Firm‐level productivity growth returns of social capital: Evidence from Western Europe

Abstract

AbstractWe analyze the firm‐level labor productivity growth returns of social capital—defined as a synthetic measure of “generalized trust,” “active participation,” and “social norms”—using a large sample of manufacturing firms in France, Germany, Italy, Portugal, and Spain. We find that firms' labor productivity growth is higher in areas with a better social capital endowment. The positive returns of social capital are, nevertheless, unevenly distributed across firms, with smaller, less productive, less capital‐endowed, and low‐tech firms benefitting the most from operating in strong social capital ecosystems.