Social Capital, Creative Destruction and Economic Development

This paper develops a conceptual framework for the role of social capital in the political economy of innovation, growth and reform, with illustrations from developing and transition countries. It identifies separate but related roles for the individual and communal interpretations of social capital. It argues that economic growth via innovation requires the creative destruction of individual social capital linkages and discusses the roles of communal social capital and formal market institutions in the process. A negative externality associated with creative destruction implies the possibility of growth accelerations as well as growth traps.