Business Relational Capital and Firm Performance in South Western Nigerian Small Scale Enterprise Clusters

Abstract

This paper examines the effect of relational capital components on firms’ performance of selected Small Scale Enterprises Clusters in Southwestern geo-political zone of Nigeria.Nigeria. It examines the business aspect of relational capital in Nigeria context. The units of study were the firms within the cluster, and two clusters, Abeokuta and Osogbo located in Ogun and Osun State respectively in South Western Nigeria. The data for the measures of the variables are collected through questionnaire adapted from Tumwine (2010) survey using five-point Likert’s scale. 94 survey instruments were distributed while 80 were returned and found useful for the analysis. A correlation matrix and multiple regression models were used to test the hypotheses advanced. The Relationship with suppliers, customers and internal networks among the employees were found to be positively and significantly related to and predictor of the clusters’ firm performance. Furthermore, relational capital as a whole accounts for 63% of the variation in performance of the firms’ in the clusters studied. In order to boost the clustered firms’ performance, managers within the clusters should employ viable relational capital strategies that include building strong business relational ties with their suppliers and customers in order to identify their needs and provide optimal value for them. The study, also, recommends that internal network among employees based on mutual trust and cooperation within the cluster should be encouraged. This can be achieved through employees share value and togetherness built on trust and open culture within the cluster. This will enhance provision of optimal value for customers and mutual trust and cooperation with suppliers. Lastly, cluster initiative can be boosted, if each firm within the cluster can exploit the benefit in relational capital mix through team building, sharing organizational mission and values, and trust with customers.

Keywords: Cluster, Firm Performance, Nigeria, Relational Capital, Small Scale Enterprises.