The role of human and social capital on the development of wooden furniture clusters in Sri Lanka

Abstract

PurposeThe purpose of this paper is to investigate how human and social capital assist in the development of clustered and non‐clustered firms in the wooden furniture industry in Sri Lanka. The study resulted in three major findings: the most experienced and educated entrepreneurs played an important role to secure their market introducing brand name for the product; human capital acquired through formal education and experience is highly significant for the performance of clustered firms than that of non‐clustered firms; and irrespective of clustered or non‐clustered, performance of the firms in the wooden furniture industry in Sri Lanka is significantly relying on social capital.Design/methodology/approachBoth cross‐sectional and time series data of 96 active firms related to the wooden furniture industry in Sri Lanka are used in this study. The data were collected through questionnaires which were distributed by visiting wooden furniture firms in Sri Lanka in the year 2010. To test the hypotheses, two dependent variables, namely, brand name dummy and the size of the firm (in value added revenue) were used.FindingsThe number of years of schooling of the managers and their operational experience within their own business have a positive and highly significant effect on the introduction of a brand name for the products in both type of wooden furniture firms (clustered and non‐clustered). Formal education and prior work experience as managers are more significant in the case of clustered wooden furniture firms than non‐clustered firms.Originality/valueThe author visited these firms personally and interviewed the managers. From this, the author tried to see how both human and social capital contribute to the firms' performance. According to the author's knowledge, this type of study has never been done before in Sri Lanka.