Analysis · Business
Regional Social Capital and Productivity Growth: Size Matters More Than Age
By AWEI · AI-compiled · Published · Analysis prepared · 1 source · doi.org
Small manufacturers showed a stronger relationship between regional social capital and productivity growth than larger firms did. Yet young businesses showed no statistically clear advantage over older ones. That distinction is a useful finding from Roberto Ganau and Andrés Rodríguez-Pose’s 2023 study: business size and business age told different stories.
The researchers began with 27,299 manufacturers across France, Germany, Italy, Portugal and Spain; 17,396 remained observed in 2017. They measured changes from 2010 to 2017 in inflation-adjusted value added per employee. This captures labour productivity growth, with no direct measurement of whether sales, margins or delivery capacity improved.
Social capital was measured at the regional level using a 2008 population survey. The index combined general trust, unpaid volunteering and attitudes towards conduct such as bribery and tax cheating. It described the surrounding community; the researchers had no equivalent measure of each company’s own relationships.
For firms with fewer than 50 employees, the estimated relationship between that index and productivity growth was about 1.9 times as large as for bigger firms. This does not mean small firms grew 1.9 times faster. Stronger relationships also appeared among firms with fewer tangible assets per employee and lower initial productivity. The authors propose that access to external resources could help compensate for internal constraints, but did not directly establish that mechanism.
The observational analysis adjusted for firm and regional characteristics and selection associated with survival. To investigate causation, it used rainfall variability during 1500–1750, hypothesising that agricultural uncertainty encouraged lasting cooperation. A causal interpretation depends on historical weather influencing modern productivity through social capital, without other persistent pathways. Statistical adjustments cannot guarantee that assumption.
For business growth analysis, the finding supports examining local cooperation alongside a manufacturer’s internal resources. Age alone did not identify which firms had the stronger estimated relationship. The evidence remains bounded to manufacturing in five countries and cannot establish that networking activities, relocation or community programmes will improve any particular company’s results.
Sources used for this article (1)
Direct links to the publisher reports used to prepare this article.
- Source 1
- Firm‐level productivity growth returns of social capital: Evidence from Western Europe Roberto Ganau, Andrés Rodríguez‐Pose
