Effect of Social Capital on SMEs Performance: Does Innovation Matter

Abstract

The study investigated how social capital influences firms to generate higher performance through innovation among SMEs in Ghana. The study employed a quantitative approach. The study employed stratified sampling to sample 240 respondents from 240 SMEs in the Eastern Region of Ghana. Primary data was gathered using a questionnaire adapted from previously validated instruments. The data gathered was analyzed using Partial Least Square (PLS) of the Structural Equation Model (SEM). The findings proved internal and external factors of the SMEs were found to be strengthened through innovation initiatives of the SMEs. The social capital initiatives of the SMEs positively and significantly enhanced the innovation practices of the SMEs. The result showed internal and external social capital initiatives of the SMEs were positively and significantly associated with the innovation practices of the firms. It concludes that the effect of social capital among SMEs on firm performance is indirectly through their level of innovation practices. The results provide empirical support to the validation of existing theories that a company’s utilization of important values offer some level of competitive advantage for superior performance in an industry. We therefore recommended that Owners and Managers of SMEs take advantage of their internal social resources as well as building strategic external capital in the quest to remain competitive and enhance profitability.
 
 Citation:Tetteh, F. K., Mohammed, J. and Teye, E. (2021). Effect of Social Capital on SME: Does Innovation Matter?
 International Journal of Technology and Management Research (IJTMR), Vol. 6 (2): Pp.21 －37.
 Received: February 5, 2021
 Accepted: September 1, 2021

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