Effect of Trust on Micro Entrepreneurship Development with the Mediatory Role of Social and Emotional Capital

Abstract

Policymakers are pouring in huge incentives for microenterprise like subsidized capital, grants and capacity building programs. Still, they were not able to achieve success. Interestingly, successful microenterprises are more often achieved success without these intermediations. It means that there may be other factors intangible in nature that determines their success. This study provides a new dimension to the success of microenterprise i.e. the intangible component of intermediation. We define them as social and emotional capital. For this, we propose a theoretical framework motivated from the exploratory work of Panda (2016) in which microenterprises development (MED) is affected through the intangible factor of trust. This trust creates social and emotional capital, which in turn enables microenterprises development. Trust is measured through Trust in Work Team, Trust in Management, and Trust in Work Setting. Whereas social capital is classified into Cognitive, Structural, and Relational Dimension. Emotional capital is proxies by Gratitude Culture at Work. To establish its empirical validity, a survey was conducted using a Likert scale type close-ended questionnaire. Data was collected from 366 participants from micro-enterprises in Pakistan and analyzed using Structured Equation Modeling. Emotional capital has a direct significant effect on MED as well as through the Cognitive dimension on social capital which in turn affects MED. Moreover, social capital positively affects MED when it is related to cognitive and structural dimensions and has no influence in the relational dimension. The results suggest that trust has a significant effect on MED, social, and emotional capital when it is associated with work team and does not significantly affect when it is associated with management and work settings.