An Investigation of Entrepreneurial SMEs’ Network Capability and Social Capital to Accomplish Innovativeness: A Dynamic Capability Perspective

Abstract

The empirical assessment of small and medium enterprises (SMEs) from different perspectives is an ever-green research agenda because of their enormous contributions to developed and developing economies. However, the size and resource limitations hinder the progress of SMEs. In this regard, business networks and connections have great potential to enable SMEs’ access to scarce and valuable resources. Entrepreneurial SMEs’ healthy relationships and connections with stakeholders can yield dynamism and innovativeness. Despite that, the understanding of these networks and connections over the innovation capability of entrepreneurial SMEs is limited and needs further empirical investigation. Thus, this study is among the preliminary ones which assay the impact of network capability on innovation capability in the entrepreneurial SMEs context. This study also investigates the above relationship through social capital. The study ground its assumptions based on dynamic capability theory and collected feedback via a questionnaire from 199 entrepreneurial SMEs operating in Pakistan. After ensuring the reliability and validity of collected feedback, the study employed the partial least square structural equation modeling technique to analyze it. Results of the study expand the understanding by unveiling that network capability has a substantial positive impact on innovation capability. This implies that by fortifying network capability, entrepreneurial SMEs substantially enhance their capabilities to innovate. Results also affirm that by building strong network capability, entrepreneurial SMEs boost their social capital, which subsequently has a positive and significant impact on innovation capability. Finally, by operationalizing the proposed model in the entrepreneurial SMEs context, this study made novel contributions to the literature of network capability, social capital, innovation capability, and entrepreneurship.