Social networking and firm performance of small and medium enterprises (SMEs): the mediating role of Financial Bootstrapping

Abstract

The purpose of this study was to examine the mediating role of financial bootstrapping (FB) in the association between social networking (SN) and firm financial performance (FP) of small and medium-scale enterprises in Sri Lanka. The research was designed as a quantitative cross-sectional study following the deductive approach under the positivist research paradigm. The Resource Dependency Theory and Pecking Order Theory shed light on conceptualizing the study. A structured questionnaire was self-administered among 353 respondents for collecting data. The Partial Least Squares Structural Equation Modeling (PLS-SEM) was employed for the data analysis. The findings of the study disclosed that both direct effect and indirect effect are statistically significant. This reflects that financial bootstrapping is partially mediating the association between social networking and firm financial performance. This study implies the significance of creating social networks in a more organized, structured, and accessible way to harness the maximum utilization of such avenues by the entrepreneurs of SMEs. Future researchers are suggested to explore the potential impact of gender differences on this mediating effect. Further, they are encouraged to study whether different types of financial bootstrapping strategies similarly mediate the social networking and firm performance relationship.