Three essays analyzing the role of social capital on individual and firm decision making

Ariana P Torres Bravo, Purdue University


The following dissertation is comprised of three essays that focus on different mechanisms on which social capital influences firm and entrepreneur behavior. All three essays use different econometric techniques to account for endogenous variables. Essay 1: Are Local Market Relationships Trumping Organic Certification? The Case of Small and Medium Fruit and Vegetable Farmers. This article investigates how an organic fruit and vegetable farmer’s choice to use direct-to-consumer market channels impacts his/her decision to be certified organic. First, we model the decision to be certified organic as a conditionally independent decision from the farmer’s chosen market channels. Second, we estimate the probability of certifying organic as an endogenously determined marketing decision to the choice of market channels, and use a bivariate probit specification to model this decision. Empirical evidence indicates that the decision to certify is endogenous to the chosen market channels. We show that farmers selling direct to consumers are less likely to certify organic. Essay 2: The Economic Implications of Social Capital on Hispanic Entrepreneurship. This essay assesses the effect of social capital, defined as the clustering of Hispanics, on the probability of Hispanic business creation. A big issue in xii the social capital literature is identification. We use new econometric procedures to try to address this possible endogeneity and draw causal conclusions on the effect of social interactions on individual economic behavior. This essay provides robust empirical evidence on the role of social capital on Hispanic entrepreneurship. We also tackle the constructs of Hispanic heterogeneity and find that second generation Hispanics may be used as a potential indicator for Hispanic entrepreneurial environment. Essay 3: The Resilience of Small Business: A Post-Katrina Analysis of Social Capital. Small business resilience becomes more relevant as natural disasters become more frequent. Post-disaster business resilience is the product of many complex decisions that result from the interaction of individuals, families, businesses, and communities. Little is known about what it takes for a small business to build resilience after a natural disaster and most studies have focused at a single point in time or look at the community as the unit of analysis. This study enhances the literature by providing empirical evidence on the factors that help small businesses to build post-disaster resilience over time. This article bridges the gap between social capital and post-disaster small business resilience. We answer two main questions. Does social capital explain small business resilience after a natural disaster? And, what type of social capital has the greatest impact for building small business resilience? These questions aim to shed light on the relevance of social networks to help small businesses face post-disaster situations. Incentives and interventions should support the creation and strengthening of community linkages through community participation and leadership development.




Marshall, Purdue University.

Subject Area

Agricultural economics

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