Inter-institutional Social Capital for Self-Organising 'Nested Enterprises'

Abstract

A self-governing institution designed according to Ostrom's principles provides a way for its members to self-organise the management and sustainability of common-pool resources. Such institutions have been studied as a form of social capital, used as an input to a decision-making framework for coordination in various collective action situations. It has been shown that formally representing and reasoning with (electronic) social capital can reduce the complexity of decision-making, enhance participation and improve outcomes of collective action. However, it was assumed that these institutions were essentially independent, and so the members were limited in their ability to fully exploit their social capital across different collective actions situations because they did no learning. Therefore, in this paper we examine the role and nature of social capital with learning agents in the context of Ostrom's institutional design principle regarding structural self-organisation, specifically in the form of multiple layers of nested enterprises. Both inter-agent and inter-institutional interactions are then situated in a Public Goods Game, typically used to study the effects of free-riding which diminishes the positive benefits of cooperation in otherwise unregulated situations. Our experimental results demonstrate that the Social Capital created both within and between the institutions beneficially affects the development of a bottom-up structure of nested enterprises.