In the socio-economic literature social capital generally emerges as an individual attitude with the characteristics of a public good: it does not imply privately appropriable benefits. By contrast, the main idea behind this paper is that SC might and should be interpreted as a component of an investment which implies private and public benefits entangled with each other. In order to put forward this idea, a theoretical framework that considers social capital as the public component of the impure public good R&D is developed. It shows that the 'civic culture' of the district area in which a firm works is not sufficient as an incentive to increase its investment in social capital, because this investment strictly depends also on the economic convenience of investing in the R&D. Social capital /networking dynamics might positively and complementary evolve only if the opportunity cost of investing in innovation is sufficiently low.
We consequently focus our attention on a specialized industrial district located in the Emilia Romagna region - the biomedical district of Mirandola (Modena) - characterised by a strong pattern of innovative activity. Using a proxy for innovative activity as dependant variable, we observe that R&D and networking/social capital arise as complementary driving forces for innovation outputs. When empirical evidence confirms that this complementarity plays key role, and consequently strong links exist between market and non-market dynamics relating to firms, the role for policy actions targeted to social capital is larger. The policy effort should be targeted toward both market and non-market characteristics taken together, rather than solely to the production of (local) public goods (social capital) or innovation inputs as independent elements of firm processes. The input of SC alone is not sufficient to ensure innovation and growth: economic incentives matter. On the other hand, whenever SC dynamics are crucial for R&D private investments, the effect of economic incentives depends on the presence and degree of their complementarity.