Proceedings of the 3rd European Conference on Intellectual Capital

Relational Capital Management <strong>of</strong> new Ventures Through
Virtual Embeddedness and Social Media
Eleni Magdalini Vasileiadou 1 , Magdalena Missler-Behr 1 and Sebastian Ullrich 2
1
Brandenburg University <strong>of</strong> Technology, Cottbus, Germany
2
SRH Hochschule, Berlin, Germany
vasileia@tu-cottbus.de
magdalena.missler-behr@tu-cottbus.de
ullrich@asperado.de
Abstract: New forms <strong>of</strong> data storage and transfer as well as <strong>the</strong> new methods to communicate, collaborate and
exchange knowledge at diminishing transaction costs over <strong>the</strong> world-wide-web have revolutionised networking,
knowledge creation and innovation processes in <strong>the</strong> Web 2.0 era. Virtual embeddedness signifies <strong>the</strong> possibility
to draw upon pay-per-use computing resources and a variety <strong>of</strong> customised web services and applications. The
facilitated utilisation <strong>of</strong> S<strong>of</strong>tware-as-a-Service and in particular social media (SM) applications enables effective
networking on platforms and in virtual communities in social as well as in business terms. Such networking
processes lead to <strong>the</strong> accumulation <strong>of</strong> social, relational and intellectual capital, as <strong>the</strong>y facilitate information and
knowledge exchange, integration and creation. As information and knowledge sharing, collaboration and
socialising take virtual dimensions, opportunities and threats arise for enterprises regarding relational capital
management (RCM) as well as knowledge and value creation. Most new ventures are keen on utilising SM for
internal and external communication and collaboration purposes. Through networking in <strong>the</strong> web, building up
virtual relationships and exchanging virtual knowledge through forums, blogs and online communities, RCM can
be accomplished efficiently and effectively, provided that <strong>the</strong> targeted customers, partners and potential
shareholders are keen on going online and utilising SM as well. In this context, <strong>the</strong> question arises: how can new
ventures improve <strong>the</strong>ir RCM through <strong>the</strong> utilisation <strong>of</strong> innovative information and communication technologies
(ICT) and SM? To answer this question, ventures have to grasp <strong>the</strong> potential <strong>of</strong> web technologies and SM and
assess <strong>the</strong>ir appropriability to achieve relationship-specific goals. They need to be aware <strong>of</strong> SM risks in order to
exploit chances and avert threats that arise through SM use. After an analysis <strong>of</strong> <strong>the</strong> properties <strong>of</strong> social and
relational capital and <strong>of</strong> <strong>the</strong> different forms <strong>of</strong> embeddedness <strong>of</strong> organisations, <strong>the</strong> utilisation <strong>of</strong> SM for RCM
purposes, <strong>the</strong> implementation <strong>of</strong> a SM strategy and <strong>the</strong> example <strong>of</strong> a German e-commerce venture that took
advantage <strong>of</strong> web technologies to build up and manage relational capital in virtual and physical dimensions are
discussed. The paper also tries to visualise how virtual embeddedness and SM influence knowledge, value and
reputation creation and <strong>the</strong> social and relational capital <strong>of</strong> organisations by means <strong>of</strong> a conceptual model.
Keywords: social capital, relational capital, Web 2.0, social media, new ventures
1. Introduction
Entrepreneurs draw upon <strong>the</strong> value <strong>of</strong> <strong>the</strong>ir social and relational capital lying within embedded
network ties, such as goodwill, reputation and trust, to access tangible and intangible resources,
exchange information and knowledge and create value (Shane and Cable, 2002; Packalen, 2007;
Zhang et al, 2008; Hormiga, Batista-Canino and Sánchez-Medina, 2010). While most research papers
concentrate on <strong>the</strong> positive effects <strong>of</strong> physical embeddedness on new ventures, Morse, Fowler and
Lawrence (2007) explain how virtual embeddedness can help to overcome <strong>the</strong> liabilities <strong>of</strong> newness
(Stinchcombe, 1965), which reflect <strong>the</strong> new ventures’ lack <strong>of</strong> resources and capacities. To overcome
<strong>the</strong>se liabilities, mostly consisting <strong>of</strong> <strong>the</strong> lack <strong>of</strong> social and financial capital, new ventures have to
develop organisational systems (e.g. roles and procedures), reputation and trustworthiness and to
build up <strong>the</strong>ir relational capital through target-oriented activities.
In <strong>the</strong> following sections, overviews and definitions <strong>of</strong> social and relational capital, physical and virtual
embeddedness, innovative Web 2.0 technologies and social media (SM) illustrate <strong>the</strong>ir benefits and
risks for (not only new) ventures. Finally, after <strong>the</strong> discussion <strong>of</strong> <strong>the</strong> utilisation <strong>of</strong> SM by Elbenwald
GmbH, a German young venture that used <strong>the</strong> advantages <strong>of</strong> <strong>the</strong> web to accumulate relational and
financial capital, a conceptual model about <strong>the</strong> impact <strong>of</strong> virtual embeddedness on <strong>the</strong> creation <strong>of</strong>
intellectual and relational capital is drawn as a conclusion <strong>of</strong> literature review and made observations.
2. Social capital and relational capital
The term “social capital” (SC) stands for a very broad, amazingly elastic concept, credited with
heterogeneous <strong>the</strong>oretical backgrounds by social, political, business and organisational sciences
(Adler and Kwon, 2002: 17; Woolcock, 1998). SC consists <strong>of</strong> a social structure and cultural context
that shapes and influences social and economic actions <strong>of</strong> embedded actors through <strong>the</strong>
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