This paper offers a brief review of the theory of “social capital” and brings together several conceptualizations into one unified model. The main point behind the theory of “social capital” is that social networks have value. The goal of the theory is to detail and quantify the positive and negative implications of specific relationships with others in a community or region.
A statistical model is then developed from the theory and tested through logistic regression analysis on data resulting from the Business Retention & Expansion Program conducted in the Long Range Regional Economic Zone of Newfoundland and Labrador. Logistic regression is the statistical procedure used because it is effective in dealing with dependent variables that are of a binary “yes/no” nature. It measures the probability of a respondent answering "yes" when giving consideration to several other variables This data of small and medium sized business owners in rural Newfoundland is used to assess how relevant “social capital” might be for preventing the crisis situations of business relocation, downsizing, and closure, respectively. This same assessment will also reveal whether social capital theory is relevant to the study.
The data and subject of analysis of this paper stem from the Business Retention and Expansion (BR&E) project conducted in the Long Range Regional Economic Development Zone. The BR&E Project was a three-year initiative of the Department of Innovation, Trade and Rural Development supported by Human Resources and Skills Development Canada and the Atlantic Canada Opportunities Agency conducted between 2003 and 2005. The questionnaire was administered by each respective Development Board in the province and the P.J. Gardiner Institute for Enterprise and Entrepreneurship at Memorial University was responsible for compiling the data and analyzing it.