Family-run micro-enterprises in India rely on more than just business acumen for financial success, according to a study in the International Journal of Social and Humanistic Computing. Researchers have explored the key factors contributing to the success of such businesses and have found that social networks, financial literacy, and entrepreneurial ambition play important roles in driving financial performance.
S. Bharathithasan and K. Sakthi Srinivasan of VIT University in Tamil Nadu, India, looked at the interactions between these factors and found that entrepreneurs with the strongest social networks, including connections with family, friends, and their local community, were more likely to achieve financial stability. Financial stability in this context being represented by a steady income, manageable debt, and overall financial security. Such stability then allowed those business owners to make better decisions to drive their company’s long-term growth.
The researchers suggest that the importance of social networks in this context cannot be overstated. In environments such as those in which many Indian micro-enterprises find themselves, resources are limited and competition is fierce. Social capital, an essentially intangible asset drawn from one’s personal and business relationships, plays a vital role in allowing business owners to face the many challenges. Strong connections within the community provide entrepreneurs with access to financial resources, business advice, and emotional support. Moreover, family and community ties offer micro-business owners a distinct advantage, helping them to mitigate risks, adopt new technologies, and respond more readily to market changes.
While social networks are clearly important, the researchers also showed that financial intelligence plays an important part in the success of micro-businesses. Financial intelligence refers to the ability to manage money effectively in terms of budgeting, investing, and making informed financial decisions. That said, the study found that the importance of financial literacy was not in terms of greater long-term financial success directly but rather in working synergistically with social capital.
The team adds that entrepreneurs with obvious ambition are more likely to take calculated risks and make decisions that contribute to sustainable growth. However, it is the foundational support of family and community that sets them up to realise their ambitions.
Bharathithasan, S. and Srinivasan, K.S. (2024) ‘Building your network, building your wealth’, Int. J. Social and Humanistic Computing, Vol. 4, No. 3, pp.253–276.