Workers’ Social Capital and Firms’ Output Performance: Empirical Evidence from Small and Medium Firms

Abstract

The study aims to investigate empirically whether workers' social capital attributes affect firms' output performance. To achieve this objective, workers of small and medium firms are interviewed, and empirical analysis is carried out at the firm level for a sample of 100 firms, located in Rawalpindi and Islamabad. Findings of the study suggest, at large, workers' social capital attributes have a positive effect on firms' output performance. This indication is derived from the fact that in six out of nine specifications, the social capital attributes of workers enter the model significantly and positively. Perceiving the result prudently, firms' output performance upsurges with the extension of workers' social participation and networking, whereas decreases as workers' preserve more social trust attributes. The result points towards the fact that a certain level of trust may prove beneficial; having enhanced exchange of unstated learning and hazard taking. However, firms that exceedingly trust other firms might be misguided in both input and output decisions, which poses a negative impact on their output performance.