During the latest economic downturn, companies once again reverted to downsizing. Unemployed workers were urged to sharpen their skills and to retrain. According to human capital theory, such individual investments translate into better wages and job security for workers, higher productivity for firms, and greater economic growth for the nation. While few doubt the importance of education and training, some have questioned whether the human- capital framework is sufficient for understanding economic growth. In particular, some scholars are instead focusing on the economic value of social relationships at work—or social capital. This idea combines insights from sociology and economics. The notion of social capital assesses how people interact to produce additional economic value beyond that attributable to individual skills and abilities. Research on product development teams, for example, has shown that their effectiveness depends importantly on strong internal bonds among members as well as on their social relations with outside groups and departments. Downsizing and ongoing restructuring undermine those ties at work, thereby limiting the ability of even highly educated scientists and technicians to deliver new products and innovations. Similarly, for individual employees, research shows that job opportunities and income growth often depend more on whom they know than on what they know. These are examples of social capital—the idea that resources embedded in social relationships are a major source of economic value to firms and individuals alike.
