Social capital is acknowledged as an important factor in local economies. However, depending on their specific characteristics, social capital resources may have both positive and negative effects on socioeconomic development: The outcomes are related to whether the local contexts are endowed with bonding or bridging social capital. This article investigates the impact of the bonding social capital present in a local production system in the Polish region of Łodž. The findings reveal that although the “rise and demise” of this local economy cannot be ascribed only to the quality of social capital, bonding social capital brought positive results in the form of rapid economic growth of the local companies and neutralizing the effects of the post-1989 crisis. It has subsequently hampered cooperative behavior, impeded learning and unlearning, and finally contributed to the incapacity of the local production system to adapt to new market economy conditions. Bonding social capital resources originating from the communist period have been further reproduced through local economic governance mechanisms, heavily influenced by the shadow economy.
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