Relational capital

Relational capital is one of the three primary components of intellectual capital, and is the value inherent in a company's relationships with its customers, vendors, and other important constituencies.

Overview

Relational capital is defined as all relationships - market relationships, power relationships and cooperation - established between firms, institutions and people, which stem from a strong sense of belonging and a highly developed capacity of cooperation typical of culturally similar people and institutions. There are major conceptual differences between industrial and regional economists in their views towards Relational Capital. There has been a number of research studies which apply quantitative, empirical, econometric techniques in an effort to verify the existence and importance of relational capital on the innovation activity of firms. Proxies are found to represent the channels through which local knowledge develops at the local level and therefore indirectly of relational capital.

Collaborative entrepreneurship research suggests that small-and-medium-size firms (SMEs) are pursuing more collaborative relationships throughout a worldwide network of firms, driving a strategy of continuous innovation. Tapping into a body of literature that focuses on the importance of human capital in driving long-term success, some researchers merge ideas of collaborative research with a growing body of work on human capital or human resource management in SMEs. The belief is that it is not the human, per se, that is the real asset, but the relationships those humans have that are the most inimitable and important capital. There is also some indication that the only capital that differentiates low vs. high performance, regardless of firm size, is the relational capital aspect. Relational capital is a fundamental asset for firms, but especially for SMEs, and high performing companies are those that are able to negotiate with others and develop collaborative agreements, thus placing a high value in relational capital.

Leif Edvinsson, Director of Intellectual Capital at Skandia, may be considered the father of current thought on Intellectual Capital. Edvinsson and Malone (1997) are pioneers in working with intellectual capital. Customer capital is the strength and loyalty of customer relations. Customer satisfaction,repeat business, financial well-being, and price sensitivity may be used as indicators of customer capital. The notion that customer capital is separate from human and structural capital indicates its central importance to an organization’s worth. The relationship with customers is distinct from other relationships either within or outside an organization. Relational capital or customer capital is the strength and loyalty of customer relationships.