Social Capital, Entrepreneurial Leadership and SMEs Performance: The Mediating Effect of Innovation Capability

This study aims to solve the problems of SMEs’ performance in the culinary and
hospitality sectors in Pekanbaru by involving several companies’ internal environmental
factors to build a competitive strategy. The variables engaged in this study consisted of
social capital, entrepreneurial leadership, innovation capability, and performance. It
involves 200 SMEs consisting of 167 culinary enterprises and 33 hospitality enterprises in
Pekanbaru City in Riau of Indonesia. Using the structural equation model (SEM) approach,
the results show that social capital has no significant direct effect on the business
performance of culinary and hospitality SMEs in Pekanbaru. However, social capital
indirectly affects SMEs’ performance through innovation capability. In addition,
entrepreneurial leadership, directly and indirectly, affects the financial and non-financial
performance of SMEs through capability. Culinary and hospitality SMEs in Pekanbaru must
do a job in relationships partnerships with withs with common goals in furthering SMEs
business. This active participation helps SMEs nurture knowledge and the latest
information in the business world. Furthermore, culinary and hospitality SMEs actors were
dominated by young entrepreneurs. It could be a valuable capital for SME act to be more
innovative and creative in company improvement strategies, especially in coping with the
COVID-19 pandemic.