Effect of Social Capital on the Performance of Small and Medium Scale Enterprises in Ilorin Metropolis

Abstract

Despite their significant contributions to Nigeria's economic growth and development, SMEs continue to face a variety of problems, including limited or no access to human resources, technology, and market intelligence necessary for their growth and survival. As a result, the purpose of this study was to investigate the impact of social capital on the performance of SMEs in Ilorin. Social capital theory and social cognitive theory were used to base the research. The study used a survey research design, in which data were gathered from respondents randomly sampled. The participants in the study were SMEs operators in the Ilorin metropolitan area. Three hundred and fifty (350) respondents were chosen at random for the research study. Data collected were analyzed using One-way ANOVA and correlation coefficient used to test the formulated hypotheses at 5% level of significance. The finding revealed that cognitive social capital variables (relevance & trust) have lesser relationship with business performance as compared to structural social capital variables (friendship & information). Information has the highest and cordial relationship (coefficient of 0.7741) with business performance. The study concluded that social capital influences SMEs' success; but, due to the unique characteristics of Nigerian SMEs, structural social capital appears to have a far more pronounced impact on company performance. To take full advantage of social capital, the study recommended that entrepreneurs should maintain strong relationships with their families, friends, and co-workers, as well as absolute trust and social cohesiveness among themselves and their respective company partners, employees, or apprentices.