Enterprises’ Social Capital and the Economic Performance of Local Government
Funded Science and Technology Projects:
An Empirical Research
Tian-qi Li1, Guo-qing Huo2, Xiao-dong Zhang1
1
2
Management School, Graduate University of Chinese Academy of Sciences, Beijing, China
College of Technology Management, Graduate University of Chinese Academy of Sciences, Beijing, China
(ltqapple@163.com)
Abstract – In the process of the implementation of
government funded science and technology projects,
enterprises can accumulate a certain amount of social
capital through establishing social relationships with
governments, universities, science and technology
organizations, and banks. This paper firstly determined
social capital and economic performance of local
government funded science and technology projects factors
and criteria weights in conjunction with professional
opinions and the analytical hierarchy process. Then based
on the analysis of 40 science and technology projects
financially supported by Karamay, we set up a multiple
linear regression model to test the assumptions of the
correlation between the economic performance of projects
and enterprises’ social capital accumulated in the process of
implementing science and technology projects. Results
indicate that there is a notably positive correlation between
social capital and project economic performance.
Keywords – Analytic hierarchy process (AHP), economic
performance of projects, empirical research, government
funded science and technology projects, social capital
I. INTRODUCTION
With the advent of knowledge-based economy and
the new situation of vigorously promoting independent
innovation capability, the role of science and technology
(S&T) has become increasingly prominent, so recently
the methods of relying on technological progress to
promote economic growth have become the focus of
regional competitions[1]. Investment in S&T is necessary
for S&T progress, and the quantity determines the scale
of S&T activities, so local governments constantly
increase investments in S&T. The investments of local
government in S&T mainly focus on enterprises’ S&T
projects, including basic research projects, applied
research projects and experimental development projects.
During the implementation of government funded
S&T projects, enterprises acquire valuable social
resources through the cooperation with universities, S&T
organizations, and government departments, with the
result of higher social credibility. So how can the social
capital that the enterprise accumulates through
implementing the government funded project impact on
This research was supported by Karamay Science and Technology
Bureau under Grant 09410461G2.
the final project performance? In this paper we first
founded the index system for social capital and economic
performance of government funded S&T projects in
conjunction with professional opinions and the analytical
hierarchy process (AHP), and then based on the analysis
of 40 S&T projects financially supported by Karamay (a
city in Xinjiang Province), we set up a multiple linear
regression (MLR) model to examine the correlation
between the economic performance of S&T projects and
enterprises’ social capital accumulated in the process of
implementing S&T projects.
II. LITERATURE REVIEW AND HYPOTHESIS
A. Definition of Social Capital
Social capital was first proposed by a French
sociologist named Pierre Bourdieu in 1980, who defined
social capital as the third form of capital coordinated with
economic capital and cultural capital, and a realistic or
potential resource collection which could not be separated
from some persistent network possessions. Subsequently,
scholars developed intensive studies on social capital;
however, at present there is no unified understanding.
Nahapiet and Ghoshal (1998) defined social capital as the
sum of actual resources and potential resources embedded
in the personal or social groups in the network of
relationships, which could be utilized[2]. Alder and Kwon
(2002) regarded social capital as the resource for
members in the network, which could be obtained in
accordance with their positions in the structure of social
relations[3]. Zhu and Cai (2007) claimed that social capital
was the sum of social network relations referring to
clusters of enterprises or institutions, and businesses
could achieve benefits by using this network
relationships[4]. Bian (2000) considered social capital was
a social network formed on the basis of trust and
cooperation between people and social networks, as well
as one of the most important interpersonal relationship
and an important way for the allocation of resources[5].
As referred above, we can find that the nature of
social capital could be the resource collection embedded
in the relational network which can be accessed and used,
as well as the trust relationship between individuals or
social groups in the network. Social capital includes
individual trust and social trust. Fan (2010) formed an
enterprise social trust network system, which was
consisted of a micro layer, a medium layer and a macro
layer[6]. In the system, the medium trust layer includes
traditional partners, cooperation business (members of the
alliance), the interpersonal trust of enterprises and their
marginal organization; the macro trust network consists of
companies that aren’t directly related with the production
or exchange but are outside the environment, for example,
governments, associations, and other public organizations,
as well as the horizontal or vertical trust given to
enterprises by consumers, communities and publications.
Yang (2005) divided entrepreneurial social capital into
formal networks (e.g. universities, governments,
professional and support organizations) and informal
networks (e.g. friends, families, colleagues, and informal
relationships with high-tech companies)[7].
In conjunction with the literature, the object and the
purpose of this study, we define enterprise’s social capital
as the social relations with governments, banks,
universities, research institutes, established in the process
of implementing government funded S&T projects, as
well as the sum of resources which can be accessed and
used. It is represented by the credit and relations with
other cooperation organizations, including two
aspects--S&T cooperation and social credit.
B. The Relationship between Social Capital and Firm
Performance
There are many empirical researches about the
relationship between social capital and business
performance based on the data of different countries and
different industries. Gulati and Singh (1998) considered
firms were embedded in the relations and structure[8].
Hagedoorn and Schakenraad (1994) analyzed the impact
of the number of strategic alliances and interactive
relationship of social network on economic performance
in information, machinery and petrochemical industries in
Europe, America, Japan and other countries, and found
that the established strategic social networks could
improve the economic performance of organizations[9].
Stuart, Hoang and Hybels (1999) found that startup
biotechnology enterprises that could establish relationship
with well-known enterprises would obtain market
opportunities more quickly and get a higher market
valuation[10]. Tsai and Ghoshal (1998) analyzed the
relationship between social capital and resources
exchange and product innovation in large multinational
business, and examined the positive impact of social
interaction and trust on the exchange of resources
between departments, as well as the positive effect on
product innovation performance[11]. Baum, Calabrese and
Silverman (2000) found Canadian high-tech companies
could use social networks to enhance organizational
innovation performance[12]. Lee and Pennings (2001)
found that social capital helped to improve the financial
performance of the South Korean technological
companies[13]. Chen, Cheng and Hwang (2005) believed
that if a firm owned more intellectual capital including
human capital, structural capital and relational capital, it
would achieve the higher innovation performance[14].
Based on the empirical analysis of the technological
innovation of Chinese enterprises, Chen and Li (2001)
found that there was a signally positive correlation
between enterprise’s vertical social capital and
technological innovation performance, and a strong
correlation between horizontal social capital and
technological innovation performance[15]. Zheng, Cai and
Wang (2005) believed that social capital not only helped
to reduce the transaction costs of high-tech enterprises,
but also helped to improve the technological innovation
capability of enterprises[16]. By analyzing the data obtained
through the questionnaire survey of 235 Chinese
companies, Zhang and Xu (2008) considered social
capital was an important factor for Chinese enterprises in
the process of innovation, and the impacts of different
social capital on knowledge transformation, innovation
and performance were different[17]. Chen, Xie and Zhu
(2004) conducted a questionnaire survey to a sample of
high-tech enterprises in Zhejiang Province, and found that
human capital, structural capital, innovation capital and
customer capital were signally correlated with business
performance[18].
Overall, most researches on the relationship between
corporate social capital and business performance have
examined the view that corporate social capital has a
positive impact on firm performance.
C. Research Hypothesis
Every year local governments provide financial
assistance to S&T projects declared by local enterprises.
In the process of implementing S&T projects, firms gain
and use kinds of resources by establishing social relations
with research institutes, universities, S&T teams,
government departments, banks, and enterprises in the
same industry. However, will the social resources and the
trust relationships improve the economic performance of
S&T projects? This proposition needs to be proved.
There
are
similarities
between
economic
performance of S&T projects and enterprises.
Consequently in this paper, based on the references to
studies about the relationship between corporate social
capital and firm performance, we propose the following
assumption:
Assumption: There is a positive correlation
between social capital gained by enterprises in the
process of implementing government funded S&T
projects and the economic performance of S&T
projects, which means the more social capital
enterprises gain, the better project performance
enterprises will achieve.
III. METHODOLOGY
In this paper we used SPSS (Version 16.0) to analyze
the correlation between variables based on the sample,
and in the MLR analysis we examined the hypothesis by
means of forcing all variables in the model.
A. Sample
In this study, the data were collected from 64 S&T
projects subsidized by Karamay between 2004 and 2008
through a questionnaire survey from August 2010 to
January 2011. After the preliminary research and deep
interviews to four representative S&T projects financially
supported by Karamay, we first sent large scale
questionnaires by email, and then invited them to go to
the government's S&T sector to have in-depth interviews.
We distributed 64 questionnaires, and 48 questionnaires
were returned. The recovery rate is 75%. Overall, five
projects are soft researches, and three questionnaires are
not completed; so we removed them, at last in this study
we used the 40 effective questionnaires as the sample. In
addition, Karamay is an oil industrial city, so 90% of the
sample projects belong to the petrochemical industry.
B. Variables and Measurement
(1) Independent Variable
The independent variable in this paper is the social
capital gained by enterprises in the process of
implementing S&T projects. First, we determined how to
measure social capital. As it is mentioned in part two,
social capital is measured by two factors--S&T
cooperation and social credit. Specifically the criteria and
definitions included are shown in Table I. As the criteria
of S&T cooperation and social credit are all qualitative,
we first quantified the raw data, respectively evaluated for
every criterion a value between 1 and 5.
Then we constructed the analytic hierarchy model
and the judgment matrix to determine the weights of S&T
cooperation, social credit and the criteria included. We
invited three experts from Karamay to fill in the AHP
questionnaire, and used the Expert Choice software for
the calculation of each indicator weight. All the results
have passed the consistency test, and the specific weight
values are shown in Table II. Finally we compounded the
value of social capital (in this study we named it SC) by
hierarchically adding up the product term of criterion and
its weight.
(2) Dependent Variable
The dependent variable in this paper is the economic
performance of S&T projects. The financial performance
indicators that scholars commonly use in strategic
management studies contain ROA, ROE, Tobin's Q and
profit growth rate[19]. But when did the preliminary
research, we found it difficult to obtain data about
corporate ROA, ROE, Tobin's Q through questionnaires
and in-depth interviews. Therefore, in conjunction of the
purpose of this study and the real situation, we used four
factors -- new products, change of product prices or costs,
new sales and new profits to measure economic
performance of S&T projects. The data were collected
from survey questionnaires and in-depth interviews. We
evaluated for every criterion a value between 1 and 5.
We constructed the analytic hierarchy model and the
judgment matrix to determine the weights of the four
factors and the criteria included. Three experts from
Karamay were invited to fill in the AHP questionnaire,
and the Expert Choice software was used for the
calculation of each indicator weight. All the results have
passed the consistency test, and the specific weight values
are shown in Table II. Finally we compounded the value
of economic performance of S&T projects (in this study
we named it ECON) by hierarchically adding up the
product term of criterion and its weight.
TABLE I
Variable
MAIN VARIABLES AND MEASUREMENT
Factor
Criteria
Definition
S&T
Cooperative
cooperation partners
Awards
Social
capital
Social
credit
New
products
Economic Change of
performa product
prices or
nce of
costs
S&T
projects
New sales
Achievement
register
Attention or
subsidization
Bank credit
improvements
New products
or technology
improvements
Product prices
improvements
and costs
reduction
Sales
improvements
Profit
New profits
improvements
The social relations with
government, research institutes,
universities, and banks, which
become
the
long-time
cooperation partner
The awards achievements of
projects
If project achievements were
registered in S&T department
The higher authorities’ attention
and subsidization
The bank credit improvements
after complement of projects
The number of new products or
technological
improvement
achievements
The percent of product costs
reduction and the percent of
product prices promotion after
the application of project
achievements
The average annual increased
sales of project achievements
The average annual increased
profits of project achievements
TABLE II
THE WEIGHTS OF CRETERIA BASED ON AHP
Variable
Factor and weights
Criteria and weights
S&T
cooperation
Social
capital
Social credit
0.5
0.5
Cooperative partners
1
Awards
Achievement register
0.325
0.067
Attention or subsidization 0.46
Bank credit improvements 0.149
New products or tech
New products 0.143
1
improvements
Economic
Change of
Product prices
performance product prices 0.075 improvements and costs
1
of S&T
or costs
reduction
projects
New sales
0.560 Sales improvements
1
New profits
0.202 Profit improvements
1
(3) Controllable Variable
As the sample data are about S&T projects
financially supported by Karamay between 2004 and
2008, the time span is long. We considered the year in
which project was started to be implemented (we named it
YEAR in this paper) as a controllable variable, rating it
between 1 and 5. In addition, government funding for
each project is different according to the type of projects.
Therefore, we considered the government funded amount
(we named it AMOUNT in this paper) as a second
controllable variable.
IV. RESULTS AND DISCUSSION
A. Pearson, Spearman Correlation Analysis and Partial
Correlation Analysis
First, Pearson product-moment correlation and
Spearman correlation between SC and ECON were
analyzed, and then partial correlation between SC and
ECON was analyzed when the variables of YEAR and
AMOUNT were controlled. The results are shown in
Table III.
It can be seen from Table III, Pearson and Spearman
correlation analysis and partial correlation analysis
between SC and ECON are both significant within the
acceptable range (p<0.5). The correlation coefficients (r)
are all close to 0.4, so there is a weak correlation between
SC and ECON, indicating that there is a certain linear
correlation between SC and ECON. When the variables of
YEAR and AMOUNT were controlled, partial correlation
analysis between SC and ECON passed the test of
significance. The correlation coefficient is 0.399,
indicating that SC is correlated with ECON.
B. Hypothesis Test Results and Discussion
In the basic model, there are only the controllable
variables including YEAR and AMOUNT, and the
dependent variable--ECON. In model 1, SC was included
for making multiple linear regression to the dependent
variable ECON (see Table IV). The variance inflation
factor (VIF) of basic model and model 1 are all less than
1.1, and the tolerance limits are more than 0.9, indicating
that there is no serious collinearity between variables.
The linear regression results show that the
hypothesis in this paper could be accepted. The F-value of
basic model is 0.217; however, it doesn’t pass the
significance test, so the basic model is not valid. When
SC is included in the model, the R Square (R2) change
value is 0.157 in the significant level of 0.1, which shows
that the explanatory power of the model has been
significantly enhanced. F-value of model 1 is 2.436 in the
significance level of 0.1; it passes the significance test,
indicating that model 1 is valid. The R Square (R2) of
model 1 is 0.169, indicating that the variables (YEAR,
AMOUNT, SC) could explain 16.9% variation of ECON.
In model 1, the standardized regression coefficient of
SC is 0.404 (P<0.1), passing the significance test, that is,
when SC increases one unit, ECON would improve 0.404
unit, indicating that there is a significant positive
correlation between SC and ECON. In model 1, the
controllable variables--YEAR and AMOUNT do not pass
the significance test, which may be due to the same type
of annual government funded S&T projects and the
similar amount of subsidy.
We can make some interpretation for the results.
When implementing government funded projects,
enterprises would establish a network of social relations
with universities, research institutes, S&T teams, or
business related enterprises, from which they can gain or
use resources, with the result of achieving knowledge
transfer with a low cost. By this they could save R&D
expenditure, improve the technological content of
products, or achieve technical improvements, which
would enhance the economic performance of the projects.
In addition, through the declaration of the Government's
Technology Fund or S&T awards, enterprises could
construct social relations with governments and then
improve corporate social credit. Because the permission
of the principal leaders of the local government is great
and integrated, the resources enterprises obtain from them
are abundant, so the social credit accumulated by the
declaration of the government funded projects helps to
improve the economic performance of the projects.
TABLE III
RESULTS OF PEARSON, SPEARMAN AND PARTIAL CORRELATION
ANALYSIS
Pearson
Spearman
Partial
Mean Standard product-moment correlation correlation
Variable
correlation
value deviation
SC
ECON
SC ECON SC ECON
SC 2.587 0.819
1
1
1
ECON 2.721 0.903 0.396*
1
0.380* 1 0.399* 1
Notes: *p<0.5, **p<0.1, ***p<0.001, two-tailed test.
TABLE IV
RESULTS OF MULTIPLE LINEAR REGRESSIONS
Economic performance of projects (ECON)
Basic Model
Model 1
***
*
Constant
(4.414)
(2.359)
0.11
-0.065
YEAR
(0.065)
(-0.407)
0.105
0.105
AMOUNT
(0.622)
(0.671)
0.404*
SC
(2.609)
R Square
0.12
0.169
Adjusted R Square
-0.042
0.099
R Square change
0.12
0.157*
F-value
0.217
2.436 f
Notes: Sample size N=40, numbers in the table are standardizing
regression coefficient β, numbers in the bracket are T-test value of β,
f<0.1, *p<0.05, **p<0.01, ***p<0.001, two-tailed test.
V. CONCLUSION
In this paper, we further confirmed the positive
correlation between corporate social capital and economic
performance, and extended the research objects to the
S&T projects, and got some meaningful conclusions. We
first founded the index system for social capital and
economic performance of government funded S&T
projects in conjunction with professional opinions and
AHP. Social capital was measured by two factors--S&T
cooperation and social credit, and economic performance
of S&T projects was measured by four factors -- new
products, change of product prices or costs, new sales and
new profits. Then we have examined that there is a
positive correlation between economic performance of the
local government funded S&T projects and corporate
social capital accumulated in the implementation of the
projects by the means of setting up the linear regression
model, concluding that the more the accumulation of
social capital in the process of implementation of
government S&T projects, the better the economic
performance of the projects.
We can give some advice to enterprises. For example,
in the process of implementing S&T projects enterprises
could achieve social capital through long term
cooperation with universities, research institutes and
social organizations or other enterprises, thus improving
the economic performance of the project; they could
improve the social credit by declaring all kinds of
governmental S&T awards, in order to get the concern of
government departments, gaining the support of the banks,
and these would help to improve the economic
performance of the S&T projects.
With the limitations of sample size and sample data
quality, the statistic significance of the variables in the
multiple regression models is not very significant. As the
variable of social capital in the model is a composite
variable, so in future the impact of the factors of social
capital on the project economic performance could be
researched.
ACKNOWLEDGMENT
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
We would thank the cooperation partners from
Karamay for helping us to collect the data used in this
paper. Especially we would thank Wei Xiaoli for assisting
us in surveying in enterprises in Karamay.
[16]
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