The social capital of a firm is high when:
A) legitimacy of the firm is high.
B) the firm has an underdeveloped social network.
C) the firm fails to make ethical decisions.
D) external relations of the firm are ill-managed.

Question

Quizplus · Accepted Answer

Social capital refers to the network of relationships a firm has with its stakeholders. When a firm has high legitimacy, it means that it is perceived as a trustworthy and credible entity, which in turn increases its social capital. Therefore, option A is the best choice because it directly links legitimacy to social capital. Option B is incorrect because an underdeveloped social network would decrease social capital, not increase it. Option C is also incorrect because acting unethically would harm a firm's relationships with stakeholders and decrease social capital. Option D is incorrect because good external relations are a key aspect of social capital, and their mismanagement would decrease social capital.

The Social Capital of a Firm Is High When