The effects of social capital and human resources on financing and small and medium enterprises performance

Abstract

BACKGROUND AND OBJECTIVES: Small and medium enterprises still exhibit dominant contribution to the economy. Small and medium enterprises manage to absorb greater labor force and to survive the economic crisis. Various efforts to empower small and medium enterprises have been less successful. Financing constraint, low quality of human resources, and limited marketing competence have been the typical problems of small and medium enterprises that harm small and medium enterprises performance. Despite these problems, SMEs still manage to survive. METHODS: Using the sampling method of stratified random sampling with area strata, this study generates 203 small business units as the sample. The research was conducted by using accidental sampling. The quantitative and qualitative data are from primary and secondary sources. The data was collected by using observation, interview, and in-depth interview. The variables in this research was analyzed by using path analysis. FINDING: Social capital positively affect small and medium enterprises ’ financing as indicated by the significance value of 0.000 (< α= 5%). The stronger social capital of small and medium enterprises implied greater access of external financing sources. Social capital, and small and medium enterprises financing positively affect small and medium enterprises performance with 1% confidence level, and human resources positively affect small and medium enterprises performance with 6% confidence level. The finding shown the stronger social capital and human resources increases SMEs performance. CONCLUSION: The results show that social capital and SMEs’ financing positively affect SMEs’ performance, and human resources positively affect small and medium enterprises performance. The results imply that stronger social capital and human resources increases small and medium enterprises performance. Social capital facilitates access to finance, marketing, production, and information. The results shows that human resources affect SMEs’ performance. Social capital and human resources positively affect small and medium enterprises financing. Similarly, social capital, human resources, and financing positively affect SMEs’ performance.