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International Journal of Research and Scientific Innovation (IJRSI) | Volume IX, Issue VII, July 2022 | ISSN 2321–2705

The Social Capital towards the Performance of Small and Medium Scale Enterprises evidences from Sri Lanka

P A B H Amarathunga1, Sadun Wijethunga2
1Wayamba University of Sri Lanka,
2University of Sri Jayewardenepura

IJRISS Call for paper

Abstract: Small and Medium-scale Enterprises (SMEs) are one of the driving forces for economic development by enhancing national production, creating income, employment, and mitigating poverty in any country. Social capital is defined as the total stock of relationships that an individual possesses. In the Sri Lankan context, much attention has not been paid to social capital. The objective of this study is to recognize the interrelation between the social capital concept and the performance of SMEs and how social capital impacts SMEs in Sri Lanka. The study was conceptualized using 03 variables; network ties, trust, and shared vision, and a dependent variable is the performance of small and medium-scale enterprises. A self-administered questionnaire was applied to collect primary data for the present study. Survey data were collected from 384 SME owners through the simple random sampling technique. The trustworthy and shared vision has the highest impact on the performance of SMEs based on the findings of the regression analysis. The findings of the present study will enable scholars and practitioners to gain more insight and understanding of social capital concepts while providing novel insight and useful suggestions to owners of SMEs’.

Keywords: Community Social Capital, Performance of SMEs, Network ties, Trust, Shared vision

I.INTRODUCTION

SMEs play a vital role in the Sri Lankan economy. It is recognized as the backbone of the economy. SMEs account for more than 75 percent of all enterprises and provide 45 percent of employment, accounting for 52 percent of the Gross Domestic Product (GDP). Different countries define SMEs in different ways based on the level of growth, the total number of workers, annual turnover, and the total number of employees. The Sri Lankan government considers SMEs as the backbone of the economy, as they account for more than 75 percent of all enterprises and provide 45 percent of employment, which accounts for 52 percent of the Gross Domestic Product (GDP). SMEs foster broad-based equitable growth and expand opportunities for women and youth to participate in the country’s economic development (Ministry of industry and commerce Sri Lanka, 2020). The different definition of SMEs in Sri Lanka represents in table 1.