Is Social Capital a Key Factor to enhance Firm’s Performance via Manager’s Intangible Capabilities?

Abstract

Purpose: The purpose of the study is to analyse the role of internal social capital and external social capital in determining the financial and non-financial performance of the firm and the effect of manager’s intangible capabilities on internal social capital and external social capital of firm in the context of the manufacturing sector of India. Design/methodology/approach: The data for this study is collected from 417 managers of manufacturing firms through a structured questionnaire and is analysed through SPSS and AMOS by performing confirmatory factor analysis and structural equation modelling. Findings: Findings reveal that a manager’s business experience, financial literacy and intellectual capital significantly enhance the firm’s internal and external social capital. Furthermore, it has been found that the internal social capital of the firm has the potential to enhance the performance of the firm in financial and non-financial terms. The external social capital also significantly derives from the firm’s financial performance; however, it has not significantly impacted its non-financial performance in the current study. Research limitations/implications: These findings provide many implications in theoretical and practical terms because the literature regarding social capital and the linkage among social capital, intangible capabilities and firm performance will be enhanced. The strategymakers and policymakers can also benefit from this study’s implications for making better strategies and policies regarding social capital and the firm’s performance. Originality/value: Past studies, though, examined the influence of social capital on business performance. However, no prior research addresses the phenomenon through which social capital can determine business performance while undertaking the role of a manager’s intangible capabilities in such a model. Therefore, the current study is the first to study the interrelationship among the manager’s intangible capabilities, social capital, and firm performance.