IMPACT OF SOCIAL CAPITAL ON ENTREPRENEURIAL PERFORMANCE IN NIGERIA

CHAPTER ONE INTRODUCTION 1.1 Background of the Study Entrepreneurship continues to be a pivotal factor in driving economic development, innovation, and employment generation globally (Fatoki, 2020; Okafor & Onuoha, 2023). Entrepreneurship refers to the process of identifying, creating, and exploiting opportunities to introduce new products, services, or processes, typically through the establishment and management of new businesses (Kuratko, 2021). It involves innovation, risk-taking, and proactive resource mobilization to generate economic value. Entrepreneurs play a critical role in driving economic growth by creating jobs, fostering innovation, and enhancing competition (Fatoki, 2020). In the context of developing economies like Nigeria, entrepreneurship is not only a pathway for individual wealth creation but also a strategic mechanism for addressing socio-economic challenges such as unemployment and poverty (Ojo & Adetunji, 2022). The contribution of entrepreneurship to Nigeria’s economy is substantial and growing. According to the Nigerian Bureau of Statistics (NBS, 2023), small and medium enterprises (SMEs), which are largely driven by entrepreneurial activities, account for approximately 48% of Nigeria’s GDP and provide employment for over 60% of the workforce. The National Bureau of Statistics (2024) further reports that entrepreneurship contributes around 40% of Nigeria's non-oil export earnings, reflecting its critical role in economic diversification. Despite facing challenges such as limited access to finance and infrastructural deficits, Nigerian entrepreneurs remain resilient, driving innovation and supporting inclusive economic development (World Bank, 2022). Beyond financial and human capital, social capital has increasingly been recognized as a vital resource that influences entrepreneurial performance by facilitating access to information, resources, and supportive networks (Akanbi & Oloyede, 2021; Adegbite & Olawale, 2022). Social capital comprises the relationships and social networks that entrepreneurs can leverage to navigate competitive environments, improve decision-making, and mobilize resources for business growth (Smith & Doe, 2021). The multidimensional nature of social capital—encompassing bonding, bridging, and linking networks—plays a significant role in entrepreneurial success (Oluwaseun & Ibrahim, 2022). Bonding social capital refers to close-knit relationships such as family and friends, which provide emotional and financial support. Bridging social capital extends to more diverse and weak ties, including professional acquaintances that facilitate access to new ideas and markets. Linking social capital connects entrepreneurs to formal institutions and authorities, enabling access to critical financial and regulatory resources (Johnson et al., 2023). Empirical evidence from recent studies in developing economies illustrates that entrepreneurs embedded in strong social networks tend to exhibit better performance metrics including profitability, innovation, and business growth (Ademola & Akinyemi, 2020; Bello & Adebayo, 2021). However, these effects are moderated by contextual factors such as industry characteristics, cultural norms, and institutional support systems, which may either amplify or constrain the benefits of social capital (Ibrahim & Musa, 2023; Eze & Okeke, 2021). This study aims to deepen the understanding of how distinct components of social capital influence various dimensions of entrepreneurial performance within Nigerian SMEs. 1.2 Statement of the Problem Despite the acknowledged importance of social capital in entrepreneurship, many entrepreneurs in Nigeria and similar contexts face challenges that hinder their ability to leverage these networks effectively (Ogunleye & Oladipo, 2022). Key issues include limited access to financial capital, weak institutional support, and poor networking skills, which collectively reduce entrepreneurial performance (Adekunle & Nwankwo, 2020). Additionally, there is a lack of comprehensive empirical studies that disaggregate social capital into its bonding, bridging, and linking forms to assess their specific impacts on entrepreneurial outcomes. Furthermore, policymakers and entrepreneurial support programs often emphasize access to financial and technical resources but neglect the critical role of social networks in facilitating business success (Chukwuemeka & Eze, 2021). This oversight results in missed opportunities to harness social capital as a strategic asset for entrepreneurship development. Consequently, there is a pressing need to investigate how different forms of social capital affect entrepreneurial performance and how contextual variables moderate these relationships in Nigeria’s dynamic business environment. 1.3 Objectives of the Study The main aim of the study is to examine the Impact of Social Capital on Entrepreneurial Performance: The study seeks to: 1. Examine the relationship between bonding social capital and entrepreneurial performance. 2. Analyze the influence of bridging social capital on innovation and business growth. 3. Assess the role of linking social capital in accessing financial and institutional support. 4. Explore the moderating effects of industry type and socio-economic environment on these relationships. 1.4 Research Questions The study will address: 1. What is the impact of bonding social capital on entrepreneurial performance? 2. How does bridging social capital influence innovation and growth among entrepreneurs? 3. In what ways does linking social capital facilitate access to finance and institutional resources? 4. How do contextual factors moderate the relationship between social capital and 1.6 1.5 Significance of the study This study holds substantial practical significance for entrepreneurs, policymakers, and business development practitioners in Nigeria and similar developing contexts. By elucidating how different dimensions of social capital bonding, bridging, and linking affect entrepreneurial outcomes, the findings provide actionable insights on optimizing social networks to enhance business performance. Entrepreneurs can leverage these insights to strategically build and utilize their networks for improved access to resources, information, and institutional support. Additionally, policymakers and support agencies can design targeted interventions and programs that strengthen social capital infrastructure, thereby fostering a more enabling environment for entrepreneurship growth and sustainability. Empirically, this research contributes to filling existing gaps in the entrepreneurship literature by disaggregating social capital into its key components and examining their distinct effects on various performance indicators. While much prior work has treated social capital as a singular construct, this study offers a nuanced analysis informed by recent data from Nigerian SMEs, thus enhancing the contextual relevance and robustness of findings. Moreover, by integrating moderating factors such as industry type and socio-economic environment, the study advances theoretical understanding of how social capital operates under differing conditions, providing a more comprehensive framework for future empirical investigations. 1.6 Scope of the Study This study focuses on examining the impact of social capital on the entrepreneurial performance of small and medium enterprises (SMEs) in Abuja, Nigeria. It specifically investigates the roles of bonding, bridging, and linking social capital in influencing key performance metrics such as business growth, profitability, and innovation capacity. The research scope is limited to entrepreneurs operating within Abuja’s metropolitan area, encompassing diverse sectors including trade, manufacturing, and services. By concentrating on this geographical area, the study aims to provide contextually relevant insights that reflect the unique socio-economic and institutional environment of Nigeria’s capital 1.7 Definition of Terms Social Capital: According to Nahapiet and Ghoshal (2020), social capital refers to the networks, norms, and social trust that facilitate coordination and cooperation for mutual benefit. In the entrepreneurial context, it represents the social relationships entrepreneurs utilize to access resources and support. Entrepreneurial Performance: As defined by Olawale and Agbaje (2021), entrepreneurial performance encompasses the measurable outcomes of a venture’s activities, including profitability, growth, market share, and innovation capacity. Bonding Social Capital: This is the close-knit social ties with family, friends, and immediate community members that provide emotional, financial, and informational support (Ademola & Akinyemi, 2020). Bridging Social Capital: Refers to more distant connections such as acquaintances and professional contacts that offer access to new information, opportunities, and diverse resources beyond the immediate network (Bello & Adebayo, 2021). Linking Social Capital: Defined as relationships between individuals and formal institutions, including government bodies and financial organizations, which facilitate access to resources and policy support (Johnson et al., 2023).