Journal of Business and Economic Development

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Effect of Social Capital on Mitigating Transaction Uncertainty of Small Enterprises in Sri Lanka

Received: 05 October 2017    Accepted: 16 October 2017    Published: 14 December 2017
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Abstract

Small Enterprises (SEs) do not have capacity to collect and evaluate information to predict future behavior of business environment on one hand and they fail to avoid the hazards from opportunism of exchange partners on the other hand due to the lack of information. SEs develop informal and personal relationships with different members of the network expecting supports in order to overcome their limitation of information. The network relationships lead to build Social Capital (SC) (values of social relationships; i.e. inter-personal trusts, relational norms, flexibility, integrity, common understand etc.) and thereby facilitate access to information which have an influence on mitigating Transaction Uncertainty (TU). Therefore, the study attempted to explore how different dimensions of SC affect the mitigation of TU of SEs in Sri Lanka. The study mainly employed the survey method to gather data using quantitative methodological approach. The data were collected from 373 SEs located in nine districts representing all Provinces in Sri Lanka, conducting face-to-face interviews with the respondents. The data were analysed using Partial Least Squares-Structural Equation Modelling. The results revealed that different dimensions of SC (structural, relational and cognitive) have a significant impact on mitigating TU of SEs in Sri Lanka. Thus, the study has provided sufficient evidences to conclude that SC has a significant impact on mitigating TU of SEs. The study contributes to theoretical knowledge by synthesizing all the dimensions of SC and TU into a new framework and testing it empirically which extends the transaction cost economics in the context of SEs in Sri Lanka. The study contributes to the methodology quantifying SC of SEs using a multi-dimensional conceptual model. The study provides important insights for policy makers to focus their strategies to new direction rather than conventional supporting approaches to develop SEs.

DOI 10.11648/j.jbed.20180301.11
Published in Journal of Business and Economic Development (Volume 3, Issue 1, March 2018)
Page(s) 1-10
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Small Enterprises, Social Capital, Transaction Uncertainty

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Author Information
  • Department of Economics and Statistics, Sabaragamuwa University of Sri Lanka, Belihuloya, Sri Lanka

  • Department of Economics, University of Colombo, Colombo, Sri Lanka

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  • APA Style

    H. M. S. Priyanath, S. P. Premaratne. (2017). Effect of Social Capital on Mitigating Transaction Uncertainty of Small Enterprises in Sri Lanka. Journal of Business and Economic Development, 3(1), 1-10. https://doi.org/10.11648/j.jbed.20180301.11

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    H. M. S. Priyanath; S. P. Premaratne. Effect of Social Capital on Mitigating Transaction Uncertainty of Small Enterprises in Sri Lanka. J. Bus. Econ. Dev. 2017, 3(1), 1-10. doi: 10.11648/j.jbed.20180301.11

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    AMA Style

    H. M. S. Priyanath, S. P. Premaratne. Effect of Social Capital on Mitigating Transaction Uncertainty of Small Enterprises in Sri Lanka. J Bus Econ Dev. 2017;3(1):1-10. doi: 10.11648/j.jbed.20180301.11

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  • @article{10.11648/j.jbed.20180301.11,
      author = {H. M. S. Priyanath and S. P. Premaratne},
      title = {Effect of Social Capital on Mitigating Transaction Uncertainty of Small Enterprises in Sri Lanka},
      journal = {Journal of Business and Economic Development},
      volume = {3},
      number = {1},
      pages = {1-10},
      doi = {10.11648/j.jbed.20180301.11},
      url = {https://doi.org/10.11648/j.jbed.20180301.11},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.jbed.20180301.11},
      abstract = {Small Enterprises (SEs) do not have capacity to collect and evaluate information to predict future behavior of business environment on one hand and they fail to avoid the hazards from opportunism of exchange partners on the other hand due to the lack of information. SEs develop informal and personal relationships with different members of the network expecting supports in order to overcome their limitation of information. The network relationships lead to build Social Capital (SC) (values of social relationships; i.e. inter-personal trusts, relational norms, flexibility, integrity, common understand etc.) and thereby facilitate access to information which have an influence on mitigating Transaction Uncertainty (TU). Therefore, the study attempted to explore how different dimensions of SC affect the mitigation of TU of SEs in Sri Lanka. The study mainly employed the survey method to gather data using quantitative methodological approach. The data were collected from 373 SEs located in nine districts representing all Provinces in Sri Lanka, conducting face-to-face interviews with the respondents. The data were analysed using Partial Least Squares-Structural Equation Modelling. The results revealed that different dimensions of SC (structural, relational and cognitive) have a significant impact on mitigating TU of SEs in Sri Lanka. Thus, the study has provided sufficient evidences to conclude that SC has a significant impact on mitigating TU of SEs. The study contributes to theoretical knowledge by synthesizing all the dimensions of SC and TU into a new framework and testing it empirically which extends the transaction cost economics in the context of SEs in Sri Lanka. The study contributes to the methodology quantifying SC of SEs using a multi-dimensional conceptual model. The study provides important insights for policy makers to focus their strategies to new direction rather than conventional supporting approaches to develop SEs.},
     year = {2017}
    }
    

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  • TY  - JOUR
    T1  - Effect of Social Capital on Mitigating Transaction Uncertainty of Small Enterprises in Sri Lanka
    AU  - H. M. S. Priyanath
    AU  - S. P. Premaratne
    Y1  - 2017/12/14
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    N1  - https://doi.org/10.11648/j.jbed.20180301.11
    DO  - 10.11648/j.jbed.20180301.11
    T2  - Journal of Business and Economic Development
    JF  - Journal of Business and Economic Development
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    PB  - Science Publishing Group
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    UR  - https://doi.org/10.11648/j.jbed.20180301.11
    AB  - Small Enterprises (SEs) do not have capacity to collect and evaluate information to predict future behavior of business environment on one hand and they fail to avoid the hazards from opportunism of exchange partners on the other hand due to the lack of information. SEs develop informal and personal relationships with different members of the network expecting supports in order to overcome their limitation of information. The network relationships lead to build Social Capital (SC) (values of social relationships; i.e. inter-personal trusts, relational norms, flexibility, integrity, common understand etc.) and thereby facilitate access to information which have an influence on mitigating Transaction Uncertainty (TU). Therefore, the study attempted to explore how different dimensions of SC affect the mitigation of TU of SEs in Sri Lanka. The study mainly employed the survey method to gather data using quantitative methodological approach. The data were collected from 373 SEs located in nine districts representing all Provinces in Sri Lanka, conducting face-to-face interviews with the respondents. The data were analysed using Partial Least Squares-Structural Equation Modelling. The results revealed that different dimensions of SC (structural, relational and cognitive) have a significant impact on mitigating TU of SEs in Sri Lanka. Thus, the study has provided sufficient evidences to conclude that SC has a significant impact on mitigating TU of SEs. The study contributes to theoretical knowledge by synthesizing all the dimensions of SC and TU into a new framework and testing it empirically which extends the transaction cost economics in the context of SEs in Sri Lanka. The study contributes to the methodology quantifying SC of SEs using a multi-dimensional conceptual model. The study provides important insights for policy makers to focus their strategies to new direction rather than conventional supporting approaches to develop SEs.
    VL  - 3
    IS  - 1
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