Relational capital

New ventures put much of their energy into securing financial capital, money to invest in fixed assets on the one hand, and working capital on the other. But relational capital is just as important. This is both the knowledge and trust built up between a venture and its users and suppliers, and the relationships between a venture and its staff and circle of volunteers. Conventional accounting takes little account of this intangible capital, yet in all social ventures it is the foundation of their strength and of their distinctiveness.

We use the concept of relational capital to capture the quality of relationships within which economic exchanges take place. This is the issue of greatest relevance for a social venture for it is on the range and depth of its relationships that its fortunes depend.

These relationships are multifaceted. They include the nature of its connections to users and investors, to suppliers and distributors, and with its own staff and Board and volunteers. With many of them there will be formal agreements, but whereas in the private market economy relationships take place across a territory demarcated by the interests and boundaries of private property and contract, for a social venture the boundaries are more porous and internal and external interests mesh.

It is one of its greatest potential assets that a social venture can attract support and resources from outside itself, as well as motivation from within, on the basis of its ideas and the way it works to realise them. This creates particular issues for management.