Social capital, entrepreneurial skills, and business performance among rural micro-enterprises in times of crisis

Abstract

The unprecedented COVID-19 crisis has adversely affected enterprise performance, which has led to inequalities, particularly for rural micro-entrepreneurs. Therefore, ensuring business survival through social capital and entrepreneurial skills as coping strategies for the rural micro-entrepreneurs is important to sustain their livelihoods. Both coping strategies can enhance the survival rate during a crisis, but there is limited knowledge on how enterprise performance of rural micro, Small and Medium-sized Enterprises (SMEs) can be improved. This study examined the linkages between social skills, entrepreneurial skills (knowledge, experience), and enterprise performance during a crisis. The Federal Land Development Authority (FELDA) Triangle Village was selected as a proxy for the rural population, and sampling frame of 543 micro-entrepreneurs was obtained from the Local District Office. A total of 150 questionnaires were distributed in a systematic random order based on a minimum sample size of 85 calculated using the G*Power statistical tool. The final 134 usable samples were analyzed using Structural Equation Modelling (SEM). The results ascertained that the direct positive effect of social capital on enterprise performance was significant (β = 0.521, t = 8.060, p < 0.001) and that social capital had a specific and indirect effect on enterprise performance through entrepreneurial skills (β = 0.520, LCL = 0.378, UCL = 0.651, p < 0.001). The study also reported the full mediating effect of entrepreneurial skills on the social capital-enterprise performance relationship. This study proposes practices to develop adaptive entrepreneurs that can adapt to crisis challenges.