Dimensional Impact of Social Capital on Financial Performance of SMEs

Abstract

In emerging economies, small and medium enterprises (SMEs) contribute a sizeable proportion of exports and manufacturing output, and millions of people are provided employment. Entrepreneurs and these small firms are influenced by many contextual factors in their operations. Social capital factors, both formal and informal social networks, are considered influential to their performance. This study uses regression analysis to study the impact of social capital dimensions on financial performance of SMEs. Primary data were collected through survey of SMEs of India. It was found that out of five social capital dimensions only four dimensions, such as complicity, status, social relations and personal relations, positively impact the financial performance of SMEs, whereas one dimension ‘Interlinking and family support’ had no significant impact on financial performance of SMEs. The implications of these findings are discussed.