The Role of Human Capital and Social Capital in Improving the Performance of Small and Medium Enterprises (SMEs)

Giovani Tania Zebua, Fuad Masud, Suharnomo Suharnomo

Abstract


Small and Medium Enterprises (SMEs) are an essential pillar in driving the regional
economy, including in Central Java Province. Behind their significant contribution, SMEs
still face serious challenges, ranging from low productivity to limited competitiveness.
This study aims to examine how the roles of Human Capital and Social Capital contribute
to improving SME performance, using a descriptive qualitative approach without
involving statistical analysis. Through a descriptive qualitative approach, this study
explores contextually how SME actors interpret, develop, and implement the use of
human resources and social networks in their business activities. The information
obtained shows that the capacity of human resources among SME actors is generally
formed through experience, but has not been systematically managed. Meanwhile, Social
Capital, as reflected in relationships among actors, customers, and surrounding
communities, remains spontaneous and has not yet been utilized as a collective force to
support business growth. Limited access to training, technology, and mentoring also
weakens the use of both capitals in business operations. This study recommends
empowerment strategies that target the strengthening of individual competencies
alongside the development of productive business social networks to encourage
sustainable improvements in SME performance. Furthermore, the results of this study are
expected to provide insights for the formulation of more adaptive and contextual policies,
in line with the characteristics of local SMEs that serve as the backbone of the people’s
economy in Central Java.

Keywords: SMEs performance; human capital; social capital; enterprise empowerment

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