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Abstract
This paper characterizes and measures the contribution of social capital to the
performance of 50 agroenterprises in Colombia. Using qualitative analysis we document how
social capital performs a variety of functions in firms, including providing access information via
networks of contacts, reducing transactions costs in contracting via trust, and sustaining capacity
for collective action. 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 relationships that firms maintain. Econometric analysis finds that
firm-level returns to relationships are high, higher than to physical or human capital. The
results suggests that while firms can increase their economic performance by investing in social
capital, institutional and technological innovations that ameliorate the effects of the market
failures that lead to use of social relationships for business purposes could also improve both
equity and efficiency.