Chapter 8.8, Problem 8.3ARQ

Explanation of Solution

Capital:

• Capital is one of the investments of resource for future profit. It refers to money invested in a firm for the purpose of promoting business objectives.
• For example, machinery or other tools used for the firm.

Human capital:

• Human capital is another type of investment in human skill and knowledge for future profit. The collective of knowledge, skills or other kind of intangible resources of one person can be used to create economic value for that person, their employees or their companies.
• For example, education is human capital investment, which pays off in term of greater productivity.

Social capital:

• Social capital is third type of investment in social relations with the expectation of returns in the marketplace.
• It is an economic idea that refers to the link between people and entities that can be economically valuable.
• For example, companies requiring people for job and also acquiring new customers.

Values of social capital:

Social capital adds value in four ways. They are:

• Information
• Influence
• Social credentials
• Personal reinforcement

Information:

• Information is the first relationships in social capital. It provides information about problems, alternatives, opportunities and other factors important to the business professionals.
• For example, in personal level, a friend tells about a new job or in business professional level, a friend introducing the person to a potential new supplier.

Influence:

• Influence is the second relationship in social capital and it provides an opportunity to influence decision makers in organizations who are critical to the success.
• For example, an employee plays a game with higher officer of the company that could increase the chances of being promoted.

Social credential:

Social credential is a third relationship in social capital. It is connected to a network of highly regarded contact. Resource is an example of social credential.

Personal reinforcement:

• Personal reinforcement is a final process in social capital...