SCBS Social Capital Benchmarking System
Profiting from Social Capital when Building Network Organisations
José María Viedma
(Polytechnic University of Catalonia, Spain
icms.viedma@terra.es; jose.m.viedma@upc.es)
Abstract: In knowledge economy, companies and organisations build
sustainable competitive advantages not only relying on their internal intellectual
capital but also on the intellectual capital of other companies, organisations
and institutions and specifically on those of the cluster [Porter,
1990a], microcluster or territory where the company is located. This
kind of intellectual capital, basically external and of a relational nature
is one of the main constituents of the networked organisation and (will
be called) from now on Social Capital [Nahapiet and Ghoshal,
1998] because it is embedded in the social fabric (texture) of the
nearby environment.
SCBS (Social Capital Benchmarking System) is both a new management method
and a new management tool, that identifies, audits and benchmarks the resources
and capabilities or the social capital, existing in alternative cluster
locations that are necessary in order to develop the specific network organisation
that each particular business model requires. The system has been successfully
piloted in five European enterprises.
Keywords: Social capital, intellectual capital, clusters, benchmarking,
resources and capabilities, knowledge management.
Category: H [Information Systems]
1 Introduction
Resource based view [Barney, 1991, 1999;
Grant, 1991, 1998; Teece,
1997] stresses that in turbulent times and in times of quick changes
in technology and in customer and industry needs, sustainable competitive
advantages are mainly due to the company resources and capabilities or
being more specific to the core capabilities that are in practice, equivalent
to the core competencies or to intellectual capital. In search of sustainable
competitive advantages, some models have been developed in recent times.
These models manage intellectual capital of the two value chains; that
is to say, the operations value chain and the innovation value chain. The
better known, are: Skandia Navigator [Leif and Malone,
1997], Intangible Assets Monitor [Sveiby, 1997]
and Balanced Scorecard [Kaplan and Norton, 1994].
They all consider strategy (vision, mission and objectives) as the main
reference and human capital, structural capital and relational capital
as the aggregates to manage. Other models also focus on strategy as the
main reference, but instead of considering the three types of capital that
we have mentioned before, they manage only core competencies or core capabilities.
My models Intellectual Capital Benchmarking System [Viedma,
2001 a] and Innovation Capabilities Benchmarking System [Viedma,
2001 b] are among this second group, as well as Daniel Andriessen's
Value Explorer Model [Andriessen, 2001].
Nevertheless, in knowledge economy, companies and organizations build
sustainable competitive advantages not only relying on their internal intellectual
capital, but also on the intellectual capital of other companies, organizations
and institutions and specifically on those of the cluster [Porter,
1990 a], microcluster or territory where the company is located. This
kind of intellectual capital, basically external and of a relational nature,
is one of the main constituents of the networked organization and (will
be called) from now on Social Capital [Nahapiet and Ghoshal,
1998] because it is embedded in the social fabric (texture) of the
nearby environment.
The present models of intellectual capital are focused on the value
chain internal intellectual capital and do not take into account this social
capital when building and managing networked organizations that intend
to achieve sustainable competitive advantages. This paper is trying to
fill up this gap by developing SCBS a new social capital model that complements
the existing intellectual capital models.
2 Theoretical background
Recent strategy theorists suggest that intangible resources and in particular
core competencies and relationships, are the most important critical drivers
of sustainable competitive advantages. Nevertheless, in strategy management
there still coexist two relevant perspectives for understanding how firms
deploy scarce resources to create superior value [Haanes,
et al 2000]: The resource-based view and the activity-based view. [Porter,
1980, 1985, 1996]. Both are
complementary. The resource-based view focuses on what the firm has, whereas
the activity-based view focuses on what the firm does.
The resource-based view focuses on the crucial role of internal core
competencies and core capabilities and on the role of relationships that
give access to other companies and organizations core competencies resources
and capabilities. The activity-based view focuses on profiting from external
core competencies or capabilities (the ones that belong to other companies,
organizations or institutions mostly located within the cluster or territory)
when building the value chain, the value constellation or the networked
organization.
3 Social capital as an important constituent of the network organization
As it has been said in the introduction to this paper, knowledge economy
companies and organizations build sustainable competitive advantages, not
only relying on their intellectual capital (core competencies), but also
on the intellectual capital (core competencies) of other companies, organizations
and institutions and specifically on those of the cluster, microcluster
or territory where the company is located. This kind of intellectual capital,
basically external and of a relational nature, is one of the main constituents
of the networked organization and (will be called) from now on Social Capital.
Nevertheless, the concept of networked organization is a very large one
and includes different, new organizational options. Some authors [Harrison,
1994] distinguish four types of production networks; the craft-type
industries, the small firm-led industrial districts, the geographically
clustered big firm -led production systems and the strategic alliances
production networks.
We will not focus on the particularities of these types of networks,
and on those of other types of networks, such as starburst, federal or
spider web forms. For the purpose of this paper a network organization
is the one that in order to build internal core competencies (intellectual
capital) extensively uses, through cooperation agreements, other companies,
organizations and institutions core competencies (intellectual capital).
With reference to the concept of social capital there are many definitions,
but we show preference to that of Nahapier and Ghoshal [1998].
They literally state: "The sum of the actual and potential resources
embedded within, available through, and derived from the network of relationships
possessed by an individual or social unit. Social capital thus comprises
both the network and the assets that may be mobilized through that network".
In a more simplistic way, we say that social capital is the sum of the
resources and capabilities that belong to the network of organizations
that the intelligent enterprise has built in order to successfully compete.
4 Social capital as the main source of cluster sustainable competitive
advantage
As it has been said in the introduction, the relationships with the
companies, organizations and institutions that belong to the cluster, are
privileged relationships because they are the only ones capable of transmitting
the tacit knowledge that is embedded in core competencies and core capabilities.
Hence the importance of clusters located in a specific city, region or
territory. Relationships with other companies and organizations outside
the cluster location usually only transmit explicit knowledge, that is
less relevant to the process of gaining and sustaining competitive advantages.
In that sense, social capital belonging to the cluster's outside network,
will be rated lower that the social capital inside the network.
5 Profiting from existing social capital when building network organizations:
the need to benchmark
When the intelligent enterprise is focusing on core competencies (intellectual
capital) and core activities and strongly specializes on those core competencies
and activities, all the other activities and the development of other competencies
are left to the companies of the network and specially to the ones inside
the cluster-city, the cluster-region or the cluster territory. In that
context, it is crucial to choose the right cluster among the different
possible cluster options, because the cluster will be the foundation of
the network construction. Hence, the importance of an accurate evaluation
of different clusters options considering in any case as the starting point,
the strategy, the business model and the industry segment of the intelligent
enterprise. Figure 1 draws this process.

Figure 1: Choosing the best cluster
In fact, once the business model and specially the industry segment
is very well defined, it is essential to focus on the best cluster-location
in the world, where the most competitive and excellent companies of the
industry segment are located. The best cluster in the world will be the
reference model and we will need to benchmark any optional alternative
cluster location against the best cluster in the world. In consequence,
benchmarking in a systematic way is an unavoidable practice if profiting
from existing social capital becomes a strategy priority of the intelligent
enterprise.
6 Building the SCBS general framework
The present models of intellectual capital are focused on the value
chain internal intellectual capital and do not take into account social
capital when building and managing networked organizations that intend
to achieve sustainable competitive advantages. This paper attemps to fill
up this gap by developing SCBS, a new social capital model that complements
the existing intellectual capital models. However SCBS (Social Capital
Benchmarking System) is also a new management method and a new management
tool that allows a specific company to benchmark the resources and capabilities
of the cluster where the company is located, against the resources and
capabilities of the best cluster in the world, in order to successfully
develop the business activity of the specific company. It is a framework
built around the key factors and criteria that determine clusters competitiveness
in the context of global market.
SCBS framework draws inspiration from the Michael E. Porter determinants
of national advantage [Porter, 1990b]. The factors
considered are: a) Resources and capabilities b) Demand c) Suppliers and
other related industries d) Firms strategy, culture and structure e) Competitors
f) Government. SCBS identifies the relevant factors and criteria that allow
the best network construction for a specific business activity. Figure
2 illustrates the general framework.

Figure 2: SCBS general framework
The definition and the content of each particular factor are:
a) Resources and capabilities: Cluster position in different
resources and capabilities such as physical resources (land, water, mineral,
timber deposits, fishing grounds, hydroelectric power, climate, location)
human resources (quantity, skills and cost of personnel) financial resources
(amount and cost of capital available in the different forms) knowledge
resources (scientific and technical knowledge that reside in universities,
research institutes, private research facilities, business and scientific
literature, etc.) and infrastructure (type, quality and user cost of available
infrastructure such as transportation system, mail and parcel delivery,
communications system, telecommunications system, health care, housing
stock, cultural institutions, etc.)
b) Demand: Refers to home demand for the products and services
of the industry segment. The three main attributes of home demand are:
the nature and composition of buyer needs, the size and pattern of growth
of home demand, and the quality and sophistication of home demand when
compared with international standards. The last attribute fosters cluster's
firm innovation.
c) Suppliers and other related industries: Refers to suppliers
and other related industries that are internationally competitive. Home
base first class suppliers are key in the process of outsourcing but specially
in the process of improving, upgrading and innovation. The presence in
the cluster of competitive related industries gives cluster's firms the
possibility to share value chain activities in technology development,
manufacturing, distribution, marketing and service. All this improves firm's
core competencies and creates new ones.
d) Firms strategy, culture and structure: Refers to the conditions
in the cluster and specifically in the industry segment, that determine
how companies are created, organized and managed. This factor also includes
the cultural context in which firms develop their activities.
e) Competitors: Refers to domestic rivalry within the cluster.
There is a close association between vigorous domestic rivalry and the
creation of sustainable competitive advantages in an industry segment.
Having world class competitors at home fosters imagination, creativity
and innovation. It is a challenging situation that encourages the process
of learning in order to surpass the best in class competitors.
f) Government: government influences the five other determinants
of cluster competitive advantages that have been described above. In this
case we refer not only to the national government but also to the local
government. The influence on the other factors can be direct or indirect
and what it is more important, they can-be either positive or negative.
On the role of government, Porter M.E. (1990b) asserts:
"Factor conditions are affected through subsidies, policies toward
the capital markets, policies toward education, and the like. Government's
role in shaping local demand conditions is often more subtle. Government
bodies establish local product standards or regulations that mandate or
influence buyer needs. Government is also often a mayor buyer of many products
in a nation....Government can shape the circumstances of related and supporting
industries in countless other ways... Government policy also influences
firm strategy, structure and rivalry, through such devices as capital market
regulations, tax policy and antitrust laws".
At the same time each one of the six factors is broken down into a set
of different criteria and each criterion is evaluated through questionnaires.
The operating system of the SCBS is the following: Company A, that belongs
to a specific industry segment, once defined its core competencies needs
to assess which cluster location is the best in order to build its network
organization. If the company is located in cluster A, or is trying to locate
in cluster A, cluster B where the best competitors within the industry
segment are located, may be a better cluster location. Evaluation of the
two possible locations is done through the factors SCBS model.
This model assesses social capital and physical and financial capital
because the three types of capital always go together and because access
to physical and financial capital is always done because of social capital.
The assessment process is done through the extensive use of factors, criteria
and questionnaires.
The six factors of the SCBS, model, individually and as a system, create
the context in which firms are born and compete. Firms gain competitive
advantage in industries when their home base affords better ongoing information
and insight into product and process needs. Firms gain competitive advantage
when the goals of owners, managers and employers support intense commitment
and sustained investment. Ultimately, territories succeed in particular
industries because their home environment is the most dynamic and the most
challenging, and stimulates and prods firms to upgrade and widen their
advantages over time [Porter, 1990b].
7 The SCBS balance sheets
The processing of questionnaires corresponding to each of the cluster
factors and criteria provides us with the social capital results and balance
sheets. These results and balance sheets can be obtained for the whole
social capital or for each particular factor. Some examples of balances
and results are given below (figures 3 and 4):

Figure 3: Social Capital global assessment: Balance sheet

Figure 4: Partial assessment of Social Capital resources
and capabilities
8 Benefits from using SCBS
Considering that SCBS identifies, audits and benchmarks the resources
and capabilities or the social capital, existing in alternative cluster
locations, that are necessary in order to develop the specific network
organization that each particular business model or industry segment requires,
the benefits from using SCBS are the following:
- Identifying the world best cluster locations, where the intelligent
enterprise is able to establish the necessary relationships, that each
specific business model requires in order to build its network organization.
- Identifying the specific external social capital factors and criteria
which are relevant in a given business model or industry segment.
- Through the SCBS factors framework enabling the identification, audit
and benchmark of the social capital alternative cluster locations that
are the source of sustainable relational competitive advantages.
- When using SCBS in an orderly, systematic and repetitive way, we obtain
social capital balance sheets that are future-oriented and complement and
perfect finance and intellectual capital balance sheets, leading companies
to leveraging social capital.
- Selecting in a systematic and organized way the necessary information
for evaluating relevant social capital factors and criteria.
- Identifying the key areas in which in-depth benchmarking can be carried
out in the future.
- Promoting organizational learning through benchmarking teams, assessment
teams, project teams and strategic teams.
- Introducing a common language for company managers when dealing with
social capital or external resources and capabilities.
- Measuring the reliability concerning the relevant information and the
progress of acquiring this information.
- Facilitating the work of the benchmarking and competitive intelligence
teams.
- Facilitating the work of the knowledge and intellectual capital managers.
- Giving SME's managers access to social capital management in a systematic
and organized way.
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