Internal and External Social Capital for Radical Product Innovation: Do They Always Work Well Together?
| Date | 01 April 2014 |
| Author | Carmen Cabello‐Medina,Gloria Cuevas‐Rodríguez,Antonio Carmona‐Lavado |
| DOI | http://doi.org/10.1111/1467-8551.12002 |
| Published date | 01 April 2014 |
Internal and External Social Capital for
Radical Product Innovation: Do They
Always Work Well Together?
Gloria Cuevas-Rodríguez, Carmen Cabello-Medina and
Antonio Carmona-Lavado
Business Organization and Marketing Department, Pablo de Olavide University, Ctra. Utrera, km.1 41013
Sevilla, Spain
Corresponding author email: gcuerod@upo.es
We examine the role of internal and external relational social capital (SC) as determi-
nants of radical product innovation (RPI). By analysing both sides of SC, we provide
interesting insights on their relative influence and their interaction effect on this type of
innovation. Besides, traditional assumptions on SC and innovation are questioned. In our
empirical study using a sample of 142 manufacturing and service companies we found
that, of the two types of SC analysed, internal SC is the most relevant predictor of RPI
in relation to either technological or market dimensions. The influence of external SC is
not as strong as the internal one. Regarding their interaction effect, external SC reduces
the positive effect of internal SC on the market dimension of RPI. Interesting implica-
tions arise for practitioners, who should pay special attention to the higher impact of
internal SC on RPI and the need to carefully manage the difficulties that emerge when
it is combined with external SC.
Introduction
The concept of social capital (SC) is gaining cur-
rency as a powerful factor to explain success in a
number of areas of central concern to organiza-
tional researchers (Adler and Kwon, 2002).
Among them, the effect of SC on the creation of
knowledge and innovation has been widely dis-
cussed (Chen, Chang and Hung, 2008; Lee, Wong
and Chong, 2005; Moran, 2005; Nahapiet and
Ghoshal, 1998; Subramaniam and Youndt, 2005;
Tsai and Ghoshal, 1998).
SC is the sum of the actual and potential
resources embedded within, available through and
derived from the networks of relationships by an
individual or social unit (Nahapiet and Ghoshal,
1998, p. 243). The dominant assumption about the
influence of SC on innovation has to do with
the idea that informal relations and tacit social
arrangements encourage productive resource
exchange and combination and thereby promote
product innovations (Tsai and Ghoshal, 1998,
p. 473).
Research on SC has traditionally highlighted its
relational and structural dimensions (Granovet-
ter, 1992; Moran, 2005). Although some research-
ers, such as Nahapiet and Ghoshal (1998),
conceptually differentiate structural, relational
and cognitive dimensions, most of their statements
about the relational and cognitive dimensions
describe features that are common among them.
A vast amount of research in this field provides
interesting arguments and evidence about the role
of network structure on innovation activities
This research was supported by the Spanish Ministry of
Innovation and Science (Research Project ECO2010-
21859).
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British Journal of Management, Vol. 25, 266–284 (2014)
DOI: 10.1111/1467-8551.12002
© 2013 The Author(s)
British Journal of Management © 2013 British Academy of Management. Published by John Wiley & Sons Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA, 02148, USA.
(Ozman, 2009). Nevertheless, the network struc-
ture of SC is not the only aspect that needs to be
considered when exploring its impact on innova-
tion. Innovation not only depends on the density,
connectivity and hierarchy of the relationships
established between the people involved (struc-
tural dimension) but also on the quality of such
relationships (relational dimension) (Moran,
2005). Our research focuses on the relational
dimension, as this can contribute to better explain
innovation.
We analyse both internal and external sides of
relational SC in terms of intrafirm and interfirm
relationships (Adler and Kwon, 2002). The dis-
tinction between them is a matter of perspective
and unit of analysis. For the purpose of this
paper, internal SC will refer to the linkages
among individuals or groups within the organiza-
tions, while external SC will represent the exter-
nal linkages to other firms and institutions.
Previous research has focused on how either the
external SC (Inkpen and Tsang, 2005; Koka and
Prescott, 2002) or the internal SC (Moran, 2005;
Tsai and Ghoshal, 1998) favour innovation. Nev-
ertheless, the study of internal and external SC in
isolation restricts the full understanding of both
in interaction (Adler and Kwon, 2002; Walter,
Lechner and Kellermanns, 2007), and disregards
the potential effects of such interactions on
innovation. Besides, although a more-is-better
approach has been the dominant assumption in
the literature on SC and innovation, some poten-
tial disadvantages of SC should also be consid-
ered. Reaching a better understanding of the
influence of SC on innovation may require, first,
consideration of both the internal and the exter-
nal perspective in such a way that insights on
their relative influence are provided, as well as
their interaction effect on innovation. Second,
discussion of some alternative arguments that
address less beneficial effects of high levels of SC
should be taken into consideration.
Although the bulk of related research so far
has broadly discussed how SC may have an
important role to play in innovation, its influence
on radical product innovation (RPI) has
remained underexplored. This paper focuses on
RPI, characterized by a high degree of novelty
(Gatignon et al., 2002; Tidd, Bessant and Pavitt,
1999), due to its positive impact on firm perform-
ance (Salomo, Talke and Strecker, 2008; Tellis,
Prabhu and Chandy, 2009). Besides, radical inno-
vation involves higher risks, uncertainty and
complexity (Ettlie, Bridges and O’Keefe, 1984;
Green, Gavin and Aiman-Smith, 1995; Sorescu,
Chandy and Prabhu, 2003), characteristics that
seem to be better managed in the presence of
either internal or external SC, which facilitates
knowledge exchange and sharing (Carmona-
Lavado, Cuevas-Rodríguez and Cabello-Medina,
2010; Pérez-Luño et al., 2011). In other words,
SC appears especially relevant for innovation in
the case of RPI. For these reasons, we analyse the
effect of SC on the degree of RPI.
Our research questions are as follows: How does
internal and external relational SC influence on
RPI? Is this influence always positive? What kind
of influence is exerted when they act together?
Thus, the objective of this paper is twofold: first, to
examine whether both internal and external rela-
tional SC separately affect RPI when considering
both linear and non-linear relationships; second,
to explore the intriguing interaction effect of both
sides of SC on RPI by proposing two alternatives
and opposite explanations.
This paper contributes to the literature in
several ways. First, we address both internal and
external relational SC. Given that both have an
impact on firms simultaneously, focusing only on
either the internal or the external side implies dis-
regarding the complexity of this phenomenon. In
order to achieve RPI, firms have to balance their
levels of both internal and external relational SC,
and this balance should be guided by an under-
standing of their relative contributions and their
interaction effect. Second, by addressing the
potential harmful effects of high levels of SC on
innovation, we try to overcome the simplification
involved in a more-is-better approach to SC,
which has been a dominant argument in the lit-
erature. Third, we focus on RPI, given its great
impact on firm performance and competitiveness.
By analysing this type of innovation, and by con-
sidering its technological and market dimension,
we can provide a more comprehensive and accu-
rate view on how it can be enhanced by means of
internal and external SC.
The paper is structured as follows. First, we
introduce the main theoretical arguments to justify
our hypotheses, based on the SC and innovation
literature. The following sections describe the
methodology of the empirical research and the
results from regression analyses. Finally, we
discuss the main findings and conclusions reached.
Social Capital for Product Innovation 267
© 2013 The Author(s)
British Journal of Management © 2013 British Academy of Management.
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