Social capital as a pathway to small and medium-sized enterprises' performance in North-West Province

Abstract

Social capital is an intangible asset that influences the performance of small and medium enterprises (SMEs). SMEs are critical drivers of economic growth in the emerging economy. Small businesses are the key drivers of job creation rather than large companies. However, despite government intervention in developing SMEs, there is still a high failure rate of SMEs in the North-West Province. Therefore, understanding how relational and cognitive social capital relates to the performance of SMEs is crucial. Resources accumulated through social capital can drive the performance of SME. This study is quantitative, and it takes a deductive approach. Primary data was collected with a sample size of 384 in North-West province through a self-administered questionnaire. Data analysis includes validity, reliability, correlation, and regression. Relational social capital emerged as a significant predictor of SME's performance (employment growth and revenue). Cognitive social capital was a negative significant predictor for SME's performance. The finding of social capital is in line with existing literature that suggests that there is a significant positive relationship between social capital and SME's performance. Entrepreneurs who invest in social capital are likely to accumulate financial and non-financial performance. The study recommends that entrepreneurs should develop value chains from networking partners. The study concludes that entrepreneurs who invest in social capital have a high level of performance. Based on the findings, entrepreneurs can accumulate other entrepreneurial capital (human & financial capital) through social capital. The study suggests that future researchers can help assess how to foster value chains from networking partners.