Leveraging Social and Psychological Capital to Improve SME Performance: Evidence from Knowledge Sharing Behavior in Indonesia

ABSTRACT : Small and Medium Enterprises (SMEs) play a strategic role in regional economic development; however, their performance remains constrained by limited tangible resources and managerial capacity. In a knowledge-based economy, intangible resources such as social and psychological capital have become critical drivers of sustainable SME performance. This study aims to examine the effects of social capital and psychological capital on SME performance, with knowledge-sharing behavior as a mediating variable. The research was conducted among food and beverage SMEs fostered by the local government in Kediri. Using an explanatory research design, data were collected from 200 SME owners through structured questionnaires and analyzed using Structural Equation Modeling with the Partial Least Squares (SEM-PLS) approach. The results demonstrate that social capital and psychological capital have significant positive effects on knowledge sharing behavior and SME performance. Knowledge-sharing behavior is also found to have a direct positive effect on SME performance and partially mediates the relationships among social capital, psychological capital, and performance outcomes. These findings confirm that intangible capital contributes to SME performance not only directly but also indirectly through internal behavioral mechanisms related to knowledge exchange. This study contributes to the literature by integrating Social Exchange Theory, Positive Organizational Behavior, and the Knowledge-Based View of the Firm within the context of an SME in a developing economy. Practically, the findings highlight the importance of strengthening social networks, psychological resilience, and knowledge-sharing practices to enhance SME competitiveness and sustainability. From a policy perspective, the results provide empirical evidence to support SME development programs that emphasize the development of intangible capital alongside conventional financial and technical assistance.