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Fundamentally affecting the economic growth, both globally and domestically, customer-based Small and medium enterprises (SMEs) are promised a smooth path towards the global market (Jalali & Jaafar, 2019). Jalali, Abhari, and Jaafar (2022) argued that SMEs focusing on meeting customer demands can successfully enter the universal market. Rashidirad and Salimian (2020) asserted that SMEs account for an estimated two-third of industrial employment in developed countries such as USA and UK. In addition in almost all developing countries across the world, SMEs comprise more than 90 per cent of all jobs and added value and contribute to 40 percent of total GDP (Dias, Rodrigues, Craig, & Neves, 2018).
In Iran, SMEs account for a large portion of enterprises (80 per cent) and contribute nearly 36 per cent of value-added to its national economy (Jalali, Jaafar, & Ramayah, 2020). Smes can significantly contribute to the growth of the economy in Iran (Sadeghi, 2018). Jalali and Jaafar (2019) asserted that SMEs have begun receiving attention from the Iranian government due to their potential in promoting inflection and novel products, as well as in employment, in comparison to large enterprises.Given the fact that SMEs are a multi-faceted entity, definition of SMEs vary including micro enterprises with 1 to 9 employees, small enterprises with 10 to 49 employees, and medium enterprises with 50 to 99 employees (Jalali et al., 2020). According to Afshar Jahanshahi, Nawaser, and Brem (2018), political sanctions, such as limited access to various resources (e.g. loans), limited market demand because of economic contraction, limited access to new technologies and information because of the trade embargo, as well as lack of entrepreneurial skills and abilities among entrepreneurs, had tempered with the act of empowering SMEs through innovativeness.
Traditional economy focused on the basic resources necessary for the firm such as land, labour and other classical assets (Jalali et al, 2022; Sullivan, 2000). Jalali and Jaafar (2019) employed the resource-based view (RBV) in order to seek a list of resources (tangible and intangible) that motivates the SMEs competitiveness level. According to the resource-based view (RBV), a firm’s resources, particularly intangible ones, are more likely to contribute to the firm’s attaining and sustaining superior performance (Hsu & Wang, 2012). To maximize performance, managers need to pursue competitive strategies that best match the conditions of the intangible resources. In other words, the availability rate of intangible resources such as relational capital (Hsu & Fang, 2009) is expected to affect a manager’s strategy. Therefore, a manager’s strategy must be to deploy its resources to seize opportunities in the market (Hsu & Wang, 2012).
Safari and Saleh (2020) argued that recent business environment places greater emphasis on the informational age rather than the industrial age. In the field of entrepreneurship study Liao and Welsch (2005, p. 350) defined relational capital as the extent to which “an entrepreneur is actually able to receive informational, physical and emotional support”. Thus, Jalali et al. (2020) found that firms which develop informal internal and external relationships and smooth the piecemeal allocation to merge and share resources will show a higher level of entrepreneurial behaviour. There are numerous studies in entrepreneurship which show the benefit of social relationship in order to sustain new business (Safari & Saleh, 2020). Moreover, Jalali et al. (2022) examine how an impressive relationship can be sustained over the long term. Despite the previous studies that have been done regarding networks, Cohen and Kaimenakis (2007) argue that few studies have explored intangible resources such as relational capital in SMEs.