Relational Capital and Performance: Empirical Evidence on the Services Sector of SMEs in Malaysia

Abstract

Many studies have examined the effect of relational capital on SMEs. However, most studies were done in SMEs, not specific by sectors or industries. Relational capital is expected to have a different impact on the services sector due to its unique characteristics. Moreover, for SMEs to achieve a competitive advantage, SMEs in the service sector need to utilize the knowledge sharing and resources they possess fully. Due to this lack, this study aims to examine the relationships between relational capital and the performance of service SMEs in Malaysia. The survey questionnaire distributed to the SME managers consists of demographic profiles of the respondents and firms’ characteristics and items measuring relational capital, including customers, suppliers, distribution channels, the government, and financial institutions. This study revealed that relational capital measured by customers, suppliers, partners, distribution channels, and financial providers significantly influence SMEs’ economic and financial performance. Therefore, the findings suggested that the owner or manager of SMEs in the service industry should invest in building and maintaining close relationships with the networks to continuously serve the nation and contribute to the economies.