Question

Analyze the relationship between financial capital and social capital. How does one affect the other? Is there ever a situation in which an individual could have a lot of one, but not the other? Or are the two inextricably linked? Provide examples to support your claims.

Explain how different types of capital can affect technology access and adoption.

Be sure to use evidence/examples to support your claims.

Answer 1

Economically speaking, all those variables which bring in better returns to a business is something that is of great advantage. Over the years, the ultimate aim for any firm owner is to maximize their profits. To do this you need manpower as well as sufficient capital. This can be explained as follows: -

Financial Capital refers to the investment in terms of money which an enterprise makes, to be able to produce, market and advertise as well as sell its products to the target audience. To create a product or a service offering payments in terms of procurement of raw material, labour costs, advertising, sales and distribution etc apply to business owners depending on the size and volume of business activities.

On the other hand, social capital refers to the network of people which add on to a firm over time. These include investors, manpower, customers, potential customers, distribution network etc. As a company grows in size the network of people increases and becomes interconnected in nature. Significant investment in the same, brings in positive results for business owners over a period of time.

Social Capital and Economic Capital are both interrelated in nature. The existence of one alone is not going to result in efficient outcomes for any enterprise. For example, through the use of economic capital it may be possible for a firm to be able to make a product but without social capital selling the same is almost impossible.

When a firm starts its journey and only has one person working which is the owner himself, the social capital may not be in existence. Over time it builds and grows as the firm grows in size and volume.

If you have higher value of economic capital, the access to technology also increases. Top firms invest more in development of technology so that they can limit their expenses over a period of time. This is done to ensure that profits can be maximized over a period of time. Also, if social capital is high, the adoption of new technology takes place relatively quickly.

For example, companies as big as Apple, Microsoft etc, have huge capital capabilities of bringing in new technology to their office which would allow for easier development of resources. Also, their social capital is such that it easily accommodates to the technology being offered without major resistance.

Please feel free to ask your doubts in the comments section.