The Role of Social Capital in Innovation: Findings from Selected OECD and BRICS Countries

Abstract

Low levels of human capital and institutional underdevelopment have been linked to the economic downfall of developing nations. With time, it became evident that the direct mechanisms of innovation creation are not explained by the traditional linear framework of innovative development. Later, the significance of both social and institutional settings for innovation production was emphasized, as was the necessity of their convergence to close gaps in the fields of technology and technological growth in different nations worldwide. Social capital has positive effects on poverty reduction, economic growth, knowledge transfer, knowledge creation, and backs in knowledge management, reduces transaction costs, influences proactiveness and even considered as the glue that holds a society together. The literature on social capital concentrates on the internal and external networks of the companies that may support innovative capacities that result in proactive strategic behavior. Through improved interpersonal interactions, social capital promotes better coordination of activities. Consequently, increased community trust and a shared vision increase market efficiency and lower related costs. The aim of this research is to examine the influence of social capital on the innovation process ability of countries. This study has demonstrated the beneficial impact of social capital on innovation mainly for selected BRICS countries and developing countries. Among the three forms of capital the social capital has the highest value. When social capital increases by 1%, the number of patent applications increases by 2.46% for BRICs. Therefore, these counties must establish a robust trust ecosystem inside and outside their organizations for all stakeholders to gain competitive advantage in the global world. JEL Codes: L14, O31, C33