In this paper, a social capital perspective is applied to the relationship between the IT department and the Business organization. IT and Business are conceptualized as different occupational communities, with different understandings of their work. Our focus is on the level of social capital and the process of knowledge sharing between these occupational communities. We analyze the role that these factors play in reaching a mutual understanding within the process of IS development, and the influence this has on the perceived performance of the IT organization. Our study, combining qualitative and quantitative methods, points out that a lack of social capital (structural, relational as well as cognitive) can serve as an explanation for the often problematic relationship between these communities. Our analyses also show that social capital is especially relevant for the Business organization's perception of IT performance, whereas the IT department's perception is that performance is primarily dependent on the exchange of information. © 2011 Operational Research Society Ltd. All rights reserved.