How Reliable Are Strong Ties in Enterprise Innovation? An Assessment of the Role of Social Capital in the Innovation Performance of SMEs in Northern Ghana

Abstract

Innovation among small and medium-sized enterprises (SMEs) is influenced by several factors including those that are internal and those from the external environment, and the entrepreneur’s own orientation towards innovation. The concept of strong ties in business refers to individuals and groups that have a direct interest and effect on the business, and the entrepreneur’s relationship with these stakeholders form the social capital of the entrepreneur.  The objective of this study was to determine the mediating role of strong ties in the relationship between entrepreneurial orientation and innovation in the enterprise. To achieve this, a sample of 354 SMEs were selected from across the northern part of Ghana. Data analysis was done using partial least squares structural equation modelling (PLS-SEM) to test the hypotheses via the Smart PLS software.  The findings show that entrepreneurial orientation significantly influences innovation performance among SMEs.  Furthermore, customer and supplier collaborations fully mediate the relationship between entrepreneurial orientation and innovation performance, while employees and family/friends partially mediate this relationship. Strong ties are cost-effective sources of new product ideas, and SMEs can always seize the opportunity to solicit ideas from these collaborators to improve upon innovation performance.