The mediating effect of social entrepreneurship activity on the relationship between social capital and organisational performance of SMEs in Klang Valley Malaysia

This study examined the direct relationships between social capital (SC) and organisational performance (OP), whilst taking into consideration social entrepreneurship activity among the SMEs in Malaysia. Studies have shown SC and SEA are factors that contribute to this gap. The effect of IR4.0 and other megatrends make it even more challenging for these SMEs to prosper. Hence, SMEs require to make use of their full potential which includes adopting the best practices implemented in most develop countries, which is to increase the SC. This implementation validates new business models, the creation of new industries and redirecting of resources. The increasing rates of SC in the country can result in positive well-being functions, sustainability and economic growth. This research also examined social entrepreneurship activity (SEA) as a mediator variable facilitating the relationship between SC and OP. SEA facilitates SC and OP. SEA through its business activities has been recognised by social economy. The SMEs should effectively seek SEA in generating income. SEA refers to the significant support to OP and business growth. Self-administered questionnaires were used to collect data from 500 SME manufacturing firms located in Klang Valley, in April and May 2018, and the gathered data was analysed by using SPSS 23.0. Statistically, the results confirmed that SC is positively related to SME performance. The results support the mediation hypothesis where SC showed a lower effect on OP after controlling the mediator, consistent with partial mediation. The outcome of this study provides new knowledge and important insights for government agencies to improve the policy to boost the performance of SMEs. Finally, in order to evaluate OP, it is more relevant to explore SEA, which needs encouragement to convert an organisation into a social organisation