Enterprise-related social capital as a driver of firm growth in the periphery?

Abstract

Social capital plays an important role in firm competitiveness and firms located in peripheral regions may benefit from different types of social capital such as that gained from contacts to other business partners (production-related) or that gained from contacts with external actors like policymakers and politicians (environment-related). We investigate production-related and environment-related social capital of firms located in Swiss peripheral regions and fill a research gap by empirically testing the influence of those two types of social capital on firm performance. Using a unique matched dataset (survey data and register data), we investigate if and how different kinds of networks, and their geography, influence firm growth in peripheral regions. We find that environment-related social capital has, in most cases, positive effects on firm growth. This holds especially for extra-regional social capital. For production-related social capital, however, a positive effect is only significant for geographically proximate clients and suppliers. Consequently, conclusions about what drives firm growth in the periphery have to be nuanced and need to encompass different approaches and explanations.