Abstract
Small Enterprises (SEs) do not have capacity to collect and evaluate information to predict future behavior of business environment on one hand and they fail to avoid the hazards from opportunism of exchange partners on the other hand due to the lack of information. SEs develop informal and personal relationships with different members of the network expecting supports in order to overcome their limitation of information. The network relationships lead to build Social Capital (SC) (values of social relationships; i.e. inter-personal trusts, relational norms, flexibility, integrity, common understand etc.) and thereby facilitate access to information which have an influence on mitigating Transaction Uncertainty (TU). Therefore, the study attempted to explore how different dimensions of SC affect the mitigation of TU of SEs in Sri Lanka. The study mainly employed the survey method to gather data using quantitative methodological approach. The data were collected from 373 SEs located in nine districts representing all Provinces in Sri Lanka, conducting face-to-face interviews with the respondents. The data were analysed using Partial Least Squares-Structural Equation Modelling. The results revealed that different dimensions of SC (structural, relational and cognitive) have a significant impact on mitigating TU of SEs in Sri Lanka. Thus, the study has provided sufficient evidences to conclude that SC has a significant impact on mitigating TU of SEs. The study contributes to theoretical knowledge by synthesizing all the dimensions of SC and TU into a new framework and testing it empirically which extends the transaction cost economics in the context of SEs in Sri Lanka. The study contributes to the methodology quantifying SC of SEs using a multi-dimensional conceptual model. The study provides important insights for policy makers to focus their strategies to new direction rather than conventional supporting approaches to develop SEs.
Highlights
Small Enterprises (SEs) have higher Transaction Uncertainty (TU) due to asymmetrical information [1]
The tolerance levels range from 0.334 to 0.820 exceeding 0.20. These results provide a strong evidence for the absent of multi-collinearity issues between the independent constructs and the dependent constructs in the structural model
The study analysed the effect of Social Capital (SC) on mitigating TU of SEs in Sri Lanka
Summary
Small Enterprises (SEs) have higher Transaction Uncertainty (TU) due to asymmetrical information [1]. SEs use their informal and personal connections in order to get required information and resources [7], [8]. These informal and personal connections are based on network relationships with family members, relatives, friends, supportive institutions and the others [7], [9], [10]. Such network relationships generate different values such as interpersonal trust, relational norms, and common understand etc.
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