The Role of Social Capital in the Relationship between Human Capital and Career

Mobility. a case of equity bank limited

DENNIS KASOO

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Table of Contents
The Role of Social Capital in the Relationship between Human Capital and Career Mobility. a
case of equity bank limited...............................................................................................................i
CHAPTER ONE: INTRODUCTION..........................................................................................1
1.1 Background of the Study........................................................................................................1
1.2 Research Problem.................................................................................................................3
1.3 Research Objective................................................................................................................4
1.4 Value of the Study..................................................................................................................4
CHAPTER TWO: LITERATURE REVIEW.............................................................................6
2.1 Introduction..........................................................................................................................6
2.2 Theoretical Framework.......................................................................................................6
2.2.1 Theory of Human Capital................................................................................................6
2.3 Human Capital and Career Development..............................................................................7
2.4 Subjective Career Success.....................................................................................................8
CHAPTER THREE: RESEARCH METHODOLOGY...............................................................10
3.1 Introduction..........................................................................................................................10
3.2 Research Design...................................................................................................................10
3.3 Data Collection....................................................................................................................10
3.4 Data Analysis.......................................................................................................................11
References..................................................................................................................................12

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 CHAPTER ONE: INTRODUCTION

1.1 Background of the Study

Social capital is a concept which has been accepted as a valuable asset for protection and safety
of society, empowerment of organizations, and likelihood of civil society (Timberlake, 2005). It
plays an important role in meeting organization‘s needs and contributing to their successful
survival in today‘s world of competition. It acts as a management tool for fulfilling
organizations‘goals more effectively and with less cost. In other words, social capital facilitates
knowledge sharing, value creation, competitive advantage, better and faster performance, and
further development of organizations (Abili and Faraji, 2009). It includes norms, values,
orientations, networks and social relations governing behaviors and interactions among
individuals. It also facilitates individuals‘ mutual cooperation and coordination for shared
interests and enables them to act collectively. Social capital a set of valuable resources inherent
in social relations of primitive and secondary groups and also in the social organization of the
society (official and unofficial institutes). Some major resources, which are sometimes referred
to as social values, are: honesty, rapport, sympathy, friendship, participation, etc. Through these
resources , social capital can make the interaction of the active members in different levels
somehow easy , quick and inexpensive and this way help them in reaching their common social
goals (Fatehi,2004). The new advantage is context how internal and external content is
interpreted, combined, made sense of, and converted to new products and services.

During the past decade, careers researchers have paid a great deal of attention to the topic of
career mobility ( Eby, Sorensen, & Feldman, 2005). To a considerable extent, this research
emerged in response to a confluence of major changes in global and local labor markets
(Sullivan, 1999). Increased competition from emerging economies with cheaper labor and raw
materials resulted in more “off-shoring” of operations. Rapid increases in health insurance costs
and pension liabilities created incentives for companies to replace full-time, permanent workers
with temporary or part-time employees. The employment security of managers in large
corporations declined in response to a lengthy period of mergers, acquisitions, and downsizings
in major industries (Hirsch & Shanley, 1996). Moreover, as the shape of nuclear families

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changed, employees sought out new employment opportunities that better fit their changing
personal circumstances (Kirchmeyer, 2006). In the boundary less Career (1996), Arthur and
Rousseau not only synthesized the previous decade’s research on the changing career landscape
but also urged researchers to pay more attention to these new labor market realities in the future.

Creating competitive context requires social capital – the ability to find, utilize and combine the
skills, knowledge and experience of others, inside and out side of the organization. Social capital
is derived from employees‘ professional and business networks. Human Resources used to focus
only on within-employee factors. The new competitive landscape requires focusing on between-
employee factors, the connections that combine to create new processes, products and services.
Social capital encompasses communities of practice, knowledge exchanges, information flows,
interest groups, social networks and other emergent connections between employees, suppliers,
regulators, partners and customers. Social capital is what connects various forms of human
capital. It is these patterns of connections that produce advantage for one group, and constraint
for another. People with better social capital: Find better jobs more quickly, (Granovetter, 1995)
Are more likely to be promoted early, (Gabbay, 1997) Close deals faster, (Mizruchi, 2000)
Receive larger bonuses, Enhance the performance of their teams, (Rosenthal, 1996) Help their
teams reach their goals more rapidly, (Hansen, 1998) Perform better as project managers,
(Greve, 1999) Help their teams generate more creative solutions, (Ancona, 1992) Increase
output from their R&D teams, (Reagans, 1992) Coordinate projects more effectively, (Martin,
2000) Learn more about the firm‘s environment and marketplace, (Lofstrom,, 2000)and Receive
higher performance evaluations. (Burt,, 1998)

The affects of social capital do not contribute to just the success of individuals and teams.
Organizations with better connections in the network of industry alliances and joint ventures
report higher patent outputs, (Gautam, 1998)) a higher probability of innovation, (Stuart, 1999)
and higher earnings and chances of survival in rapidly innovating industries. (Kenneth, 2000).
For years, there have been three different assets including natural, physical and human capital for
development and economic performance. However, it is important to realize that development

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depends on social capital and active institutions in the organization (Amirkhani & Poorezzat,
2010).
1.1.1 Equity Bank
Equity Bank was started in 1984, as a building society in Murang'a, with a focus the mortgage
sector. Its expansion necessitated the conversion to a bank in December 2004. Equity Bank is
one of the biggest indigenous local banks, a status it has managed to achieve in just a space of 25
years. It initial target market was Muranga's tea zone. The tea zones were an easy target, as they
had no powerful cooperatives offering banking services. The bank has been focusing on small-
scale farmers, individual customers and small and medium scale businesses. The bank has now
moved to other segments like corporate banking, mortgages, and investment banking.

The bank has continued to consolidate its position in Kenya, as at the end of February the bank
had 3 million customers and 106 branches. Chiou, 2009 provides empirical evidence that
building a branch network enables a firm to favourable compete due to increased proximity and
resulting convenience. Equity branch expansion has been duplicated by other banks like
Barclays, Cooperative Bank, Ecobank, Bank of Africa and Family Bank. The bank has also
aggressively expanded to the Great Lakes region, where it intends to replicate its Kenyan model.
Equity bank also aims at further grow its market share by raising its stake at Housing Finance
and acquiring the government's 23% stake in National Bank. If successful, Kenya's banking
industry will be lead by two indigenous banks, Equity Bank and Kenya Commercial Bank.

Equity bank has expanded its initial products like personal savings and loan accounts offered by
the building society to include trade finance, treasury services, personal banking, corporate e-
banking, cash back services, short message services banking, retail Internet banking, swift codes,
business loans, mobile banking, automatic teller machines, insurance, investment banking, and
custodial services. Loan products include overdrafts, hire purchase, premium financing, asset
financing, bills discounting and financing, trade finance and collateral management, cheques
discounting, and “fanikisha” loans for women.

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1.2 Research Problem
Organizations are presumed to have boundaries. They are endowed with various kinds of assets
on which they make ownership claims, and which are protected with isolating mechanisms such
as patents and contracts. They are liable for the products and services they produce. Also, they
have members whose inclusion in the organization is usually beyond dispute. In fact, the firm as
a collection of individuals is often bracketed when considering the competitive game it is playing
with other firms. Yet, organizational boundaries are precarious and certainly permeable. They
have exchange relationships with suppliers and clients, collude with competitors, and forge all
kinds of alliances with them because they cover only part of the value added in their value chain.

A majority of past research on career rank progression focused on intra-firm mobility pattern, the
effect of family background on workers’ career achievement, or the causal link between
institutional arrangements and workers’ career progression. Because this kind of research were
mostly based on case studies, it is difficult to generalize these findings to the whole labor force
( Pinfield, 1995; Yamagata et al., 1997). Relevant studies in Kenya also suffered from similar
data constraint (Chang, 1988; Chang, 1993; Tsay, 1998). One exception is the study of Chang
and her associate (2004), which systematically analyzed the career progression of people. Our
study seeks to examine the role of social capital in the relationship between human capital and
career mobility

1.3 Research Objective

1. To examine the relationship between social capital and human capital with career
success
2. To explore age, gender, and marital status as potential moderators in the above
relationships

1.4 Value of the Study

Findings of the study will particularly be useful in providing additional knowledge to existing
and future institutions on the role of social capital in the relationship between human capital and
career mobility. This will expand their knowledge on growth on social capital, human capital and

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career mobility and also identify areas of further study. The study will be a source of reference
material for future researchers on other related topics; it will also help other academicians who
undertake the same topic in their studies. The study will also highlight other important
relationships that require further research. The study will in addition to the above, be useful to
stakeholders, financiers, and investors in formulating and planning areas of intervention and
support.

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 CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction
This chapter reviews the entire literature related to social capital and human capital with career
success
2.2 Theoretical Framework

2.2.1 Theory of Human Capital

The influence of human capital on career mobility has been the major concern in sociology of
education as well as economics of education, because human capital is the core concept when we
evaluate the extent to which educational investment pay off. Early research on status attainment
emphasized the influence of ascribed traits, such as gender, ethnicity, and parental occupation,
on one’s occupational attainment. Recent studies extended beyond the ascribed traits, included
the achieved traits, such as productivity, accumulated work experience, and resource
mobilization (Tsay and Lin, 2000; Lin, 2001). The upgrading of productivity is directly related to
worker’s stock of human capital (Liu and Sakamoto, 2002), this implies that school education,
work experience, or previous on-the-job training must have certain influence on worker’s career
progression. Rosenbaum (1990) contended that human capital theory emphasizes the positive
effect of worker’s productivity in acquiring a better job, the causal link lies in the premise that
worker’s productivity reflects his or her ascribed ability or educational attainment, which should
have positive influence on worker’s job search outcome.

The stock of human capital not only determines a worker’s productivity, it also affects his or her
earnings, promotion and other status outcome. Past research on human capital theory have often
relied on ability, schooling and work experience to explain an individual’s occupational
attainment. Scholars criticizes human capital model for being too individualistic oriented that it
fails to consider the influence of structural forces on human capital formation (Tam, 1998;
Rosenbaum, 1990; Tsay and Lin, 2000). Actually human capital model only works for those who
have clearly made their career plan, most people can hardly make long-term plan of their
occupational career (Tsay and Lin, 2000), but rather rely on past life experiences to decide one’s
future plan.

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2.3 Human Capital and Career Development
Human capital refers to the multiplicative effect of schooling and on-the-job training.
Specifically, human capital refers to the combination of various job experiences, such as
managerial experience and job tenure, constitute the worker’s “employment capital”. Rank of
first position and work experience can be considered as the starting point effect on career
mobility. Job-related experience, job tenure and on-the-job training are important elements of
firm-specific human capital (Chang and Chuang, 2004). Nevertheless, these elements have been
poorly measured due to data constraint. For example, work experience has been measured as the
time difference between entering the labor market and entering the current firm; whereas job
tenure as the time difference between entering the firm and the date of interview. Such
measurement failed to account for the complexity and work experience and job tenure, especially
the complex dimension of job skill (Tsay and Lin, 2002). Recent studies have contributed to the
measurement of such concepts (Neal, 1995; Tam, 1998; Tsay and Lin, 2000; 2002).

Usually changes in one’s job positions or the length of time stayed in certain positions in the
same firm or same industry have positive impacts on one’s promotion prospect. A worker who
has been located in more positions is likely to land in the higher-rank position than those who
have not simply because of the cumulative effect of positional capital he or she had. Tam (1998)
attempted to use positional capital to explain the characteristics of the labor process. Positional
capital refers to the composite sum of a worker’s formal job positions. A firm usually
systematically allocates its resources, and the employees have to acquire certain positions to
access such resources. These vital positions not only provide access to organizational resources,
but also help to develop workers’ ability and in turns, to enhance their productivity. Therefore,
positional capital is similar to human capital, it has cumulative effect and it benefits the workers
who own them. The accumulation of positional capital is path dependence, it signals the
influence of past work experience on future status attainment (Tsay and Lin, 2000; 2002), and
can be labeled as the accumulation process of workers’ “employment” or “labor” capital.

The concept of work tenure and positional capital is closely related. The longer a worker stayed
in the same position, the less likely he or she is to experience different positions. Neal, an
economist, focused on workers’ career progression, he observed that workers changed

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employers, experienced different jobs or even transferred into different industry, and attempted
to answer whether past work experience would be an asset or liability after a worker changed his
or her job. He found that in the U.S. workers who changed their job but still stayed in the same
industry benefited from the cumulative effect of prior work experience and tenure, such
advantage turned into the seniority of their new job, and contributed to earnings improvement.
On the other hand, if worker’s new job belongs to a different industry, then prior work
experience cannot turn into positive assets to them (Neal, 1995; 1998; 1999). To what extent
work experience will affect the likelihood of job promotion just as it did to earnings will need
further empirical investigation.

2.4 social capital and relationship with human capital and Career Success
Interaction between human capital and social capital has positive effect on the organization‘s
financial performance (I bid) Top managers nowadays are aware that social capital increasingly
gains more importance and they also know that they can rarely find individuals with high social
capital. The higher value of these individuals has drawn the attention of organizations to brain-
drain and accordingly managers seeking to promote their organizations try to hire workers with
high social capital and this way increase their invisible assets (Tymon, 2003). Generally ,
individuals with high social capital gain a higher position than others in the organization in a way
that they have access to the required information and are able to understand the problems and
find functional solutions(Lin, 2005) Thus enables them to solve the problems easier and act as an
important resource to deal with other workers. This way other workers turn to consult them more
frequently and they reach an advantageous position in the organization that can be used as an
important resource in future transactions. Thus these individuals get more opportunities to help
the organization and can achieve promotion and success in their career.Managers with high
social capital gets promoted quickly. Individual with high social capital due to their great
relations with people are less dependent on a single person and can control others over
achievements in resources (Lin, 2005).

As noted earlier, subjective career success can be conceptualized as consisting of two

components: current job satisfaction and career satisfaction. Past research has suggested that
many of the variables that influence objective career success do not similarly influence
subjective success (Cox & Harquail, 1991; Judge & Bretz, 1994). As with job satisfaction (e.g.,

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Hulin, 1991; Judge & Locke, 1993), we expect that frames of reference predict judgments of
career success. Frames of reference are self referents versus other-referents - where individuals
evaluate their inputs and outcomes against their own expectations (not against what others
receive; Hulin, 1991). The desirability of a particular level of extrinsic outcome likely depends
on what standard or reference point that the practitioners use.

Demographic, human capital, and social capital factors, because they serve as career inputs, may
influence the internal standards by which career success is judged. Thus, it is likely that these
variables act as frames of reference in evaluating job and career outcomes (Judge & Locke,
1993). Age and experience (job and occupation) may act as frames of reference in evaluating
career outcomes, because older and more experienced practitioners may find a particular level of
objective success less satisfying than would a person who is younger or less experienced. In fact,
empirical data support a negative relationship between career satisfaction and age and tenure,
when controlling for extrinsic factors (Cox & Harquail, 1991; Cox & Nkomo, 1991). Similarly,
because individuals use their goals as criteria against which they evaluate their success, those
who set high goals (are ambitious) are found to be less satisfied with their current situation
(Judge & Locke, 1993). Thus, we expect that motivation negatively predicts job and career
satisfaction. Another potentially relevant frame of reference is gender. As Greenberg and
McCarty (1990) noted, several studies have shown that women have lower expectations
regarding pay and promotions than do men. This suggests that female practitioners may be
equally satisfied with a lesser level of objective outcomes (Dreher & Ash, 1990) or, equivalently,
be more satisfied with an equal level of objective outcomes, as compared to their male
counterparts.
2.5 Social Capital

Social capital can be seen as an important asset for creating and maintaining healthy
communities, robust organizations, and vibrant civil societies. Coleman (1990), Putnam (1995),
and Scopol (2003) observed the centrality of social capital and civic engagement towards the
well-being of a democratic life. In an organization, social capital refers to features of a social
organization such as information, trust, and norms of reciprocity inherent in one’s social
networks that can facilitate coordinated actions (Putnam 1993, 167; Sandefur and Laumann

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1998, 482; Woolcock 1998, 155). From the literature above, the first key concept of social
capital is social trust.

Social capital exists in the relationships between and among persons and extends even more
when the position one occupies in the social network constitutes a valuable resource (Friedman
and Krackhardt, 1997). This perspective was founded on a premise that a network provides value
to its members by allowing them access to the social resources embedded within the network
(Florin et al, 2003). The amount of social capital possessed is determined by whether individuals
can occupy an advantageous network where they get tied to others who possess desirable
resources, such as information and financial support, in order to achieve positive work-related
and career outcomes. Adler and Kwon (2002) emphasized that the network is necessary for
social capital, because it represents opportunities to gain access to and interact with others. Burt
(1997) found that managers with more social capital are promoted faster than those with less
social capital. Seibert, Kraimer, & Liden (2001) also saw that social capital is positively related
to promotions and career satisfaction.

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 CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction
This chapter provides a discussion of the outline of the research methodology that will be used in
this study. It focuses on the research design, data collection methods and comes to a conclusion
with the data analysis and data presentation methods that will be used in this study.

3.2 Research Design

This is a case study which is to investigate on the role of social capital in the relationship
between human capital and career mobility, a case of equity bank limited. This design is most
appropriate for a single unit of study because it will offer a detailed in depth analysis that will
give valuable insights to phenomena.

According to Mugenda and Mugenda (2003), a case study involves a careful and complete
examination of a social unit, institution, family, cultural group or an entire community and
embraces depth rather than breath of the study.

3.3 Data Collection

The primary data will be collected using interview guide. It makes it possible to obtain data requi
red to meet specific objectives of the study. The interviewees will be the Chief Executive Officer,
Finance Director and Marketing Equity bank limited.

Given that those who will be interviewed will not be so many and the researcher required getting
in-depth information on issues surrounding the human capital and career mobility at Equity bank
limited, interview is regarded as the best method. The interview guide will give a clear guidance
on what questions to ask.

The interview guide has unstructured questions which will be used so as to encourage the respon
dent to give an in-depth response without feeling held back in revealing of any information. With
unstructured questions, a respondent’s response may give an insight to his feelings, background,
hidden motivation, interests and decisions and give as much information as possible without hold
ing back.

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3.4 Data Analysis
The qualitative analysis shall be done using content analysis. Content analysis is the systematic
qualitative description of the composition of the objects or materials of the study (Mugenda and
Mugenda, 2003). It involves observation and detailed description of objects.

This research will yield qualitative data from the interview schedules and analyzed using content
analysis because this study seeks to solicit data that is qualitative in nature. Data collected will be
analyzed and compared with the theoretical approaches and documentations cited in the literature
review.

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