The relationship between social capital and financial performance and the mediating effect of international diversification on this relation: The example of Turkish business groups

The aim of this study is to examine the relationship between social capital and financial performance in Turkish business groups context. The study focuses on the direct effect between these two variables and also the mediation effect of international diversification on this relation. For this purpose, it's tried to reveal how much of an impact of social capital on financial performance might be occur over the degree of international diversification. These relations are analyzed on sample that consists of affiliates of various business groups which are listed in Borsa İstanbul (BIST). The data set that consists of data of 74 affiliates of 15 different business groups is used for analyses. The study base on social capital and social network literature. The first model of the study have traces of resource dependence and transaction cost theories and tries to explain the reasons of financial performance differences of business groups' affiliates by examining the direct effect of social capital on financial performance. The findings of the analyses show that social capital which is measured over centrality has influence on financial performance. Significant relations are not observed for the effect of networks formed with strong ties on financial performance. It's not found statistically significant relations in the second model that investigates the effect of social capital which is measured over centrality and network formed with strong ties on the degree of international diversification. As a result of these findings, the holistic model that investigates the mediation effect of international diversification on social capital and financial performance relation does not present a significant effect. Key Words: Social Capital, Financial Performance, Business Groups