Social capital, religious affiliation and business performance in Denmark

Values, norms, trust, and community membership are considered key sources of motivation for social capital, providing resource flows that can impact the performance of local actors. Motivated by limited evidence on the link between social capital and business performance, this paper explores the role of values, norms, trust, networks and religious affiliation for firm performance. We employ a novel empirical approach and capture social networks at a community level rather than focusing on firm-based social networks as much of the previous literature. Using Principal Component Analysis to construct novel social network variables for subsequent OLS firm-level regressions, this paper identifies an overall positive and significant effect of social capital and religious affiliation on firm performance in Denmark. These effects are robust to different levels of aggregation (sample structure), different sampling years and alternative measures of firm performance (return on asset, current ratio, solvency ratio and profit margin).