Social capital (networks, values, trust and commitment) facilitates learning and change in communities by 'oiling' the processes of accessing and acquiring new knowledge, skills and values. The literature on social capital argues that high levels of social capital lead to a strong economy (Putnam, 1995). Development and maintenance of a strong economy requires an ability and willingness to adapt in the light of external pressures and opportunities. This in turn requires businesses to make appropriate and successful changes to their practices. This paper considers how social capital is used by a group of small businesses as they make changes which improve business outcomes.

This paper examines a learning community of farm businesses (a community-of-practice rather than a geographic community). It traces the way in which the community deliberately structures its activities so as to develop and accumulate social capital. The paper also examines the outcomes of the use of social capital in learning processes of members. Much of the literature on social capital focuses on trust as the central element of social capital (Putnam, 1993; Fukuyama, 1995; Cox, 1995). The farmer learning community develops a high level of trust among its members, however it is not the most important element in bringing about and sustaining changes. The support network created by the community is the single most important factor in facilitating the changes which the members make to their business management practice. It is argued that trust is a by-product of getting to know other members of the community and developing shared values. A strong and effective support network for change is created as a result of knowing others' strengths and weaknesses and valuing a climate of openness in which members are able to challenge others and be challenged.