Social Capital and Financial Performance of Small and Medium Scale Enterprises

Abstract

This paper explores the importance of the three dimensions of social capital to small
and medium scale entrepreneurs in Nigeria, it is a phenomenon that is based on mutual
trust, reliability and reciprocity in social networks. This paper highlights the need to
promote social capital as a way of improving SMEs performance. This study confirms
that social capital has significant and positive effect on the performance of SMEs in
Nigeria. The findings confirm the importance of social capital in generating finance and
revenue as evident in positive and significant relationships between the three
dimensions of social capital and revenue drive. The theoretical implication is that the
study highlighted the importance of management of SMEs to promote social capital
among themselves such as mutual trust (relational social capital), information flow
(structural social capital) and goal congruence (cognitive social capital). The study of
social capital as a means to improve firm performance is a new phenomenon in
accounting literature in general and Nigeria in particular. Emphasis has not been laid
on social capital as a means to source of finance, business and market information as
well competitive advantage thus this study.