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Social Capital and the Brokerage Opportunities of Consultants

Karen MacMillan

September 2009

Karen MacMillan Social Capital and Brokerage Opportunities

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Abstract

All levels within and between firms are connected by networks of personal relationships. The ways in

which individuals use these networks to supplement and change external organizational network

structure is examined. External networks are a key factor in business, providing firms with “access to

knowledge, resources, markets or technologies” (2005, p. 146). Organizational theorists have shown

much interest in the ways organizations develop networks. Due to their role as boundary‐spanners,

professional consultants are used as the lens through which to explore the effects of social capital on

networks. Nahapiet and Ghoshal’s (1998) structural, relational, and cognitive dimensions are used to

illustrate the use of social capital by consultants. Understanding how consultants use social capital can

lead to deeper insight on the ways in which other organizational members brandish this resource. A set

of propositions on the processes through which social capital is used to affect organizations are offered.


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"The bird a nest, the spider a web, man friendship."

‐ William Blake

As children we’re told to work hard, do well in school, and career success will follow.

Entrepreneurs are told: ‘build a better mouse trap, and the world will beat a path to your door’. But

hard work, skills, knowledge, and a better product may not be enough. What we know is often less

crucial than who we know.

Organizations are comprised of social beings. The relationships we have affect the way we do

business. Granovetter (1985, p. 278) argues that “most behaviour is closely embedded in networks of

interpersonal relations” (p. 504). In fact, he goes so far as to assert that economic action is only a

special category of social action.

All levels within and between firms are connected by networks of personal relationships.

Business relations spill over into social life, and vice versa (Granovetter, 1985). Researchers have

developed the construct of social capital to help investigate the impact of interpersonal relations on

organizational life. Nahapiet and Ghoshal (1998) define social capital as “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”. These resources facilitate action that would be impossible or

more expensive otherwise. They are co‐owned by both parties. If one of the ties retreats, the tie no

longer exists. It has been shown to operate at a process level with social credits being traded across

boundaries (Llewellyn & Armistead, 2000).

Recent studies have looked at how social capital: affects the development and sharing of

intellectual capital (Nahapiet & Ghoshal, 1998); improves service (Llewellyn & Armistead, 2000) and


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knowledge transfer (Inkpen & Tsang, 2005); and affects career success (Burt, 1997a; Seibert, Kraimer, &

Liden, 2001). Broschak (2004) notes, however, that in social embeddedness research, the impact of the

individual on interorganizational ties has been largely overlooked. Moreover, little work has been done

on the effects of social capital on external networks (Somaya, Williamson, & Lorinkova, 2008).

This paper will look at how social capital is used at the individual level to supplement and

change external organizational network structure. Networks are a key factor in business, providing firms

with “access to knowledge, resources, markets or technologies” (Inkpen & Tsang, 2005, p. 146). The

process through which the social capital of individuals impacts the overall organizational network is an

area that is not yet fully understood.

Individuals who serve as consultants to organizations may be an apt lens through which to

explore the effect of social capital on organizational networks. Burt (1997a) suggests that those

operating independently of the corporate bureaucracy provide the richest evidence of social capital.

Barley and Kunda (2006) found that social skills and contacts were an important complement, and

enhanced the value of, professional contractors’ human capital (knowledge and technical ability).

Consultants are external to the organizational network, yet they are often placed in an internal position,

if only temporarily. The very nature of their function often puts them in an ideal position to affect the

organizational network, and how they wield their social capital in this capacity is a compelling question.

Understanding how consultants use social capital can lead to deeper insight on the ways in

which other organizational members brandish this resource. This line of research may be especially

relevant considering the rising tide of contingent workers. More employees are entering the workplace

on temporary contracts, and these marginalized members may be changing organizations via social

capital in unexpected ways. Even workers who hold permanent positions rarely stay with one employer

throughout a career. Arthur (1994) has called attention to the effects of the rise of ‘boundaryless


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careers’ on organizational learning and routines. Higher levels of employee mobility mean we have a

steady flow of ties going into and leaving our organizations. The positive and negative consequences of

this traffic to networks and organizational functioning are potentially enormous.

Networks and Social Capital

The business world consists of interpersonal networks within organizations, along with

“interorganizational networks created by exchanges of resources, alliances, and shared directors” (Scott

& Davis, 2007, p. 278). A firm’s external network determines the resources it can access, such as

information, capital, goods, and services. A strong network with relevant ties can be an important

source of competitive advantage, especially if competitors find the network difficult to imitate (Gulati,

Nohria, & Zaheer, 2000). As isomorphism rises, a unique external network can set an organization apart

from its competitors.

Scott and Davis (2007) describe a network as consisting of ‘nodes’ (person, group, or

organization) and ties (relationships connecting the nodes) along which materials, energy and

information can flow. They describe centrality as the measure that determines the importance of a

person within a network. A central network position indicates that the actor has many direct ties, and a

relatively short path distance to the ties in the periphery of the network. Burt (1997a) offers another

key characteristic of networks – structural holes. He suggests that two close, equivalent nodes (or

clusters of nodes) are likely to hold similar information, and can be seen as redundant. However, two

dissimilar nodes (or clusters) each inhabit a particular world, and the gap between them can be termed

a structural hole. An actor who can span a structural hole has the advantage of accessing both sets of

unique resources of the separate nodes (or clusters).

Networks that are based on personal relationships are social capital networks. Social capital is

the system through which friends, acquaintances, and relatives are mobilized to give preferential


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importance to the needs of others with whom they’re connected. Social capital and the action it can

lead to have important implications for organizational theory.

Nahapiet and Ghoshal (1998) describe three, interrelated facets of social capital: structural,

relational and cognitive. The structural dimension of social capital refers to the pattern of ties between

network members. It describes the paths to follow to access the appropriate people for a particular

situation. For example, if a salesperson wants to make a pitch to a purchasing manager at a particular

company, the structural dimension of social capital may inform the correct path to take. In this case, the

salesperson may be aware that the purchasing manager only considers new suppliers who are

recommended by company engineers.

The relational dimension focuses on the bonds between actors, usually based on respect or

friendship, that can influence behaviour. These connections can be used as assets, and leveraged for

advantage. Our aforementioned salesperson might begin a mental review of the company engineers in

order to pinpoint who among them might be willing to arrange an introduction to the purchasing

manager. The relational dimension includes a number of ways in which a social capital bond can be

formed. The salesperson may choose to approach an engineer with whom there is a bond of trust.

Perhaps the engineer had previously worked with the salesperson on sourcing a product, and the

salesperson had shown a high commitment to customer service. The engineer is more likely to trust the

salesperson’s motives. Alternately, the salesperson might access social capital with an engineer based

on a sense of obligation. One of the engineers may have previously promised the salesperson a large

order, that later fell through. An engineer who feels something is owed to the salesperson would be

more likely to grant a request. The bond could be based on a sense of identification. An engineer might

feel connected to the salesperson if they both went to the same college. Or the bond simply could be

based on norms. Perhaps the engineers in the company have made it a practice to assist suppliers in


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order to maximize the effectiveness of the procurement process for their own benefit. Of course, a

connection could easily be strengthened by several types of bonds at the same time.

Nahapiet and Ghoshal’s (1998) final, cognitive dimension is based on shared language and

representations. These resources tie into the degree to which network members share common goals

and a cultural identity (Inkpen & Tsang, 2005). Our salesperson is better able to connect to an engineer

if the conversation includes references to priorities and terms that indicate to the engineer that the

salesperson understands and appreciates the world in which the engineer lives.

These three dimensions of social capital were examined within the context of a service delivery

process of a telecommunications company in a study by Llewellyn and Armistead (2000). They found

that social capital improved employees’ ability to “deal with emergencies, recover services, and to cope

when things went wrong” (p. 225). Nahapiet and Ghoshal (1998) suggest that social capital can be a

major source of competitive advantage, because it may not only “reduce transaction costs by

economizing on information and coordination costs” (p. 260), it also greatly impacts organizational

efficiency and growth. Differences between organizations are seen to be due to differences in their

ability to create and exploit social capital.

In a related theoretical analysis of the relationship between social capital and knowledge

transfer, Inkpen and Tsang (2005) posit that network types differ in their use of social capital

dimensions. Hence, firms may have to “manage and build social capital proactively” in order to achieve

“effective and efficient knowledge transfer” (p. 160). Social capital has also been found to positively

influence salary, promotions, and career satisfaction through increased access to information and

resources, and higher career sponsorship (Seibert et al., 2001).

Uzzi (1997) found that compared to regular market ties, those external network ties that were

embedded within the social structure (high in social capital) were critical to the functioning of the


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studied organizations. They were characterized by high levels of trust, fine‐grained information

exchange, and unique joint problem‐solving arrangements. Benefits included economies of time and

the ability to quickly capitalize on market opportunities.

Somaya, Williamson and Lorinkova (2008) found that the costs of losing social capital‐laden

employees to competitors can be detrimental to an organization, while losing them to a client was

found to be less harmful. However, the benefits of social capital are realized by an organization when

they hire employees from a competitor(Somaya et al., 2008).

Social capital transactions are unique from market transactions in that obligations are

unspecified, repayment schedules are unfixed, and there are no guarantees of reciprocity (Portes, 1998).

However, perhaps the characteristic that most differentiates social capital from monetary resources is

that the more it is spent, the more it is retained (Leana & Van Buren III, 1999). This can have clear

advantages for those who are skilled at using social capital efficiently.

The Social Capital Ledger

For illustrative purposes, let’s follow the path of a hypothetical management consultant who

enters an organization in order to assist with the redevelopment of the company‐wide compensation

system. Along with the requisite briefcase, on the first day of the project, she brings with her a certain

amount of expertise on the subject (knowledge capital), and an extensive network of contacts she has

previously developed, all of which she may be able to reach out to, if needed (social capital).

She is motivated to please her client, not only to increase the likelihood of being hired for future

projects with that organization, but also to gain a positive referral so she can improve her chances of

getting hired by other organizations. Sophisticated enough to understand the value of social capital, she


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stays alert to the opportunities of adding to her already considerable network with additional or

improved ties to the new organization, in order to better service other or future clients.

In reviewing the project scope, the client mentions that an issue of great concern to the

organization is the possibility of fines being incurred by the government due to past errors in the

remittance of payroll taxes. Actions will be taken against the company unless a full accounting is

provided to the applicable agency within a matter of days. Our consultant knows a person in that

agency who would be able to procure an extension of the order (structural dimension). They have a

friendly relationship (relational dimension), so she calls him. During the conversation, the consultant

acknowledges her understanding of the bureaucratic demands on the agency and her contact (cognitive

dimension), and is granted the favour of an extension. The consultant creates a debit with her

government contact, but accrues a credit with the organization.

In order to explain the disarray of the current compensation system, the client admits that the

previous manager of the department had left the organization several weeks prior, and the organization

was experiencing difficulty finding a replacement familiar with the relevant software. Our consultant

belongs to a service club (relational dimension) with an agent at a placement agency (structural

dimension). She calls the agent, efficiently explains the needs of the client (cognitive dimension), and

the agent immediately sends over information on several qualified candidates. The consultant creates a

credit with the organization, and with the agent who is grateful for the business.

Further into the project, the consultant reviews the list of potential remittance service providers

with the client. Although the client would prefer to go with the lowest bid, the consultant speaks to the

manager with responsibility for the decision (structural dimension) and takes the opportunity to market

a provider with whom she is personally familiar (relational dimension). She explains the benefits of her

preferred provider in a manner that shows she understands the needs and constraints on the


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organization (cognitive dimension), and lets the client know she would be appreciative if this vendor

could be given the opportunity. The client agrees to give the contract to the consultant’s first choice.

The consultant creates a debit with the organization, but a credit is built with the vendor contact.

Nearing completion of the project, the consultant finds that she is unable to devote the required

time. She has no choice but to withdraw from the organization before all tasks are done. She contacts a

fellow consultant (structural dimension), and although the person is not particularly pleased to come in

at the middle of a project, he understands when the consultant explains how she became overbooked

(cognitive dimension). He agrees to do the favour (relational dimension). The client has spent a

considerable amount of time familiarizing the consultant with the project, and is not pleased with the

idea of a last minute replacement. After hearing the personal reasons behind the unexpected departure

from the consultant, the client agrees to allow the project to progress with the change in personnel. In

this instance, the consultant has garnered debits with both the replacement consultant and the

organization. She is obligated to both.

Table 1: Use of Social Capital by Consultants

Debit – External Contact Credit – External Contact

Debit ‐ Organization

“I can’t finish this project, I’ll ask

my buddy to fill in for me, if you

don’t mind.”

“Would you please use the

supplier that I recommend?”

Credit ‐ Organization

“I know someone who works

there, and he owes me. I’ll see if

I can get you an extension.”

“I can help you find someone

great for that hard‐to‐fill job.”


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The consultant attempts to judiciously spend and earn social capital in a manner that allows her

to satisfy the needs of the organization while maintaining or increasing the power of her personal

network, as can be seen in Table 1. Similar to regular market transactions, the goal is to increase assets

by carefully investing stores of social capital for the highest rate of return. Unlike normal transactions,

debits are not always a negative entry in the social capital ledger. Ties may weaken from lack of use. In

some instances, even incurring a debt can serve to strengthen a tie. The party that is ‘owed’ may have

greater motivation to maintain the relationship in order to increase the likelihood of eventual

repayment.

Proposition 1A: Consultants create social capital debits with external contacts to further client

organizations’ interests.

Proposition 1B: Consultants incur social capital debits with client organizations in order to accrue credits

with external contacts.

Proposition 1C: Consultants incur social capital credits with both client organizations and external

contacts by connecting complementary needs.

Proposition 1D: Consultants incur social capital debits with both client organizations and external

contacts in order to fulfill extraneous needs.

There is another scenario where a consultant’s social capital may come into play. For example,

a client unveils plans for the inclusion of a gainsharing program as part of the overall compensation

system. After reviewing the proposed program, the consultant makes a number of suggestions for

improvement. These recommendations are not based on her own experiences, but come about as a

result of casual conversations she’s had with network contacts who have implemented gainsharing


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programs in other companies. The social contacts have given her knowledge she wouldn’t otherwise

have. A credit is built up with the organization, but no debit is incurred. However, if the gainsharing

recommendations given by the consultant later prove to be erroneous, the result is a debit in social

capital with the organization.

Proposition 1E: Consultants incur debits and/or credits with client organizations by utilizing esoteric

knowledge gained through social capital.

Consultants Expertise with Social Capital

There are a great number of professional consultants working with organizations. Major areas

of expertise include management, IT, accounting, law, architecture, and advertising. According to the

US Census, consulting services in these areas generated over a trillion dollars in 2007.

There are several reasons to believe that consultants may have higher‐than‐average experience

in wielding social capital. First, consultants rarely enjoy the security of guaranteed employment – they

are invited in to an organization for a limited time. Unsupported by a long‐term agreement with an

organization, consultants must build and maintain strong networks in order to increase the likelihood of

securing future projects. In contrast, less transient workers in stable employment situations are not as

reliant on the consistent benevolence of employers – the decision to renew or continue a contract is not

a regular occurrence for them.

Second, when faced with paying premium fees for consultant services, organizations may have

high expectations about the ability of consultants to provide results quickly. At the same time,

consultants often need to coordinate different players without the benefit of real authority, and without

full historical knowledge of policies and procedures. Social capital can be used to overcome these

constraints. In a study of the contingent value of social capital, Burt (1997a) found that social capital


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was most valuable to individuals working across significant boundaries. He found that social capital was

very important to senior staff members with few peers, and served the important function of

legitimation. Members of out‐groups, such as minorities, sales and service personnel, and the newly

hired, were also more dependent on the effective use of social capital. Apparently, when dealing with

people who are outside of one’s in‐group, the ability to carefully craft relationships is of paramount

importance. Consultants are usually required to enter a series of organizations in the role of outsider.

Third, consultants are people who have chosen a career path that often inherently involves

interacting with a multitude of clients. This may presuppose an elevated comfort in social situations,

and thus increased situations to develop skills in this area. On a related vein, consultants with more

than one client are exposed to a large number and variety of contacts. They have more opportunity to

develop a variety of network members, and to practice the skills needed to maintain relationships.

Contract employees face similar workplace characteristics, and contractors with the best social skills

have been found to work the most (Barley & Kunda, 2006).

Proposition 2A: Consultants have a broader social capital network than internal knowledge workers do.

Proposition 2B: Consultants use their social capital network more than internal knowledge workers do.

Interorganizational Networks

If consultants are particularly adept at building and using social capital, and if their social capital

network is external to the organization’s network, it may offer considerable value to an organization. It

is likely that consultants regularly offer the advantages of their stores of social capital to clients in order

to provide added benefit to the organization. Consultants who are able to mobilize their social capital

on behalf of a client bring added value that cannot be replicated by sources internal to the organization.


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Burt (1997b) argues that actors who have relationships with otherwise disconnected networks

are in a valuable position. The structural holes separating networks serve as entrepreneurial

opportunities that the actor can use to broker the flow of information between the two networks. As

broker, the actor has additional power in that a certain amount of control over the form of interactions

is inherent. As an outsider invited to be involved in key organizational issues, consultants are often in an

ideal position to take advantage of brokerage opportunities between separate networks. This is

especially true of consultants whose networks contain a large number, and variety of, valuable ties.

Proposition 3A: The networks of consultants have more structural holes than the networks of internal

knowledge workers.

Proposition 3B: Consultants whose networks have more structural holes will be more likely to use social

capital to assist organizations meet their goals.

Organizations often face great difficulty in deciding with whom they should form ties. And yet

an organization with many structural holes may find that information is shared inefficiently or is not

widely available (Leana & Van Buren III, 1999). But it is often challenging to ascertain the reliability,

suitability, and needs of potential ties (Gulati & Gargiulo, 1999). Incomplete data on potential partners

increases search costs and the possibility of opportunistic behaviour (Gulati, 1995). This may be why

organizations often use third‐party referrals in their search for potential ties (Gulati & Gargiulo, 1999). A

consultant can often provide a greater range of information on potential ties, leading to increased

confidence and lower costs for the organization (Granovetter, 1985; Uzzi, 1997). Due diligence is

facilitated (Gulati et al., 2000). The boundary‐spanning nature of consultants may lend itself especially

well to an expansion of organizational networks.

Proposition 4: Consultants who act as brokers between structural holes in clients’ networks and external,

previously unconnected networks expand clients’ organizational networks.


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If organizations are able to ‘rent’ the social capital networks of consultants, a key competitive

advantage may be obtained. Consultancy fees may be relatively inexpensive to an organization

compared to the costs of building and maintaining networks of social capital. Even if motivated to do so

on their own, organizations would rarely have access to the number and diversity of contacts that

consultants will generally hold due to the number and variety of organizations with which they interact.

Network relations positively affect the flow of influence and information (Arthur, 1994), and the social

capital component can lubricate that movement.

If a consultant brokers a connection with a new tie who will be working closely with the same

consultant, several advantages may be realized. Previous experience working together may lead to

higher productivity, and both sides may gain social enjoyment from working with someone with whom

they share goodwill and/or respect (Granovetter, 1985).

The brokered ties that are made through a consultant’s social capital network are less likely to

result in malfeasance. Opportunism becomes more costly when a source is part of a network (Gulati et

al., 2000). And at a more specific level, impropriety may prevent the preservation of the tie with the

broker. In sum, wrongdoing may be less common since it could negatively affect not only the

connection with the new tie, but also the broader network reputation, and the tie with the broker.

Proposition 5: Organizations can access higher quality ties, with less expense and effort, through the

social capital networks of consultants.

Some organizations may be particularly advantaged by using the social capital networks of

consultants. Newly formed businesses may have a limited network, and thus may greatly benefit from

tapping into the network of consultants. Also, fast‐moving industries that are heavily dependent on

quick and efficient knowledge transfer (e.g. high‐technology firms) would be apt to profit from

immediate access to the diverse networks of consultants (Adler & Kwon, 2002). Much innovation is


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unknown to organizations, but not known to individual firms (Tether & Tajar, 2008). Consultants bring

not only their own ideas, but they can use their social capital to build a conduit of information flow from

a variety of sources (Adler & Kwon, 2002). This can be especially helpful to organizations that need an

infusion of ideas, knowledge, and partners, or those undergoing major changes. Also, innovation is

often created through interorganizational collaboration (Powell, Koput, & Smith‐Doerr, 1996). Rich data

from consultants who have worked within many organizations can lead to partnerships that provide a

competitive advantage.

Proposition 6A: Organizations that are new, and/or in dynamic industries, will be most likely to access

the social capital networks of consultants.

Proposition 6B: Organizations that are new, and/or in dynamic industries, will gain more competitive

advantage from access to the social capital networks of consultants.

Benefits

The organization benefits from the use of the consultant’s social capital because it gains

information about possible suppliers, customers, or partners it wouldn’t otherwise have known about.

Inside information makes organizations more comfortable about connecting with a source. Referring

specifically to alliances, Garlati and Garguilo (1999) state that “the paucity of reliable information about

the capabilities, the needs, and the behavior of potenetial partners creates a significant informational

hurdle for organizations…” (p. 1442).

When the consultant acts as intermediary, both sides are more motivated to make the

connection work in order to preserve the tie with the consultant (Granovetter, 1973; Gulati & Gargiulo,

1999). Granovetter (1985) argues that the expectations of embedded relations are stronger than the

constraints imposed by formal authority in discouraging malfeasance. Thus, boundaries are expanded


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to include vetted, motivated ties at a minimal cost, and in a timely manner. The company is then free to

build on and maintain the new ties indefinitely. Tapping into a network is much easier than building one

from the ground up.

Speaking of the mechanisms through which organizations and social structure affect each other, Gulati

and Gargiulo (1999) state:

“Interorganizational networks are thus the evolutionary products of

embedded organizational action in which new alliances are increasingly

embedded in the very same network that has shaped the organizational

decisions to form those alliances.” (p. 1441)

Consultants with diverse clients are able to provide crucial knowledge about innovations, inside

news on industry happenings, and lessons learned by other companies on any number of practices.

This aids both the organization who is the receiver of information, but also the consultant, who enjoys

greater marketability.

In addition to building new ties and their knowledge base, organizations are able to reap the

benefits of goodwill generated by the consultant independent of the organization entirely. The

consultant can ask members of the social network to do favours for the organization, even if the tie has

no other connection to the organization whatsoever. The organization can partake of privileges that

would otherwise never be granted. Having clout is good, but perhaps the next best thing is having

someone with clout working on your behalf.

Consultants also profit from using social credits in their work with clients. As mentioned

previously, social capital is strengthened with use. If contacts are not used, they are likely to atrophy.

While earning credits has obvious advantages, acquiring debits does, too. A tie that is owed an


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obligation is more likely to be motivated to ensure the consultant stays within the network so that there

is continued opportunity to collect on the obligation. In addition, some ties may enjoy being relied

upon, simply for the boost to self‐esteem or for the prestige.

Using social capital on behalf of the organization is also an excellent way for the consultant to

build social ties within the organization. Astute consultants continually look for ways to strengthen their

social capital network by adding new connections. Every new client is an opportunity to add important

new ties. However, when the consultant is able to broker a connection between an external network tie

and the client organization, the consultant succeeds in further tightening his/her connection to the

organization.

While many consultants may be similar in terms of knowledge capital, the particular power of

one’s store of social capital can serve as a competitive advantage in the consulting marketplace. This

particular asset is usually less powerful for internal staff. Collins and Clark (2003) found that firm

performance was improved when top managers used internal networks to gather and distribute

information across key actors. However, their external ties had much less influence on company

performance. That is, while an organization may vertically integrate certain resources, it is very difficult

for in‐house personnel to maintain the type of vibrant, diverse social networks that a number of

consultants may offer. The variety and resources of ties, and the consultants’ ability to manage them

effectively will differ amongst consultants.

Proposition 6: Consultants who have a stronger social capital network, and who provide clients with

access to the benefits of said network, will maintain a competitive advantage over other consultants.


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Risks

Granovetter (1985) warns about the dangers of trust in socially embedded relationships. Trust

can be detrimental to both the consultant and the client organization. Ties may take advantage of the

fast‐track connection enabled by a broker, possibly subverting or ignoring tender policies or fair

practices. If an organization places unwarranted trust in a new tie based on the consultant’s

recommendation, it may open itself to jeopardy that might have been better mitigated by following a

formal sourcing procedure. Sometimes economic rationality and market considerations are preferable

to embedded relationships (Uzzi, 1997). Also, if a consultant recommends a source that later is guilty of

wrongdoing, the damage will fall to the consultant’s reputation (Barley & Kunda, 2004).

Work by Portes (1998) highlights some other potentially negative effects. A consultant’s

bounded social capital network will often exclude certain ties that may well be a better choice for the

client organization. That is, the consultant’s network may limit the amount of potential partners (Gulati

& Gargiulo, 1999) or information (Adler & Kwon, 2002). The privileges requested through social capital

may place undue hardship on certain ties. For example, if the client organization feels obligation to the

consultant due to social capital debits being incurred, the organization may find repayment of the debt

to be quite costly in other ways. For example, an organization may base a decision to renew a

consultant’s contract on the basis of reciprocation of social capital‐based favours, rather than based on

objective criteria. Also, members of a network may feel pressure to take actions with which they’re not

comfortable in order to maintain access to powerful members. Network members with high centrality

often have a disproportionate amount of power. Portes (1998) discusses the ways in which individual

freedoms become curtailed in cohesive networks.

Social capital transactions are by their very nature somewhat undefined. Since terms are not

clearly laid out, there is often the danger that a source will not ‘come through’ consistent with the other


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party’s expectations. Obligations may not be repaid within a reasonable time, or at all. Social capital

transactions are, by definition, “characterized by unspecified obligations, uncertain time horizons, and

the possible violation of reciprocity expectations” (Portes, 1998). Unsuccessful social capital

transactions are more likely to evoke strong negative emotions than regular market dealings. Broken

trust can result in animosity or even escalate to vendettas (Uzzi, 1997).

Investments in social capital networks may not always be cost‐efficient in certain situations

(Adler & Kwon, 2002). Maintenance of ties may require a significant amount of time and energy (Adler

& Kwon, 2002; Barley & Kunda, 2004; Evans, Kunda, & Barley, 2004; Nahapiet & Ghoshal, 1998), with no

guarantee of equivalent payback.

Discussion

This paper is an attempt to visualize the impact of social capital in concrete terms. This is a

contribution to the extant literature in that it connects social capital with its effects on boundaries, and

provides a new perspective on the processes within which it is used. Examining the methods by which

professional consultants wield this important asset is a powerful way to develop our understanding of

the phenomenon. Organizational theorists and practitioners alike will benefit from increased insight

into the processes, benefits, and risks of using social capital.

Future research should empirically test the propositions put forward, focusing especially on the

limits of their validity in different contexts. In addition, it would be worthwhile to investigate the effects

of ties that are not characterized by goodwill. Negative ties are also apt to be part of a social network

(Granovetter, 1973), and while their volume may be lower than positive ties, their impact may be

greater in some respects. Labianca and Brass (2006) have written an insightful theoretical analysis of

the issue, and it would be illuminating to bridge their work into further discussions of the use of social


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capital by consultants. Contrasting the positive and negative aspects together would do much to

provide a fuller theoretical model.

Researchers have noted the increased use of contingent labour in the workforce (Kunda, Barley,

& Evans, 2002). The term includes a number of short‐term employment arrangements, “including part‐

time work, temporary employment, self‐employment, contracting, and outsourcing, and home‐based

work” (p. 235). Kunda, Barley and Evans (2002) suggest that an ever‐growing number of workers are

involved in these types of work arrangements; and technicians, professionals and managers make up a

larger portion of this labour force than ever before. Thus, more and more people in key positions are

now in non‐traditional relationships with companies. It is important to study how these members of the

workforce use social capital, and what effects are being felt by organizations. Only by understanding the

mechanisms through which social capital changes environments can we hope to manage the process

and provide advantage to individuals, organizations, and economies.

Looking at the ways consultants use social capital will not only help us understand the impact of

contingent workers, but also it may allow us to extrapolate to how social capital is used in organizational

internal networks. Managers, especially senior ones, are often quite similar to consultants in that they

hold a unique place in the company bureaucracy, have few peers, and are often asked to connect

diverse groups and knowledge bases together to accomplish tasks. The methods of consultants may be

the methods of boundary‐spanning managers when it comes to brokering opportunities through the use

of social capital.

Informed organizations, along with consultants, may be well‐served by capitalizing on a

thorough understanding of the myriad ways in which social capital can be used to expand boundaries

and further organizational goals.


22

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