Embedding Social Capital into the Value of the Firm

Both resource and intellectual capital models tend to have an incomplete and biased view of assets within the firm. Traditional accounting standards and practices focus on the tangible and financial assets and only consider limited intangible assets. This paper builds on the modelling of intellectual capital in organizations from the literature and uses Popper's 3 World theory to develop a more practical ontology. This model identifies and values a comprehensive classification of a firm's capital and includes both tangible and intangible assets. The resulting integrated model comprises the five asset classes of physical, financial, structural, human and social capital. The result validates the work by Adler & Kwon (2002) but offers an alternate sub-structure for social capital that is a more pragmatic model for industry. A hypothesis is developed that organizations that better understand the range of assets in the firm and invest in a portfolio of integrated management practices to manage that capital, should remain competitive and perform better.