Fostering organizational innovations through social capital and customer demands

Abstract

Drawing upon social capital theory, this study examines the underlying mechanism between interpersonal/interorganizational social capital and innovations, and also explores the boundary conditions of customer demands surrounding such a mechanism. Analyzing a sample of more than 15 thousands firm-year observations of Vietnamese small businesses in 11 years indicates that (1) both interpersonal and interorganizational social capital networks are positively associated with new product and new process innovations, respectively; and (2) when customer demands are high, the relationships between interorganizational social capital and innovations are significantly strengthened whereas the relationships between interpersonal social capital and innovations are weakened. The study is among the first to explore both interpersonal and interorganizational social capital networks as well as boundary conditions of customer demands in understanding the social capital-innovation relationship. The results provide both theoretically informed insights for academics and valuable practical implications for policy-makers who have their voice and influence on the policy-making process.