China's social capital and financial performance of private enterprises

<div class="line" id="line-19"> Abstract</div><div class="line" id="line-45"> Purpose</div><div class="line" id="line-47"> This study aims to investigate the effects of social capital (defined as networks) on the performance of Chinese private enterprises.</div><div class="line" id="line-49"> Design/methodology/approach</div><div class="line" id="line-51"> The paper employ an econometric model to test relationships between social capital and firm performance, using a sample of private enterprises in a survey in China in 2000.</div><div class="line" id="line-53"> Findings</div><div class="line" id="line-55"> The analysis suggests two findings. First, memberships in various organizations do not appear to be significant in affecting the performance of Chinese private enterprises. Second, short&hyphen;time investment in, and the flow of, social capital are significant determinants of enterprise performance.</div><div class="line" id="line-57"> Research limitations/implications</div><div class="line" id="line-59"> The study examines only the effects of the short&hyphen;time investment in social capital. Further research is suggested to examine the effects of long&hyphen;term investments in social capital, the relationship between short&hyphen;time investment and long&hyphen;time investment in social capital, and the network as a whole, including informal networks.</div><div class="line" id="line-61"> Originality/value</div><div class="line" id="line-63"> The paper uses the survey data in China to test Krishna's hypothesis which suggests that short&hyphen;term investments can play a positive role in the financial performance of firms.</div>