Effect of Information Access through Social Capital on Mitigating Business Opportunism of Small Enterprises in Sri Lanka

H M S Priyanath,S P Premaratne

doi:10.4038/cbj.v8i2.17

Abstract

The study explored how information access through different dimensions of Social Capital (SC) (structural, relational and cognitive) affects the mitigation of business opportunism. Data were collected from 373 Small Enterprises (SEs) in Sri Lanka, conducting face-to-face interviews with the owners of SEs. Partial Least Squares-Structural Equation Modelling (PLS-SEM) was employed to analyse data. The results revealed that information accessed through different dimensions of SC have significant negative effects with business opportunism of exchange partners. Therefore, the study recommends SEs to develop SC while having strong relationships with exchange partners in order to access information leading to the mitigation of opportunism of exchange partners.

Highlights

According to the Transaction Costs Economics (TCE), many business exchanges are characterized by incomplete, imperfect or asymmetrical information occurred in imperfect market (Hobbs, 1996)
The study analysed the effect of information accessed through social capital on mitigating opportunism of exchange partners
To achieve this aim, working hypotheses have been developed to test how information accessed through each dimension of Social Capital (SC) affects the opportunism of Small Enterprises (SEs) in Sri Lanka by synthesising the SCT with the TCE

Summary

Introduction

According to the Transaction Costs Economics (TCE), many business exchanges are characterized by incomplete, imperfect or asymmetrical information occurred in imperfect market (Hobbs, 1996). Asymmetrical information encourages exchange partners to behave opportunistically (Williamson, 1981). Opportunism includes guile in pursuit of one’s own interests. This does not imply that all those involved in transactions act opportunistically always; rather, it recognizes that the risk of opportunism is often present. Williamson (1979) explained that opportunism is a central concept in the study of Transaction Costs (TC), and it is especially important for economic activity that involves transaction-specific assets in human and physical capital. Transactions tend to become costly due to opportunism of exchange partners

Methods

Results

Discussion

Conclusion