THE ROLE OF SOCIAL CAPITAL IN ENHANCING SMALL BUSINESS RESILIENCE DURING ECONOMIC CRISES

CHAPTER ONE INTRODUCTION 1.1 Background of the Study Small businesses form the backbone of many economies, but their survival and growth heavily depend on factors beyond financial and physical capital. In Nigeria, small and medium enterprises (SMEs) account for a significant share of economic activities, contributing about 48% of GDP and employing over 60% of the workforce (NBS, 2023). However, SMEs in Nigeria and other similar developing economies often face recurrent economic shocks, such as currency devaluation, inflation, and market disruptions that threaten their viability (World Bank, 2023). During such crises, businesses embedded in robust social networks tend to demonstrate higher resilience by mobilizing support from family, friends, professional contacts, and institutional linkages (Akanbi & Oloyede, 2021). Business resilience refers to a company's capacity to anticipate, prepare for, respond to, and recover from disruptive events or adverse conditions—such as economic crises, natural disasters, or market shocks—while maintaining continuous operations and safeguarding key functions. It encompasses adaptive capabilities that enable businesses to absorb shocks, innovate under pressure, and quickly restore stability and growth. Resilient businesses not only survive disruptions but often emerge stronger by learning from challenges, optimizing resources, and leveraging networks, which is critical for sustained competitiveness and long-term success in volatile environments (Continuity Central, 2020; Williams et al., 2021). Social capital—comprising networks, relationships, and norms of trust—has emerged as a crucial enabler of entrepreneurial resilience, especially during economic crises (Nahapiet & Ghoshal, 2020; According to Adu et al. (2022), social capital facilitates access to resources, emotional support, and timely information, which are vital for small businesses navigating uncertain environments. The ability of social capital to provide non-financial resources—including knowledge sharing, collaboration, and trust—strengthens adaptive capacities and accelerates recovery. Social capital is multidimensional, generally conceptualized into bonding, bridging, and linking social capital (Oluwaseun & Ibrahim, 2022). Bonding social capital refers to strong ties within close-knit groups such as family and close friends, providing emotional and financial backing during crises. Bridging social capital describes more diverse networks that connect entrepreneurs to acquaintances and professional contacts, enabling access to new markets and innovative ideas (Bello & Adebayo, 2021). Linking social capital connects entrepreneurs to formal institutions, government agencies, and financial bodies, which is critical for accessing policy support, grants, and credit facilities (Johnson et al., 2023). Each dimension plays a distinctive role in enhancing small business resilience, especially under economic stress. Recent empirical studies underscore that social capital contributes significantly to business survival and performance during economic downturns. For instance, Adu et al. (2022) found that SMEs leveraging strong bonding and bridging social capital exhibited faster recovery post-COVID-19-induced economic disruptions in West Africa. Similarly, Eze and Okeke (2021) highlight that linking social capital was instrumental in facilitating access to emergency funding schemes and government interventions in Nigeria’s informal sector during the 2020 recession. Nonetheless, the efficacy of social capital in promoting resilience is influenced by factors such as industry sector, cultural dynamics, and institutional frameworks, which warrant context-specific investigation. Despite the recognized importance of social capital in crisis resilience, there remains a significant research gap regarding its nuanced roles among Nigerian SMEs facing economic instability. This study aims to fill this gap by exploring how bonding, bridging, and linking social capital influence the capacity of small businesses in Abuja to withstand and recover from economic crises. Understanding these dynamics is crucial for informing policy and practice aimed at strengthening the entrepreneurial ecosystem in Nigeria and comparable developing economies. 1.2 Statement of the Problem Economic crises frequently result in the closure of small businesses, disproportionately affecting those with limited social capital to buffer shocks. Many Nigerian SMEs have collapsed during recent economic downturns due to insufficient support networks that could have provided financial aid, market information, or emotional encouragement (Adekunle & Nwankwo, 2021). For example, during the 2020 COVID-19 pandemic, numerous small businesses in Abuja shuttered operations because they lacked access to bridging and linking social capital necessary to tap into government relief programs (Chukwuemeka & Eze, 2021). Additionally, weak bonding social capital often leaves entrepreneurs isolated during periods of financial stress, limiting their ability to mobilize informal loans or shared labor resources that could sustain operations (Ogunleye & Oladipo, 2022). Furthermore, the inability to cultivate bridging networks restricts small businesses from adapting through innovative collaborations or entering new markets, exacerbating their vulnerability (Adegbite & Olawale, 2022). These challenges are compounded by inadequate institutional linkages that hinder access to credit facilities, training, and regulatory support crucial for survival during crises. Despite these pressing issues, policy responses and entrepreneurship support initiatives tend to prioritize access to financial capital and technical skills training, often overlooking the strategic role of social capital in business resilience (Eze & Okeke, 2021). This neglect creates a gap in holistic support mechanisms needed for SMEs to survive and thrive amid economic shocks. Thus, a critical investigation is required to understand the specific impacts of bonding, bridging, and linking social capital on small business resilience during economic crises in Abuja. 1.3 Objectives of the Study This study aims to examine the role of social capital in enhancing the resilience of small businesses during economic crises, with a focus on SMEs in Abuja, Nigeria. Specifically, it seeks to: 1. Assess the impact of bonding social capital on small business resilience during economic crises. 2. Analyze the influence of bridging social capital on innovation and adaptive strategies in crisis periods. 3. Evaluate the role of linking social capital in facilitating access to financial and institutional support during economic downturns. 4. Investigate the moderating effects of sectoral characteristics and socio-economic factors on the relationship between social capital and business resilience. 1.4 Research Questions The study will address the following questions: 1. What is the effect of bonding social capital on the resilience of small businesses during economic crises? 2. How does bridging social capital influence innovation and adaptation among small businesses in crisis situations? 3. In what ways does linking social capital enhance access to finance and institutional resources during economic shocks? 4. How do industry type and socio-economic environment moderate the relationship between social capital and business resilience? 1.5 Significance of the Study This study holds considerable practical and empirical significance for entrepreneurs, policymakers, and business support organizations in Nigeria and similar developing economies. Practically, by delineating how the distinct dimensions of social capital—bonding, bridging, and linking—contribute to small business resilience during economic crises, the findings will offer entrepreneurs actionable insights into strategically cultivating and leveraging social networks. Such insights can empower small business owners to better mobilize financial, informational, and emotional resources to sustain operations and recover more rapidly during economic shocks. Furthermore, policymakers and development agencies can utilize the study’s outcomes to design more comprehensive support programs that integrate social capital development alongside financial and technical assistance, fostering a more resilient SME sector. Empirically, the research contributes to addressing existing gaps in the entrepreneurship literature by providing a disaggregated analysis of social capital’s role in enhancing business resilience in the specific context of economic crises. Most prior studies have treated social capital as a unidimensional construct or have not focused explicitly on resilience outcomes during downturns (Adu et al., 2022; Eze & Okeke, 2021). By investigating the moderating influence of sectoral and socio-economic variables, this study also advances theoretical understanding of the conditional effects shaping social capital’s efficacy. The findings will thus enrich both academic discourse and practical frameworks, supporting more targeted and effective resilience-building interventions. 1.6 Scope of the Study The study is geographically limited to small and medium enterprises (SMEs) operating within Abuja, Nigeria’s capital city, a strategic commercial hub characterized by diverse economic activities. The research focuses on SMEs across various sectors including trade, manufacturing, and services to capture a broad perspective on social capital’s role during economic crises. Content-wise, the study investigates the three core dimensions of social capital—bonding, bridging, and linking—and their specific impacts on small business resilience, particularly in relation to innovation, adaptive capacity, financial access, and business continuity during economic shocks. The temporal scope concentrates on recent economic crises, including the impacts of the COVID-19 pandemic and other macroeconomic disturbances experienced between 2020 and 2024, providing contemporaneous relevance. 1.7 Definition of Terms Social Capital: As defined by Nahapiet and Ghoshal (2020), social capital refers to the networks, relationships, and shared norms that facilitate cooperation and resource exchange for mutual benefit. In the entrepreneurial context, it encompasses the social ties entrepreneurs exploit to access information, support, and resources. Small Business Resilience: This denotes the ability of small enterprises to absorb, adapt to, and recover from economic shocks or crises, maintaining operations and sustaining growth despite adverse conditions (Olawale & Agbaje, 2021). Bonding Social Capital: Close, strong ties with family, friends, and immediate community that provide emotional, financial, and moral support during difficult times (Ademola & Akinyemi, 2020). Bridging Social Capital: More distant, heterogeneous connections such as acquaintances and professional contacts that offer access to new ideas, information, and broader opportunities beyond the immediate network (Bello & Adebayo, 2021). Linking Social Capital: Vertical relationships between individuals and formal institutions, such as government agencies, financial institutions, and regulatory bodies, that enable access to resources, funding, and institutional support (Johnson et al., 2023).