Dynamics of Social Capital: Effects of Performance Feedback on Network Change

We present a theory of social capital dynamics. In particular, we examine how individuals in organizations respond to events such as performance evaluations by changing whom they interact with and the extent to which they utilize their contacts. We argue that positive performance feedback from supervisors increases levels of self-efficacy and results in the creation of new social capital as well as the increased utilization of existing social capital (i.e., forming new ties with sources of information and aid, and increasing interactions with existing contacts). In addition, negative feedback decreases self-efficacy, resulting in reallocation of social capital utilization to concentrate on a small number of existing frequently-accessed contacts (i.e., decreasing interactions with some contacts while increasing interactions with others). Our arguments highlight the role of individual agency in social capital dynamics and clarify the role that individual performance evaluations can play in the evolving structure of social networks. To test our hypotheses, we use a longitudinal social network data-set collected over a six-year period in the IT department of a global engineering firm. Using fixed-effects panel regression models, we find support for our hypotheses, suggesting that performance feedback is a determinant factor in social capital dynamics.