Clarifying the Link Between Social Capital and MSME Innovation Performance: The Role of Absorptive Capacity

A conceptual framework is proposed in this article showing how the social capital of a community shapes the innovation performance of micro, small and medium enterprises (MSMEs) through the exercise of absorptive capacity as the mediating phenomenon between the two. Its significance stems from the unprecedented effort of explaining how community social capital matters in the innovation performance of MSMEs, a departure from previous studies which typically examined market-related or hierarchical social capital in the form of formal networks and directly linking them to firm innovation without due regard to knowledge management within the firm as an antecedent of organizational innovation. The aim is to stimulate further and empirical research on the subject of social capital of a community in an MSME and/or entrepreneurial context.