Social capital and SME innovations: the importance of knowledge combination and customer demands

Abstract This article draws on social capital theory to examine the underlying mechanisms linking interpersonal and interorganizational social capital to innovation and to explore how customer demands moderate these relationships. Two empirical studies were conducted using data from Vietnamese small and medium-sized enterprises (SMEs): a panel data study and a primary survey study. The results indicate that (i) both interpersonal and interorganizational social capital are positively associated with new product and process innovations; (ii) high customer demands strengthen the relationship between interorganizational social capital and innovation but weaken the relationship between interpersonal social capital and innovation; and (iii) the effects of both forms of social capital on innovation are mediated by knowledge combination. These findings provide theory-driven insights for scholars and practical implications for policymakers involved in shaping innovation-oriented strategies.