Dynamic Capabilities, Social Capital, and Rent Appropriation: Ties That Split Pies Author(s): Maureen Blyler and

Russell W. Coff Source: Strategic Management Journal, Vol. 24, No. 7 (Jul., 2003), pp. 677-686 Published by: John Wiley & Sons Stable URL: http://www.jstor.org/stable/20060565 Accessed: 26/03/2010 08:36
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Strategie
Published online inWiley InterScience (www.interscience.wiley.com).

Management
DOI:

Journal
(2003) 10.1002/smj.327

Strat. Mgmt.

7., 24: 677-686

AND COMMENTARIES NOTES RESEARCH

DYNAMIC CAPABILITIES, SOCIAL CAPITAL, AND RENT APPROPRIATION:TIES THAT SPLIT PIES
W. COFF* MAUREEN BLYLERand RUSSELL
_ Goizueta Business School, Emory University, Atlanta, Georgia, U.S.A.

V_
Who reaps the fruits We argue that while social capability? of a dynamic capital at the core of a dynamic and release integration, of resources use social social Thus, may capital for personal capital gain. rent generation rent appropriation. Even both causal and when contributions, employees central may to their claims. that fail is essential capability, be a key

the acquisition, for can also actors to understanding obscures individual the rent. or who grants Specifically, are highly

performance

credibility measures

ambiguity on to establish credible claims they may use their social capital who structural holes, boundaries, occupy span organizational rent because to appropriate be most able their social capital in this way may be unobservable Rent that is appropriated in normal compensation from rent. We contribute by

to distinguish

identifying the specific role of social capital in a dynamic capability and linking social capital to rent appropriation patterns. Copyright ? 2003 JohnWiley & Sons, Ltd.

Who

benefits when a firm has a dynamic capabil While many have written about dynamic capa ity? bilities as a source of advantage in volatile environ 1994; Teece, Pisano, and Shuen, has been 1996), rent allocation research focuses on the orga ignored. Existing nizational forms that successful firms adopt such as social networks inte that facilitate knowledge Moreover, 1996; Volberda, 1996). gration (Grant, the broader question of who appropriates rent from (D'Aveni, 1997; Thomas,

ments

is under-researched (Bar competitive advantages Some scholars implicitly assume that ney, 2001). shareholders reap gains by assuming that rent will in measures be observable of profitability (Grant, when employees have bargaining 2002). However, power, rent may be veiled in payments classified as costs that are hard to observe (Castanias and 1991; Coff, 1999). Helfat, The wide range of organizational forms that a firm with a resource-based take advantage may Since the hampers research on rent appropriation. form depends on many things like the resource consistent being leveraged and the environment, are hard to identify. rent appropriation patterns Therefore, focusing on specific settings, for which the range of organizational forms is narrowed,

rent words: Key dynamic capabilities; appropriation; social capital to: Russell W. Coff, Business Goizueta Correspondence 1300 Clifton GA School, Road, Atlanta, Emory University, 30322, U.S.A.

Copyright ? 2003 JohnWiley & Sons, Ltd.

Received

24 June 2002 Final revision received 18 February 2003

678
may

M. Blyler and R. W. Coff

advance approach rather than treating firms as monolithic entities. For example, employees may receive com in excess of that required to hold them in pensation place. Thus, in a firm with a dynamic capability, all stakeholders would receive at least the mini mum required to keep them in place while some receive rent. Rent is often excluded in performance measures (accounting profit, etc.) that cannot dis tinguish rent from labor costs. Structural contingency theory offers a starting forms point for insights about the organizational a dynamic that a firm with capability might take. For example, Volberda that (1996) suggests are similar to Mintzberg dynamic capabilities or Burns and and McHugh's (1985) adhocracy (1961) organic structure (e.g., flatter and less formal). Thus, Eisenhardt and Martin (2000) as requiring describe a product design capability Stalker's for bringing in design straightforward procedures or elements and combining them anew. Complex formalized routines are too rigid for a high-velocity 1998). setting (Brown and Eisenhardt, in a volatile environment, structural However, suggests that rivals must also contingency theory be organic. To produce rent, a firm must be consis tently better adapted than its rivals. In this respect, are linked to the resource dynamic capabilities based view (Barney, 2001). That is, the ability resource flows to create valuable com to manage Such firms binations may be a meta-capability. must simultaneously and excel at resource-picking (Makadok, 2001). The logic is capability-building that firms create a string of 'temporary' advan tages by adding (picking), subtracting, and recon figuring resources, which may amount to a sus tained advantage once the full pattern is consid ered. While a dyna be
cate.

rent appropriation theory. Dynamic to explore afford a unique opportunity capabilities rent appropriation in a specific context. Unlike the resource-based designs view, much is known about that are adapted to a volatile

broader
environment.

organizational

in two important ways. This article contributes First, we identify a central role of social capital in that has not been capability enabling a dynamic Second, we advance fully specified previously. literature by describing how the rent appropriation social capital can be used to predict rent appropri ation patterns in the specific context of a dynamic capability. We address these issues in the sections about rent that follow and develop propositions appropriation capabilities. patterns associated with dynamic

THE ROLE OF SOCIALCAPITAL

IN DYNAMIC CAPABILITIES
It is critical to understand the role of social capital in order to anticipate its role in in rent generation rent appropriation. However, the existing literature on dynamic has not fully specified capabilities a link to social capital. Here, we propose that not sufficient, social capital is a necessary, though In order to for a dynamic condition capability. that argument, we first define a dynamic make capability and social capital. We then examine why social capital is essential for a dynamic capability the acquisition, in terms of facilitating integration,
and release of resources.

What

is a dynamic

capability?

Eisenhardt mic

and Martin (2000: 1107) define as the firm's 'processes to integrate, capability match reconfigure, gain and release resources?to and even create market change.' This allows the to generate

imitable,

manipulate

any given resource configuration may to acquire and the meta-capability resources may be very hard to repli

new forms of rent by achieving et al, 1997). Rent, (Teece advantage competitive 'in excess of the min in turn, is a return received imum needed to attract resources' (Milgrom and 1992: 603). Since we focus on rent appro Roberts, the firm,1 we adopt a stakeholder priation within firm
1 External or strategic like customers rent (Dyer and Singh, appropriate 1988). Here we focus on employees in rent generation

What While

is social

capital?

literature has focused on the management role of social capital in generating rent (Leana and and Ghoshal, Van Buren, 1999; Nahapiet 1998), view social capital in terms sociologists typically that actors obtain through their social of benefits ties (Burt, 1992; Coleman, 1990; Portes, 1998). literature review, Portes (1998: 6) In his extensive social capital as 'the ability of actors to defines secure benefits by virtue of membership in social
Strut. Mgmt. J., 24: 677-686 (2003)

stakeholders

and generate 1980; Teece, of social capital Copyright ?

partners may 1998; Porter, and the role

and rent appropriation. & Sons, Ltd.

2003 John Wiley

Research networks.' points out, this is correlated with human capital, but social ties remain distinct from education (years) or training As Coleman (1988) (hours), capital. We use dominates is more than Van the most this common measures of human Acquiring

Notes resources

and Commentaries

679

the acquisition of resour Social capital facilitates a constant flow of information ces by promoting sources. External social ties may from diverse be especially critical for acquiring resources. For and Moore Castilla, instance, Fernandez, (2000) contacts yielded showed how employees' personal cost savings in recruiting and train significant Personal ties may also be a driving force ing. behind where resources obtained from interfirm networks the relationships depend on specific individ research uals (Dyer and Singh, 1998). Similarly, on communities of practice that indi suggests viduals' external social ties grant firms access to valuable bases (Brown and Duguid, knowledge 1998). For example, Bouty (2000) found that social ties among R&D scientists helped firms acquire intellectual resources.4 Weak ties are essential for

definition, which it the sociology literature, because to our research question appropriate individual-level

definitions (Leana and organization-level defi The individual-level Buren, 1999). how social capital nition highlights especially to rent generation and rent both contributes appropriation?our organization-level accrues to the In contrast, question.2 that rent presumes analysis 'firm' but offers no tools for core

rent appropriation within firms (e.g., understanding vs. shareholders). social cap Similarly, employees ital may be studied at intermediate units of analysis (group, division, etc.). Still, we would be left with of who, within these units, would rent. Thus, we assume that individu appropriate their jobs als draw on social capital to perform rewards (Sei and thereby secure organizational the question bert, Kraimer, and Liden, 2001)?generating is often consistent with employees' personal rent goals.

this process since they bring in information and resources but do not resist reconfiguring, as do 1974). strong ties (Granovetter, Absent social capital, firms would be unable to sustain the flow of resources and information in a volatile needed environment. for Consider, example, ing. At appear to obtain fund entrepreneurs competing the early stages, many more proposals lucrative than can be funded and venture

Social
resources

capital

and a capability

to manipulate

We

propose that social capital is an essential com in that it enables ponent of a dynamic capability resource management?a defining aspect of such a capability.3 Below, we describe how individuals' social capital allows firms to acquire, integrate, and release resources?the recombine, key tasks that Eisenhardt and Martin (2000) identify. We on existing research that, while not overtly draw aimed at dynamic capabilities, helps us understand how social capital is linked to each element of resource manipulation. We especially explore the role of weak ties as sources of resources that avoid the structural rigidities associated with strong ties.

capitalists must rely on signals beyond the quality of business plans (Sacks, 2002). As such, it is not surprising that entrepreneurs need both sound ideas and social contacts (Shane and Cable, 2002). Sim ilarly, human capital (education, training, skills, etc.) will not bring in critical new resources unless it is coupled with social networks.

Integrating

and recombining

resources

Social capital may also help us understand how resources are integrated and recombined in firms with dynamic For example, Grant capabilities. (1996) argued that social capital is a key mecha nism behind knowledge and integration. Nahapiet Ghoshal social stated: '... (1998: 250-252) similarly the development of intel capital facilitates neces lectual capital by affecting the conditions to occur.' sary for exchange and combination

2 see Portes (1998) for a discussion of the serious problems Also, associated with aggregate definitions. 3 Social capital may also have negative effects such as increased turnover costs into (Dess and Shaw, 2001) or locking actors obsolete ties (Gargiulo and Benassi, restrict our 1999). We review to those aspects that enable dynamic capabilities. Copyright ? 2003 John Wiley & Sons, Ltd.

4 Although that is not Strut.

external the focus

ties can also lead of this article. Mgmt. J.,

to knowledge

spillover,

24: 677-686

(2003)

680

M. Blyler and R. W. Coff

to a volatile environment. them maladapted Social essential information about oppor capital provides tunities to acquire and integrate resources. More over, weak ties facilitate the continuous reconfig uring required in this setting. Other elements such as an organic structure, shared culture, language, and simple routines are also required. Some are antecedents or require ments for developing social capital (Leana and Van and Ghoshal, Buren, 1999; Nahapiet 1998). Oth ers may be important independently. Thus, social not be the only element required for a capital may firm to have a dynamic capability. 1: Social is a necessary Proposition capital not sufficient) condition for the exis (though tence of a dynamic capability.

As social networks develop, they enable novel resource combinations new possibili by making ties more salient. For example, social ties facil itate inter-unit resource exchanges that promote 1998). Har product innovation (Tsai and Ghoshal, and Sutton (1997) linked IDEO's product gadon sessions at which design success to brainstorming shared information about other projects. engineers Successful resulted more from interac designs tions among engineers than individuals' knowl edge (e.g., human capital). Again, weak ties foster transfer without rigid structures that information become ossified over time (Ahuja, 2000; Hansen, resources social capital, remain and opportunities unrealized. For go example, Xerox's PARC R&D facility invented the and graphical user interface, computer networks, a host of other frame-breaking innovations. How isolated the facility ever, because management from the rest of the firm, it was poorly networked this 1999). Absent

unconnected

SOCIAL CAPITAL AND RENT

and the promise was never realized although Xerox resources (techni had the requisite complementary cal, human, financial, etc.). Had the R&D facility been better connected, they could have influenced and the sales force to be more top management to the computer business and bring the committed innovations to market.

APPROPRIATIONFROM DYNAMIC CAPABILITIES

is generated from social capital as sug we assume that actors will make claims gested, on the rent in order to increase their share (Coff, claims will 1999). The question becomes: Whose If rent be successful? We believe that social capital plays an equally important role in the rent appropria tion process as a signal of which claims will be
honored.

Releasing

resources

resources In mobilizing for one purpose, social capital also acts to release other resources. When individuals can release or set aside some relations in favor of others, they and the firm gain flexi bility and access to new resources. For example, often exit top accounting firms to take employees the firm techni positions on the client side. While cally releases these resources, they remain valuable as a source of business?the ties don't disappear. serve both the The reconfigured social ties may individual and the accounting firm. The rel weak ties in a dynamic capability make it atively to relin easier for individuals and the organization resources while keeping its identity intact. quish exiting Other conditions for a dynamic

the prospects for rent appropriation are a of stakeholders' power (Hickson et al., the strategy literature has 1971; Pfeffer, 1982), not explicitly linked this to social capital. For example, Coff (1999) describes how employee bar gaining power may stem from: (1) an information While function (2) the high cost associated with replac advantage, essential individuals, and (3) opportunities ing key to other firms. Coff did individuals have to move not consider social capital as a determinant of nor is it the focus of other power, bargaining treatments literature rent appropriation and Helfat, (Castanias of in the 1991; strategy Peteraf,

necessary

capability In sum, without external social acquire,

Copyright ?

ties,

individuals' firms

valuable internal and to be unable would resources, making

& Sons, Ltd.

recombine,
2003 John Wiley

and release

of definition social very capi that actors secure through social net its role in rent appropriation. works?anticipates Social capital translates into increased power in a number of ways. The most obvious is that indi viduals can use ties to lobby directly for personal interests. Social ties create reciprocal obligations
Strut. Mgmt. J., 24: 677-686 (2003)

1993). the Yet, tal?benefits

Research feel allocation decisions those making may to those with whom have ties. For beholden they and Wade (1996) example, Belliveau, O'Reilly, how CEOs use social capital to co-opt identify
compensation committees.

Notes

and Commentaries

681

so

which forces firms to share rent with key indi is that if key viduals. The implicit assumption individuals are not known (e.g., high causal ambi guity), they cannot appropriate rent and it will be observable in firm performance and flow to resid (e.g., shareholders). suggest that dynamic capabilities are actu the resource ally simple and causal links between or capability and the rent creation may be easy to Some establish (Eisenhardt and Martin, 2000). Since this has not been fully resolved in the literature, we explore both low and high causal ambiguity con as we shall see, causal ambiguity texts. Ultimately, may have little effect on the overall amount of rent appropriated by employees. allow more actors to make there is little evidence
claims.

this direct effect, social capital increases bargaining power in other ways along the dimen social ties sions Coff First, (1999) described. access to strategic informa grant stakeholders Beyond tion that enhances 1997). bargaining power (Burt, 1992, the most critical ties may be Second, since they are based more on per irreplaceable sonal relationships than formal authority. Such social capital-rich such as corporate individuals, 'rainmakers,' at the apex of inter- and intra-firm rent genera ties can both enable and preempt them immense bargaining power. tion?granting the external ties that bring in critical Finally, resources may enhance job mobility. Actors with ties can often move easily key boundary spanning to other firms despite being hard to replace (Dess and Shaw, 2001). For example, Granovetter (1974) used the weak ties concept to stress how informa tion available through acquaintances facilitated job
searches.

ual claimants

In fact, ambiguity may claims on the rent, and to discredit such available

Low causal We

ambiguity

In sum, while social capital plays a central in helping firms acquire and integrate key it simultaneously enhances employees' resources, bargaining power by: (1) granting access to strate role their replacement (2) increasing gic information, to other their mobility cost, and (3) increasing firms so they can offer a credible threat to leave the firm.

begin with the more straightforward context in as Eisenhardt and Martin which, (2000) suggest, the causal link between social ties and firm perfor mance is understood (e.g., low causal ambiguity).5 The fact that rivals may try to hire away key play ers has important implications for rent appropria a central actor who is clearly tion. For example, for integrating the firm's knowledge responsible for a product innovation should be able to leverage

2: The social capital underlying Proposition a firm's enables internal dynamic capability to both generate and appropriate stakeholders
rent.

Causal

ambiguity

and rent appropriation

that contribution into claims for increased compen success. In general, sation based on the product's seem quite credible if the actor can be claims will tied directly to rent generation. The en masse defections and hirings that marked many financial service firms in the late 1990s are illustrative (Schonfeld, 1998). Frank Quattrone's from Deutsche Morgan to Credit Grenfell flight Suisse First Boston, with his 100-person along the effect of knowing key indi team, demonstrates viduals responsible for rent generation. Quattrone contributed greatly to the tech IPO business both and networks. Yet he also through his management benefited when his team loyally fol personally lowed him to a rival firm to garner more pay. in a low causal ambiguity Thus, setting, the key contributors are apparent and their claims

In the context of rent appropriation, the issue of whether resource is easily the rent-generating seem to be impor linked to the outcome would tant. That is, an individual should be better posi tioned to appropriate rent if it is clear that his/her social ties are needed to generate the rent. This link between appropriability and causal ambiguity is implied in the literature. Barney (1991) indi cates that when key players are known, rivals will to hire them away?the threat of pay handsomely
Copyright ? 2003 John Wiley & Sons, Ltd.

5 Absent tainable. mechanisms complexity Strut.

causal

However,

an advantage seem unsus ambiguity, might causal ambiguity is one of several isolating 1982). Others such as social (Lippman and Rumelt, still hinder imitation by rivals (Barney, might 1991). Mgmt. J., 24: 677-686 (2003)

682

M. Blyler and R. W. Coff

corporate annual stock prices reports convincing; letters to shareholders with following

to the rent will seem credible. Evidence of their that they contribution will be sufficiently strong can offer a credible threat that their exit will stop rent production.

High

causal

ambiguity

the discussion above, dynamic capabilities Despite are most often thought of as shrouded in causal (Lei, Hitt, and Bettis, 1996). Indeed, ambiguity this follows from what we know about social capi tal: 'transactions involving social capital tend to be uncertain by unspecified obligations, and the possible violation of reci (Portes, 1998: 4). Social cap procity expectations' ital, then, may serve as a barrier to imitation due time horizons, to the associated causal ambiguity (Barney, 1991). in the strat As stated, the implied assumption egy literature is that high causal ambiguity hinders rent will rent appropriation and more employee To flow to residual claimants (e.g., stockholders). see this, we might begin by describing this setting case of the team production problem and Demsetz identified by Alchian (1972). They wrote that for team-based tasks in which individual are unknown, the transaction cannot contributions as an extreme internal in spot markets. However, be governed the prob the transaction may not eliminate izing remains unobserv lems if individual performance and incentives tend to able. Since both monitoring fail in this context, Ouchi (1980) argues that the firm's culture and socialization must substitute for infer financial incentives. From this, some might cannot appropriate rent that internal stakeholders from a dynamic capability under conditions of high causal ambiguity because incentives will lack legit the received view imacy. This might be considered in the strategy literature. we take a very different However, position. create a does not necessarily Causal ambiguity the evidence power vacuum just because linking to rent production is weak. Ambigu individuals bias (Dahl and Ran ity increases the self-serving som, 1999)?the tendency to take credit for suc Weitz, is unclear (Bettman and causality 1983; Zaccaro, Peterson, and Walker 1987). many of their claims on the important, Equally seem legitimate be since they would rent may cesses when individuals may believe hard to disprove. Here, are justified and that high levels of compensation earned (Louie, Curren, and Harich, 2000). Even the in attributions investing public found self-serving
Copyright ? 2003 John Wiley & Sons, Ltd.

improved attributions and (Staw, McKechnie, self-serving Puffer, 1983). as That said, not all claims may be viewed If credit allocation is difficult, equally legitimate. then the 'fair' allocation of compensation may also be hard. Boundedly rational decision-makers may seek signals that allow them to satisfice or fair solutions 1957; Cyert (Simon, approximate and March, 1963). Social capital may provide such a signal. Social capital may facilitate both mak the credibil ing claims over rent and determining the ity of claims. Even under causal ambiguity, firm would remain dependent on social capital (as opposed to formal structures or routines). Accord ingly, social capital should continue to be a major example of a firm with a characterized by high causal dynamic capability Sutton and Hargadon (1996) noted ambiguity. that clients even paid for IDEO's social capital brainstorm. Yet, causal ambiguity directly?per created problems when 'managers sometimes com plained they didn't get enough credit' (Sutton and and Sut 1996: 705). While Hargadon Hargadon, ton do not discuss rent appropriation, the concern about credit is, most likely, linked to claims on
the rent.

characterized

driver of power. IDEO might be one

offer an even Entertainment industries might clearer example. While much sociological research to the importance of networks for has pointed career success in the film industry, achieving a blockbuster it is unclear exactly what makes stars 1987). Nevertheless, (Faulkner and Anderson, to command salaries that may exceed continue and understate the contributions their individual via interactions with a talented direc value added tor or producer. Accordingly: 3a: High causal ambiguity encour Proposition a wide range of actors to claim rent due to ages a self-serving bias. 3b: Under high causal ambiguity, Proposition social capital is a primary means of establish ing the credibility of claims due to managers bounded rationality and the lack of clear dence confirming or contesting claims. By definition, uals to secure
Strut.

'

evi

then, social capital helps individ to benefits just as it contributes

Mgmt. J., 24: 677-686 (2003)

Research rent generation. We argue that neither low nor causal ambiguity will preempt appropriation. high is low, individu Rather, when causal ambiguity als can make clearer, stronger claims to rent via enhanced power. When causal ambiguity is high, individuals will still make claims as the allocation of credit is hard and bounded rationality may make many claims appear legitimate. of increased indicators Who power: gets the rent? Social We

Notes

and Commentaries

683

bargaining

on individuals who occupy structural holes. When are stable, such boundary external relationships rou ties are governed by well-specified spanning actors. For example, tines and easily replaceable can easily replace a liaison to a supplier Wal-Mart without jeopardizing the relationship. in the case of a dynamic capability, However, such ties are idiosyncratic and transitory?they are not governed and stan routines by rigid more personal attachments are dards. Accordingly, are not easily replaced formed and individuals and Fichman, ties may make Together, these should grant such individuals effects significant power with which to appropriate rent. (Luo, 2001; Seabright, Levinthal, the external 1992). Furthermore, such individuals especially mobile. Network Centrality work.6 A

have argued that social capital is an underlying feature of a dynamic capability and that it is likely to play a major role in rent appropriation. How, then, can we use what we know about social capital to predict who will reap the gains from a dynamic dimension social and 1977; Nahapiet that there are power network from which to appropriate rent. or those individuals of

capability? on the structural Drawing (Burt, 1992; Freeman, capital Ghoshal, 1998), we anticipate ful positions in a firm's social actors may be especially able In particular, highly central

centrality

refers to an actor's position in a net 'central' individual would have ties the network and thus enjoy a broad throughout In general, such individuals span of influence.

structural holes may enjoy enhanced occupying these have bargaining power. In varying degrees, been discussed in the sociology literature in terms of their role in securing socioeconomic benefits We draw on this 1988; Portes, (Coleman, 1998). research to make inferences with respect to the specific context of a dynamic capability.

Structural Burt

holes

from their information gather and disseminate many contacts. In addition, since many of the prob are non lems faced in a fast-paced environment routine (Lei et al., 1996), the coordinating role of central individuals must substitute for formal rou tines and authority tomobilize the firm. These indi then turn the information viduals into initiatives to reconfigure or reorder the network in response to emerging threats or opportunities. Thus, central individuals may be a key source of nimbleness at the heart of a dynamic capability. the role of central individuals in rent gen such actors may wield significant bargain eration, ing power (Ibarra, 1993). First, top management will need ties with central individuals in order to assure the timeliness of their information (both external and internal) and to convey the directives to redeploy resources. As such, central individuals and may exploit their ties with top management draw power from their high replacement cost and access to information. In sum, other things being equal, rent from a Given is likely to flow to individuals dynamic capability who occupy structural holes and those with a high degree of centrality:
6 This should not be confused with centralization to well-connected refers style or the number of or top-down actors and levels in the

(1992) has argued for the importance of struc tural holes in rent appropriation. When an individ ual occupies a network position between otherwise unconnected actors, he/she may serve as a broker for information or resources and can extract rents

for intermediation In an empirical services. test, Burt (1997) found that promotions and compen sation depend on the extent to which individuals control unique ties to key resources. While struc tural hole theory is not new, our assertion that it is a key mechanism enabling individuals to appropri ate rent within the specific context of a firm with a dynamic capability is novel. Burt (1992) argues that structural holes facilitate efficiency because they reduce the number of ties in the system as a whole. A firm with a dynamic capability requires unique sources of information about the environment, suggesting a heavy reliance
Copyright ? 2003 John Wiley & Sons, Ltd.

management. Centrality not to their management hierarchy. Strut.

Mgmt.

J.,

24: 677-686

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M. Blyler and R. W. Coff

about where strategy scholars might look for hid den rent. These literatures also offer measures for we have advanced. More testing the propositions than likely, Proposition 4 is the most easily tested. This would involve relating measures of network structure (structural holes, centrality, etc.) to indi viduals' rent appropriation promo (compensation, tions, etc.). These should be more strongly associ ated with appropriation in firms that rely heavily on social networks such as those with dynamic capa bilities. vidual between firms in dynamic environments and those in more stable settings. These effects could be differen tiated from returns to human capital by simply of education and training. including measures 3 might be tested by comparing Proposition the return on social capital in ambiguous settings are hard to observe where individual contributions (product development) ital in contexts where to the return on social cap are known key individuals To date, outcomes links between networks have not differentiated and indi

actors 4: Social enables Proposition capital structural holes and highly central occupying to generate and appropriate rent in a positions with a dynamic capability. firm It may not seem novel to presume that network structures facilitate rent appropriation. However, in other theories of rent generation, social capi tal plays a smaller role and has less impact on rent appropriation. For example, in stable settings, can be accomplished coordination using standard ized routines designed to cope with recurring prob lems (Nelson and Winter, 1982) and even key individuals have limited impact (Kerr and Jermier, 1978). As the Wal-Mart supplier liaison example shows, a structural hole may not allow rent appro priation for routinized transactions. Thus, our argu ment is specific to rent generated from a dynamic capability. A final point that should be clear is that stake holders compete with each other for rent. If there are many powerful actors, the value of any one actor's position may be diminished. This is much like Burt's (1997) discussion of how the value of social capital depends on how unique it is. Never intense competition theless, while among internal stakeholders may lower any one actor's ability to appropriate rent, it does not imply that rent is left on the table for shareholders. Rather it is divided more evenly among powerful internal stakeholders.

(e.g., sales). Here the key questions would revolve a greater number of people make around whether claims about their role and importance to the firm's success when there is ambiguity about individual contributions. 1 is complicated Testing of Proposition by the fact that it is hard to identify a sample of firms with dynamic capabilities?there is little empiri cal research on the topic. Nevertheless, studies of firms that compete in dynamic environments might confirm that social capital plays a key role. Indeed, measures of social capital might be more strongly correlated with firm performance in volatile envi ronments than in stable environments. More broadly, this article underscores the need to couple research on competitive advantage with a stakeholder view of the firm that allows us to rent appropriation patterns. Here, we disaggregate have made predictions about who will appropri ate rent by drawing on existing theory of the rent generation process. Future research should explore other theories of rent generation in specific con texts in order to predict rent appropriation patterns.

CONCLUSION

AND IMPLICATIONS

in two ways. This essay has contributed First, we drew an explicit link between social capital and dynamic capabilities 1). Second, (Proposition we explored how social capital influences who the 1-4). Ultimately, reaps the gains (Propositions social capital underlying a dynamic capability may also suggest who appropriates that rent. This is it leads us to predict that some because important rent from such a capability may fail to register line' may appropriated before in many 'bottom traditional measures. The performance of the rent is be that much the bottom line is calculated

(Coff, 1999). We have offered specific predictions about who be in a position to appropriate rent from such may an advantage. Our use of the social capital and social network literatures has offered some insights
Copyright ? 2003 John Wiley & Sons, Ltd.

ACKNOWLEDGEMENTS
This article We is dedicated Richard
Mgmt.

to the memory

of Maureen

Blyler. Joe Labianca,

Strut.

thank Gautam

Bob Drazin, Ahuja, Sue McEvily, Makadok,

J., 24: 677-686 (2003)

Research Michael Sacks, and Huggy comments and suggestions. Rao for their helpful
Dess GG, capital, Management Dyer strategy

Notes
JD.

and Commentaries
2001. Voluntary performance. 446-456. turnover, Academy

685
social of

Shaw and

organizational Review 26(3):

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