Social Capital and Firm Performance: Moderating Effect of Environmental Turbulence

Aluisius Hery Pratono,Rosli Mahmood

doi:10.5539/ass.v10n19p59

Abstract

This study aims to determine the moderating effect of environmental turbulence on the relationship among firm performance, entrepreneurial orientation, entrepreneurial management, and social capital. Along with survey on Indonesia SMEs, the finding shows that social capital plays pivotal role on firm performance. This study also provides evident that that environmental turbulence dampens the positive impact of social capital on firm performance. Under low environmental turbulence, social capital has positive impact on firm performance. However, social capital brings negative impact on firm performance during high environmental turbulence. This provides more fundamental issues on intersection between resource based view (RBV) and contingency theory (CT).

Highlights

Small medium enterprise (SMEs) are acknowledged to provide promise of welfare and job creation
This study provides evident that that environmental turbulence dampens the positive impact of social capital on firm performance
This study considers entrepreneurial orientation (EO), entrepreneurial management (EM) and social capital (SC) as main determinants to achieve the goal of firms

Summary

Introduction

Small medium enterprise (SMEs) are acknowledged to provide promise of welfare and job creation. One of the popular views is the concept of Schumpetarian with creative destruction, which refers to innovation as driving forces for the entrepreneur concept and economic development (Betta, Jones, & Latham, 2010). This school of thought considers another element of entrepreneurship, namely proactive market-driven behavior to seize business opportunities (Sundqvist et al, 2012) Both innovation and proactive behavior are considered as main element of entrepreneurial orientation, which refers to the best way of firms to achieve goals (Covin & Wales, 2012)

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Discussion

Conclusion