Social Capital and the Growth of the Nonprofit Sector n Gregory D. Saxton, State University of New York, College at Brockport Michelle A. Benson, University at Buffalo, State University of New York Objectives. This article examines the extent to which nonprofit organizational foundings are determined by various forms of social capital. Our hypothesis is that, controlling for other relevant social, political, and economic factors, communities with higher levels of social capital should experience more extensive growth in their nonprofit sectors. Methods. Using data derived from the Social Capital Commu- nity Benchmark Survey and the IRS ������charitable organization������ Business Master Files, we test our hypothesis using a negative binomial event count regression on nonprofit organization foundings in 284 U.S. counties in the year 2001. Results. We find that two core dimensions of social capital���political engagement and ������bridging������ social ties���have a significant impact on county-level nonprofit foundings. Surprisingly, a key element of social capital in the literature, the level of interpersonal trust, does not lead to an increase in foundings of new not-for-profit organizations. Conclusions. This study provides further evidence of the strength of political engagement and bridging ties for the vitality of the community. It also shows that the different dimensions of social capital do not manifest a uniform effect on nonprofit sector growth. These results further demonstrate that the growth of a community���s not-for-profit sector is dependent on a mix of ecological and environmental factors, especially preexisting organizational density, median house- hold income, unemployment, and levels of governmental spending. Overall, social capital can usefully be seen as another key ������environmental������ factor in explanations of organizational foundings. With the publication of Making Democracy Work (1993a), ������The Pros- perous Community������ (1993b), and Bowling Alone (1995, 2000), Robert Putnam sparked a decade-long debate on the value of civic engagement to society writ large. His primary argument is that communities with high levels of social capital���by which he means the networks of civic engagement that engender societal norms of reciprocity and trust���are happier as well as more cohesive, vibrant, and prosperous. Putnam effectively argues that social capital is not a ������fuzzy,������ ������feel-good������ concept, but a measurable aspect of life nDirect correspondence to Gregory D. Saxton, Department of Public Administration, SUNY���College at Brockport, 350 New Campus Dr., Brockport, NY 14420 hgsaxton@ brockport.edui. We thank the editor and the two anonymous reviewers for their helpful comments. The data used in this article are available at the first author���s replication website hhttp://www.itss.brockport.edu/ gsaxton/papers.htmli. SOCIAL SCIENCE QUARTERLY, Volume 86, Number 1, March 2005 r2005 by the Southwestern Social Science Association

with clear political, economic, and social implications. Specifically, he posits that networks of civic engagement not only foster sturdy norms of gener- alized reciprocity, but that they facilitate coordination and communication while amplifying information about the trustworthiness of other individuals. The end result is that social capital acts as an efficient ������lubricant������ that facilitates all forms of societal interactions���in the same way that using money in market transactions is more efficient than old-fashioned barter transactions. The past decade has thus seen a flourishing literature on the impacts of social capital on a plethora of social, economic, and political phenomena. Research has shown positive associations between the extent of a commu- nity���s social capital and the performance of its schools (Putnam, 2000:300), its governments (Putnam, 1993a Schafft and Brown, 2000 Pierce, Lovrich, Jr., and Moon, 2002), and its economic development (Romo and Schwartz, 1995 Woolcock, 1998). For individuals, social capital has been linked to improved health, earnings, and happiness (Putnam, 2000:319, 326), while at the organizational level, researchers have found strong associations be- tween social capital and ������corporate entrepreneurship������ (Chung and Gibbons, 1997), firm mortality (Pennings, Lee, and Witteloostuijn, 1998), the cre- ation of human and intellectual capital (Coleman, 1988), the formation of start-up companies (Walker, Kogut, and Shan, 1997), the strength of sup- plier relations (Baker, 1990 Uzzi, 1997), interfirm learning (Kraatz, 1998), the expansion of regional production networks (Romo and Schwartz, 1995), and the formation of strategic alliances (Chung, Singh, and Lee, 2000). In short, social capital has been linked to numerous intra- and extra- organizational factors that facilitate the formation, expansion, contraction, and management of public, private, and nonprofit organizations alike. In this article we extend previous research by examining in depth the rela- tionship between various forms of social capital and one of the core ������trans- actions������ of civil society���the ability of individuals to work together in initiating group responses to community problems. Specifically, we posit here that the increased trust, coordination, and communication engendered by elevated community levels of social capital render it easier for individuals to come together to form new nonprofit organizations. Our hypothesis is that, controlling for other relevant social, political, and economic factors, communities with higher levels of social capital should experience faster rates of growth in their nonprofit sectors. Using data from the Social Capital Community Benchmark Survey, the Internal Revenue Service���s ������charitable organization������ Business Master Files, the U.S. Census Bureau, and other federal government data sources, we are able to test the impact of six different dimensions of social capital on non- profit organizational foundings in 284 American counties in the year 2001. Using a negative binomial event count model, we find that two facets of social capital���political engagement and ������bridging������ ties���have a significant impact on the number of county-level nonprofit foundings above and Social Capital and Growth of the Nonprofit Sector 17

beyond the effects of community demographic characteristics, local eco- nomic performance, government spending, and preexisting organizational density. The study thus carries important implications for the literatures on social capital, organizational ecology, civic engagement, and nonprofit or- ganizations. Of particular interest is the finding that a key component of social capital in the social science literature, the level of interpersonal trust, is not associated with increased levels of organizational foundings. Theoretical Background���The Community Impacts of Social Capital America���s not-for-profit sector has steadily increased in social, political, and economic importance over the past century. In the past 25 years alone, paid employment in the nonprofit sector as a percentage of total U.S. em- ployment rose from 5.3 percent to 7.1 percent, while the number of or- ganizations jumped from 740,000 to 1.2 million (Independent Sector, 2001). The growth is not entirely even, however. As with regional and local disparities in the business sector, the nonprofit sector of some communities is unquestionably healthier than that of others. Could disparate levels of social capital supply part of the reason? In short, do communities with higher levels of social capital experience greater rates of growth in their nonprofit sectors? To understand our argument, one must first appreciate the array of community-level impacts that social capital is posited to have. As with any concept that has assumed such broad popularity, the range of specific def- initions used by interested scholars is itself quite broad (for an extensive comparison of the numerous approaches taken, see Adler and Kwon, 2002). The preferred definitions of four of the most influential social capital scholars highlight this diversity. ������Social capital is defined by its function. It is not a single entity, but a variety of different entities having two characteristics in common: They all consist of some aspect of social structure, and they facilitate certain actions of individuals who are within the structure������ (Coleman, 1990:302). Social capital is ������the ability of actors to secure benefits by virtue of mem- bership in social networks or other social structures������ (Portes, 1998:6). ������Social capital can be defined . . . as an instantiated set of informal values or norms shared among members of a group that permits them to cooperate with one another������ (Fukuyama, 1999:16). ������Social capital refers to connections among individuals���social networks and the norms of reciprocity and trustworthiness that arise from them������ (Putnam, 2000:19). For Coleman, ������social capital������ refers to the social networks themselves for Portes, to the benefits that accrue from membership in those networks for Fukuyama, to the networks��� norms and for Putnam, to both the norms and the networks. Although there are semantic differences over whether trust is a 18 Social Science Quarterly