The Role Of Social Capital In MNCs Operation And Management

After the Second World War, the most important economic phenomenon is the emergence and development of multinational corporations. Since the 1990s, the world has been more closely linked because of the advanced communications technology and transport technology. Globalization environment which has gradually replaced the international environment becomes a vast arena of multinational operation. One of the closest factors which have an influence on MNCs'management and operation is the trend of economic globalization. It makes multinational corporations faced with a string of challenges.The traditional theories for MNCs'management have a better interpretation. With the development of economic environment its explanatory power is faced with severe challenges because of its adaptability and one-sidedness. New practice calls for a new theory. In guiding the current management of multinational corporations, the value chain theory has a stronger power. Its two strategic variables: coordination situation and integration situation, have certain elements of social capital. Therefore, getting social capital embedded in the value chain plays an important role in the operation and management of multinational corporations.This paper begins with a theoretical study of the important role of social capital. Secondly, it illustrates the role of management in the capital with two cases.Finally, it discusses the negative effects of social capital and their prevention. Major innovations of this paper are as follows:First, classify social capital into two parts, namely, internal social capital and external social capital.Second, embed social capital theory in value chain theory, and reveal the fact that the explanatory power of the value chain theory is highly dependent on the acquisition and accumulation of social capital.Third, use specific examples of GM and Toyota to illustrate the existence of social capital in the value chain network.Finally, use a simple Repeated Game Theory to discuss the importance of social capital for long-term and stable cooperation.