Influence of social capital on small firm performance: examining the role of paradoxical leadership and absorptive capacity

Purpose This paper aims to examine the impact of social capital on the performance of small firms and the role played by paradoxical leadership (encompassing both humility and narcissism) and absorptive capacity (ACAP) in affecting this relationship. Design/methodology/approach This paper uses multi-source cross-sectional survey data from 205 small automotive ancillary firms in Punjab, India. The data were analyzed using partial least squares-based structural equation modeling as well as the bootstrapping method (PROCESS macro in SPSS). Findings Paradoxical leadership moderates the relationship between social capital and ACAP. Further, potential absorptive capacity mediates the relationship between social capital and realized absorptive capacity (RACAP), which directly impacts firm performance. However, paradoxical leadership does not exhibit a significant moderating effect on the translation of potential to RACAP. Originality/value Firm leadership is crucial for the social capital and external knowledge absorption in resource-constrained small firms. This paper elucidates the role of paradoxical leadership (balance of chief executive officer (CEO) humility and CEO narcissism) in developing ACAP and for translating social capital into ACAP and finally firm performance. Apart from contributing to the literature at the nexus of leadership styles and ACAP, the paper also brings more clarity to the role played by paradoxical leadership in helping small firms take advantage of social capital in boosting their performance.