The interplay of different types of capital on amplifying small business entrepreneurship performance in Cameroon: a case of Douala and Yaounde.

Abstract

There cannot be a firm without entrepreneurship, and for the exercise of effective entrepreneurship, entrepreneurial capital is indispensable. Drawing from the resource-based theory, this study assesses the interplay of social, human and financial capital on business performance in Cameroon, using a Structural Equation Modelling (SEM) approach and Principal Component Analysis (PCA). These three elements together make up the building blocks of entrepreneurial capital. The study uses a sample of 364 firms. Performance is examined in terms of growth in sales, profits and employment. The PCA isolates financial capital (FC), social capital (SC), and human capital (HC) as critical components influencing performance. HC is examined under Entrepreneur-Owner Human Capital (OHC) and LabourEmployee Human Capital (EHC). The SEM results indicate that OHC has the strongest significant effect on performance (weight 0.528), followed by FC (weight 0.420), EHC (weight 0.207) and SC (weight 0.120). Furthermore, the SEM indicated a positive and significant correlation between OHC and EHC (r = 0.61); between FC and EHC (r = 0.56); between FC and SC (r = 0.40); between OHC and SC (r = 0.34) and between SC and EHC (r = 0.32). Different elements of entrepreneurial capital complement each other in influencing performance. Investigating the constraints to business performance, five major obstacles were identified, namely: ‘financial and managerial skills’, ‘inadequate inputs’, ‘infrastructure’, ‘transaction costs and regulations’ and ‘credit access’. The study also looked at the influence of government support, regulations, and private financial institutions in hindering or amplifying business performance, using a multiple linear regression model (MLRM). The results show that ‘government regulations’ (𝜷= -0.197, p=0.004), has the strongest adverse impact on performance in terms of sales revenue. Furthermore, ‘awareness of source of funds’ was found to significantly amplify business performance in terms sales revenue (𝜷= 0.146; p=0.031) and in terms of profit (𝜷= 0.175; p=0.012). Government support was also significant to performance, in terms of labour employment (𝜷= 0.601; p=0.000); sales revenue (𝜷= 0.178; p=0.009), and profit (𝜷= 0.175; p=0.012). Government regulations have a consistently negative influence on performance, even when using different indicators.