬁrm-level human and social capital in a hazard rate model of ﬁrm dissolution. We argue that organizational human and social capital decrease the likelihood of ﬁrm dissolution and that the speciﬁcity and non-appropriability of those forms of capital aﬀect their contribution to ﬁrm dissolution. Of course, the message that people matter is hardly new (for example, Pfeﬀer, 1994). However, systematic theorizing and testing at the organizational level is rare,...
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