ENTREVISTA APLICADA A AGENCIAS OPERADORAS

The literature on the impact of social capital on firm performance has confirmed that social capital is one of the most significant factors contributing to competitive success in all types of firms (Burt 1992; Kontinen & Ojala 2012), for the following three reasons. Firstly, social capital provides firms with access to resources that are necessary for value- creating processes such as strategic knowledge and information (Roxas & Chadee 2011). Secondly, it can help improve firm performance by facilitating transactions between the focal firm and its partners (Burt 1992). Thirdly, it allows firms to reduce transaction costs relating to social interaction and exchange (Luo 2003; Roxas & Chadee 2011). Social capital, in the form of generalized trust, can help firms to reduce transaction costs in terms of searching and maintaining effective cooperation relationships, hence improving firms’ economic efficiency (Adler & Kwon 2002; Baughn et al. 2011; Hayami 2009; Putnam 1993).

Page 124

In the present research, our findings further current understandings on the different roles that social capital may play at different stages of SMEs’ internationalization. Moreover, our identification of social capital’s roles in different operation sectors, as well as to various firms’ characteristics, can further explain the changing impacts of social capital on export performance of SMEs in developing countries.

In general, the interviews report that small-sized and newly established firms tend to value the influence of social capital more highly than do participants from larger and experienced firms. This result aligns with the extant literature arguing that social capital improves export performance of SMEs by enabling the inflow of information and knowledge to create more business opportunities (Loane & Bell 2006; Pinho 2011). Thus, for small and newly established firms, where financial resources and knowledge are both limited, SMEs would be more reliant on their social capital. SMEs can convert their relational resources, which are various supports from their network of contacts, into knowledge acquisition and exploitation by establishing relation-specific assets, knowledge-sharing schemes, and effective relational governance mechanisms (Yli- Renko, Autio & Tontti 2002, p. 587). Firms’ competitive advantages and development potentials will depend on their speed in acquiring specific resources and transforming them into specific capabilities (Pinho 2011).

In the present study, the evidence suggests that, although social capital plays a critical role in acquiring export customers for SMEs in the start-up phase, retaining export customers mostly depends on quality rather than merely on relationships. In contrast to domestic business, where social capital appears to be more important in both acquiring and retaining customers, export customers are often retained based on transaction history, with the key point being the credibility and capability of firms in delivering their commitments. These findings suggest that, to be successful in export activities, Vietnamese SMEs not only may need to develop networks to include international business partners, but more importantly they need to sustain such network relationships by continuously improving their capability and competitiveness in the market. For that knowledge, innovativeness, information and skills are core values having dual relationships with social capital.

Regarding sectors, it is noted that wood processing firms (operating in a restricted environment) tend to appreciate social capital, especially networking with the authorities,

Page 125

more highly than do handicraft and agricultural product exporting firms. This indicates that there are more rent-seeking opportunities for firms operating in an unstable environment, where restrictions and administrative measures are ambiguously used instead of effective and transparent economic measures. In such a situation, firms might be more incited to capture those available rents. Hence, firms could either utilize their social capital to influence public service providers or use any other substitutions such as the use of informal fees to ‘get work done’. The leverage of social capital for such opportunistic behaviours is clearly unfair, and certainly unhealthy for the business environment in general. Therefore, it is recommended that the Vietnamese Government should focus not only on improving the transparency and comprehensiveness in the legal system but also on implementing an effective monitoring system to ensure equal treatment for all participants.

For the lower level of perceived social capital in acquiring export customers but higher level in identifying suppliers and managing the supply chain found in the agricultural exporters, this could be because these firms operate in a near-perfect competition market where entry barriers are low, products are identical (e.g. agricultural commodities such as coffee, tea, pepper and cinnamon), and suppliers are price takers; thus, social capital mainly supports firms in maintaining effectiveness and competitiveness in supply chain management. Relationships with firms’ suppliers help ensure appropriate quantity and quality, competitive price, and right time delivery. Network relationships of firms also lubricate the local logistic activities provided by public service providers, such as customs clearance, technical and quality control, and certificate of origin.

For exporters of more differentiated goods, such as handicrafts, processed foods or processed wooden products, social capital plays a more important role. The deeper that firms are involved in a value chain, i.e. the more activities that firms perform in the value chain, the higher their appreciation of the importance of social capital. Such firms not only compete on price but also on product specification, product differentiation, and product perceived value.

Despite the existence of social capital being used for opportunistic motives, this research found that the previously pervasive use of social capital for rent appropriation has gradually reduced. The roles of social capital are changing through the transitional process of the Vietnamese economy. As the country moves from central planning to a

Page 126

market-oriented economic system, rent-seeking associated with accessing restricted economic activities through social relationships has been gradually swept away. On the one hand, the emergence of entrepreneurship and market competition has reduced rent- seeking opportunities; on the other hand, it has transformed the role of social capital, in that it is more likely to be used in the service of facilitating and incorporating resources of firms to achieve competitive advantage.

5.5 Chapter summary

In summary, the qualitative analysis chapter explores the roles of social capital in business performance of small- and medium-sized enterprises in Vietnam. The main points of the chapter can be summarized as follows.

Firstly, this chapter analyses qualitative data and discusses the perceived importance of social capital in export business in comparison with domestic business; between different export business sectors; and between different phases of internationalization of firms. It then concludes that social capital is perceived as being more critical for domestic businesses rather than for export businesses, and more critical for firms at the beginning phase of export business rather than for experienced firms. This indicates that social capital is important to the export propensity of firms, rather than to the export performance of experienced exporters.

Secondly, regarding the value of different networks relationships among exporters, relationships with formal financial institutions (including banks) are consistently perceived as being important for most exporters. Nevertheless, the relationships with authorities and political connections are perceived as significant only for firms in the restricted sectors and starting firms, but not as significant for firms in restriction-free sectors and experienced firms. In addition, most exporters highly value the support from network contacts rather than the size of the networks; which indicates that the resources from networks have stronger impacts on export performance of firms in comparison with the broadness of the networks.

Thirdly, this chapter presents that, from different perspectives, the impacts of social capital on SMEs’ performance can be explained differently. From a transaction cost perspective, a network of contacts helps to reduce search costs, negotiation/contract costs, and monitoring/enforcement costs; which in turn result in better performance. From a rent-seeking perspective, social capital could be seen as either direct pressure or an

Page 127

indirect mediator to support firms in obtaining favourable treatment to outperform in the market place. From a resource-based view, social capital is considered an inimitable resource that increases competitive advantage of firms, hence improving export performance. From the dynamic capabilities perspective, social capital helps in mobilizing firms’ resources more efficiently, thus creating new resources to facilitate firms’ performance.

Finally, the chapter synthesizes and integrates the transactions costs perspective with rent theory, to explain the changing roles of social capital during the transitional economic period. Supported by extant literature and evidenced from the unstructured interviews conducted for this research, it concludes that, although social capital remains significant in doing business in Vietnam, market competition and institutional development have gradually transformed the impact channel of social capital from a rent seeking dominance to transaction cost reduction spectrum. This transforming process has been undertaken simultaneously with the gradual removal of various business restrictions and the development of the private sector, alongside the emerging and encouraging development of an entrepreneurship environment. In this process, opportunistic connections for rent appropriation have been gradually swept away, and trust-based, capacity-based and refined relationships have been emerging. For that, the saying, “it’s not what you know, it’s who you know”, might need to be revised, to “It’s not who you know, it’s what you can do”.

Page 128

CHAPTER 6: IMPACTS OF SOCIAL CAPITAL ON EXPORT PROPENSITY OF