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Abstract

This paper characterizes and measures the contribution of social capital to the performance of 50 agro-enterprises in Colombia. Using qualitative analysis we document the functions that social capital performs within firms. To estimate social capital's contribution to firm structure and performance, quantitative indicators of firm-level use of social capital are developed based on the number and strength of external relationships that firms maintain. Econometric analysis finds that firm-level returns to relationships are positive and higher than to physical or human capital. The results suggests that while firms can increase their economic performance by investing in social capital, ameliorating the effects of the market failures that lead to use of social relations for business purposes could also improve both equity and efficiency.

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