How closeness matters: the role of geographical proximity in social capital development and knowledge sharing in SMEs

Abstract

Purpose This study aims to investigate the impacts of geographical proximity on social capital development through the inter-relationship between three social capital dimensions (structural, relational and cognitive dimension) and the knowledge sharing between small- and medium-sized enterprises (SMEs). The authors empirically test a main hypothesis that the mechanism of social capital development that subsequently results in tacit knowledge sharing is different for SME buyer-supplier partners across their different geographical distances. Design/methodology/approach Multiple-group analysis in structural equation modeling (SEM) was conducted to test the research hypotheses using data collected from approximately 200 SMEs in Thailand’s food industry. Findings At a great geographical distance, the structural dimension impacts the cognitive dimension only in an indirect way through a relational dimension, which subsequently leads to knowledge sharing between SME buyer-supplier partners. At close geographical proximity, while the indirect impact of structural dimension on cognitive dimension through a relational dimension is still presented as it is in a great geographical distance, structural dimension has a positive and direct impact on the cognitive dimension as a complementary way to jointly reinforce knowledge sharing between SME partners. Among distant SME partners, the relational dimension shows a stronger impact on the cognitive dimension. In contrast, the direct influence of structural, relational and cognitive dimensions on knowledge sharing is identical, regardless of geographical distance. Practical implications The managers of SMEs can design their network-building approach in such a way that different location partners can enhance knowledge sharing. Policymakers could consider these results as a guideline when imposing SME development policies and geographical cluster policies in emerging economies. Originality/value This study provides empirical evidence that demonstrates how geographical proximity between SME partners in an emerging economy influences their social proximity through the lens of social capital development mechanism and thus leads to knowledge sharing between them.

Exploring the role of social capital in public procurement

“…These SC dimensions may be interconnected. For instance, structural capital may drive cognitive and relational capital in a case in which geographically approximate networks develop shared goals and trust (Chumnangoon et al , 2021). Contrarily, the relational and cognitive dimensions may encourage strong network development (Li et al , 2014).…”

“…A firm is considered central if it is positioned at the focal point of social interactions, unfolding information flow across multiple networks (Freeman, 1978). Proximity justifies a firm’s closeness and direct involvement with other networks (Bernstein, 2015; Chumnangoon et al , 2021).…”

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“…The stylized facts known about SME performance may be reflected in a picture of SME competitiveness generated by organizing around the three main pillars of SME competitiveness previously mentioned [2]. Studies in [3] show that SMEs are less competitive than large businesses, and that this disparity is much worse in emerging nations than in industrialized ones.…”

Are Non-Special Dimensions of Proximity in Local Clusters Related? An Analysis of 99 European Clusters

“…The justification for this fact is explained in detail by geographic economists [2]. However, most recent investigations confirm that the principal and the particular dimension of proximity known as geographical proximity, the physical distance between firms, is increasingly losing its importance (e.g., [2,3]). According to Kuch [4], geographical proximity is never a sufficient condition, albeit necessary, to achieve sustainability goals and corporate sustainability change.…”

“…Some research has intended to link firms' non-specific proximity to some outcomes such as innovation [9,10], knowledge exchange [2,3], and corporate sustainability [6][7][8]11]. Nevertheless, none of these studies clearly explains the relationship between different dimensions of proximity.…”