Seeing Both the Trees and the Forest: Closure and Social Capital in the Indian Interorganizational Network

The Indian economic context is characterized by the importance of business communities such as the Parsis or Gujarathis. These communities enable trust and norms in interorganizational transactions, and substitute for weak legal institutions. Current research in the interorganizational network context has focused on closure in the local network, and does not do as well in explaining how trust and norms can be maintained within large communities. We go back to the original Colemanian conceptualization of closure and social capital which describes the operation of trust and norms in large communities. In addition, this theory emphasizes the importance of closed structures and also the importance of having “good standing” with closed structures. Hence the theory is two dimensional, and has a positional and structural element. Current interpretations conceptualize closure as a closed triad, but this conceptualization is reductive, and (a) reduces the collective element of closure to a property of actors’ local network, and (b) loses the second positional element of Coleman’s theory.  We rely on the latest advances in network methodology and a complete population network of Indian firms to look at macro closure, and position of the actor within macro closed structures. Using this macro conceptualization of social capital, we find evidence for both the structural and positional dimension of Coleman’s theory.