The relationship between social capital, entrepreneurial orientation, cost leadership strategy and the performance of cooperatives in Malaysia

Cooperatives play an important role in the sustainable development of a nation both socially and economically. In Malaysia, the formation of cooperatives is for the members well-being progress, to eradicate poverty and play as the instrument for distribution of national wealth. However, despite the importance of cooperatives, limited studies have attempted to investigate the factors that could influence the performance of cooperatives, particularly the role of social capital dimensions namely structural, relational and cognitive, entrepreneurial orientation (EO) and cost leadership strategy. This study then examines the relationship between social capital, EO, cost leadership strategy and cooperatives performance. This study also examines the mediating effect of EO on social capital and performance link and the moderating effect of cost leadership strategy on EO and performance relationship. Data were collected from 196 cooperatives Chairman through a mailed questionnaire. The Partial Least Square Structural Equation Modelling (PLS-SEM) approach was used to analyze the data using SmartPLS version 3.0 software. The result of the study suggests that social capital dimensions and EO are positively related with organizational performance. In addition, the analysis showed that structural and cognitive social capital predict EO. It further shows that EO also mediates only the structural social capital and performance relationship and cognitive social capital and performance relationship. Lastly, the findings of this study indicate that cost leadership strategy does not moderate the relationship between EO and organizational performance. This study contributes to the literature by demonstrating the influence of social capital and EO on organizational performance particularly in the context of the study. In order to take advantage of opportunities and achieve better performance, cooperative management should enhance their networking internally and externally to gain more resources and mobilize those resources through EO. Upon articulating the theoretical and practical contribution, this study discussed some limitation and possible avenue for future research.