Strategic Management Journal Strat. Mgmt. J., 22: 587–613 (2001) DOI: 10.1002/smj.183 SOCIAL CAPITAL, KNOWLEDGE ACQUISITION, AND KNOWLEDGE EXPLOITATION IN YOUNG TECHNOLOGY-BASED FIRMS HELENA YLI-RENKO 1 *, ERKKO AUTIO 2 and HARRY J. SAPIENZA 3 1 London Business School, London, U.K. and McKinsey & Company, Los Angeles, California, U.S.A. 2 Helsinki University of Technology, Espoo, Finland 3 Carlson School of Management, University of Minnesota, Minneapolis, Minnesota, U.S.A. Employing a sample of 180 entrepreneurial high-technology ventures based in the United Kingdom, we examine the effects of social capital in key customer relationships on knowledge acquisition and knowledge exploitation. Building on the relational view and on social capital and knowledge-based theories, we propose that social capital facilitates external knowledge acquisition in key customer relationships and that such knowledge mediates the relationship between social capital and knowledge exploitation for competitive advantage. Our results indicate that the social interaction and network ties dimensions of social capital are indeed associated with greater knowledge acquisition, but that the relationship quality dimension is negatively associated with knowledge acquisition. Knowledge acquisition is, in turn, positively associated with knowledge exploitation for competitive advantage through new product develop- ment, technological distinctiveness, and sales cost efficiency. Further, our results provide evidence that knowledge acquisition plays a mediating role between social capital and knowledge exploitation. Copyright  2001 John Wiley & Sons, Ltd. INTRODUCTION As an extension of the resource-based view, the relational view maintains that competitive advan- tage derives not solely from firm-level resources but also from difficult-to-imitate capabilities embedded in dyadic and network relationships (Dyer and Singh, 1998; Lane and Lubatkin, 1998). By building relation-specific assets, knowl- edge-sharing routines, and effective relational governance mechanisms into relationships, firms can leverage their relational resources for knowl- edge acquisition and exploitation. Given that resource limitations of younger firms make them prone to liabilities of newness and adolescence (Amburgey, Kelly, and Barnett, 1993; Stinch- combe, 1965), this perspective helps to explain Key words: social capital; knowledge acquisition and knowledge exploitation; young technology-based firm *Correspondence to: Helena Yli-Renko, McKinsey & Com- pany, 400 South Hope Street, Los Angeles, CA 90071, U.S.A. Copyright  2001 John Wiley & Sons, Ltd. how and why some entrepreneurial firms are able to survive, thrive, and grow despite the lack of significant firm-specific resources. Another extension of the resource-based view concerns knowledge as a source of sustainable competitive advantage, as advocated in the knowledge- and learning-based views of the firm (Kogut and Zander, 1992; Grant, 1996; Spender, 1996). Knowledge is particularly important for technology-based firms: generating and exploiting knowledge in high-technology sectors demands that knowledge be continually replenished (Lane and Lubatkin, 1998). Because the acquisition and exploitation of knowledge are predominantly social processes (Kogut and Zander, 1992), social capital may be critical for the long-term success of technology-based firms. In this paper, we extend the above literatures by exploring how young technology-based firms can leverage interorganizational relationships to acquire external knowledge and exploit it for competitive advantage. We argue that the degree