Strategic renewal of SMEs: the impact of social capital, strategic agility and absorptive capacity

Abstract

PurposeThis research was carried out with the purpose to empirically test the model to explain the procedures concerned with the translation of social capital (SC) into strategic renewal (SR) of SMEs in developing economy like Pakistan. This procedure involves the mediating role of firms' strategic agility (SA) as well as the contingent effects of firms' absorptive capacity (AC).Design/methodology/approachThis study employed a cross-sectional design to evaluate the hypothesized model. To validate the moderated mediation model, data was collected from 519 CEOs, owners, finance managers and managing directors of 123 manufacturing units dealing in agricultural machinery (32 units), automobile accessories (16 units), pharmaceutical instrument (11 units), electrical equipment (25 units), IT related accessories (21 units) and garments (18 units).FindingsThe findings of the study confirm a positive association between SC on SR. Moreover, results also validate the mediating role of SA in the relationship between SC and SR. In addition, the moderating role of AC is also confirmed and presented this construct as a catalyst in the relationship between SC and SR.Practical implicationsThis research provides new endeavors for strategic management and strategic entrepreneurship literature by focusing on distinctive resources such as SC with its different facets. Therefore, it provides a new dimension and a roadmap that will be beneficial to the achievement of the objectives of SR.Originality/valueThe findings of this research have contributed to the streams of strategic management perspective by emphasizing upon the mediating mechanism how SC can be transformed into SR of SMEs through SA. Findings of the research also contribute to understand the moderating role of AC, and how its association with SC and SA augments the effects on SR of firms.