The Influence of Social Obligations on Resource Accumulation in Small- and Medium-Sized Firms

This research project derived and tested a theoretical model on the relationship between social capital and resource accumulation in small and medium-sized firms in an African setting. The central thesis of the model is that social capital facilitates the assembly of resources by an entrepreneur, but it does so at a cost. The model further postulates that the amount of resources raised by entrepreneurs will enhance firm performance whereas the cost of raising the resources will negatively affect firm performance.

The specific objectives to be achieved through testing this model were to: a) investigate the kinds of social capital that SME entrepreneurs in Africa possess; b) describe the kinds of resources mobilized by SME entrepreneurs; c) examine the extent to which these entrepreneurs rely on their social relations to identify, access and mobilize resources; and d) examine the effect of social obligations on the relationship between social capital, resources and firm performance. This model was tested using data collected on 242 small and medium-sized firms in Kampala, Uganda using face-to-face interviews, and analyzed using complex statistical techniques such as simultaneous equation modeling.

The key findings of this study reveal that social obligations by entrepreneurs’ social relations are costly to entrepreneurs. These costs do take away resources that would otherwise have been used for firm activities and improvement of firm performance. Network characteristics such as network size and composition may enhance or reduce the amount of resources raised and the costs of raising resources. On the one hand, large networks yield more financial resources. On the other hand, networks dominated by resource-contributing kin have a reducing effect on the cost of raising resources. Furthermore, the quantity of resources raised is positively associated with firm performance whereas the costs of raising resources have a negative effect on firm performance. The results of this study help fill a gap in literature on social capital, resource acquisition, and firm performance in an African setting. In particular, they inform organizational and entrepreneurship research in the following areas: a) the significance of analyzing the cost implications of social capital to resource acquisition, and b) the need to examine not only differences in firm performance due to amount of resources acquired, but also the implications of the cost of raising resources to firm performance. To maximize from benefits of increased amounts of resources and reduced costs, this study advocates for a reconfiguration of an entrepreneur’s network to include a large network so as to get more resources, and more kin so as to minimize the cost of raising resources.

Contact:

PhD Candidate: Jane N. O. Khayesi
Chemin des Semailles 44
1212 Grand-Lancy
Geneva, Switzerland
Email: Jane.Khayesi@unil.ch
or jkhayesi@yahoo.com

Thesis Director: Prof. John Antonakis
Associate Dean, Faculty of Business and Economics
University of Lausanne
Internef #618
CH-1015 Lausanne-Dorigny, Switzerland
Email: John.Antonakis.Autio@unil.ch
Phone: +41 (0)21 692-3438
Fax: +41 (0)21 692-3305
Web page: http://www.hec.unil.ch/people/jantonakis

Partner Institution in Uganda
Advisor: Prof. Thomas Walter
Graduate and Research Centre
Makerere University Business School
P. O. Box 1337, Kampala, Uganda
Email: thomas@waltermail.com
Phone: +256 (0) 772 736-423