Social capital and networks in forest-based rural economic development

Microenterprises funded by the rural development support scheme were studied in Vest-Agder County in Norway. Of a total of 40 start-ups in 1993 and 1994, financial statements were collected for 34 firms in 1995, 1997 and 2001, in which 80%, utilize forest resources in their production. If a firm had increased its revenue and/or employment during this period, it was defined as successful, otherwise, it was defined as unsuccessful. Social capital was defined as those group arrangements intended to make individual actions more productive than they would be in its absence. By using a logit model it was found that, if a firm was able to interact horizontally in a local arena while at the same time interacting vertically in a regional/national network, the probability of the firm being successful was 94%. If the firm did not engage in any form of network, the probability of its success was only 25%.