Abstract
The purpose of this study is to examine the impact of social capital on the performance of Small Enterprises (SEs) in an emerging economy, Sri Lanka. The study adopts a survey design and cross-sectional data collected by administering 200 questionnaires conducting face to face interviews. The social capital was measured by three dimensions namely, structural, relational, and conative social capital. The data were analyzed using Partial Least Squares-Structural Equation Modelling. The results show that structural and cognitive social capital had a positive significant impact on the performance of SEs while relational social capital had demonstrated a negative statistically significant impact on the performance of SEs. This implies that the managers of SEs emphasize the social capital as a means to a source of finance and resources and access to business and market information by maintaining close ties with the stakeholders to achieve a competitive advantage. The findings will be useful for the owners/managers of SEs who should share their knowledge, opportunities, and resources with their suppliers, customers as well as employees of the organization such that they should try to share their goals and achieve success together with parties who are related and interested in the business.
Highlights
The study attempted to explore the empirical evidence relating to the effect of social capital on the business performance of Small Enterprises (SEs) in Sri Lanka and gathered data by administering questionnaires amongst 200 owners/managers of SEs
The results further reveal that the relational social capital could show a negative significant impact on firm performance (β = -0.180 or 18 percent and t-value = 2.535) of SEs in Sri Lanka H2 that expect a positive relation between relational social capital and business performance is not accepted
The objective of the study was to investigate the effect of social capital on the firm performance of SEs in the manufacturing sector in Sri Lanka
Summary
The social capital which is the binding force that holds institutions has increasingly attracted substantial consideration of many scholars in developed and developing country studies (Cantner & Stuetzer, 2010; Ndofor & Priem, 2011; Patel & Terjesen, 2011; Brink, 2011: Bradley et al, 2012: Kipchirchir (2014): Agyapong et al, 2017). Bourdieu (1983) defines social capital as the aggregate of the actual or potential resources that are linked to the possession of a durable network of more or less institutionalized relationships of mutual acquaintance and recognition. Bourdieu (1983) defines social capital as the aggregate of the actual or potential resources that are linked to the possession of a durable network of more or less institutionalized relationships of mutual acquaintance and recognition. It is defined as the entire resources a firm accrues through its durable network of relationships with other firms (Nahapiet & Ghoshal, 1998). The structural dimension is necessary for the existence of relational and cognitive dimensions, whereas the cognitive dimension is necessary for the existence of the relational dimension
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