The effect of social capital and transformational leadership on the performance of rural enterprises

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The existence and performance of enterprises in rural areas become an interesting phenomenon as a solution for community welfare. The purpose of this study is to examine social capital and transformational leadership as factors that influence village-owned enterprises’ performance and the ability to innovate as a mediator. The research population consists of 216 village-owned enterprises. Riau Province in Indonesia is the place of research focus. This study used probability sampling with area sampling or cluster sampling. Respondents were managers, secretaries, treasury, or heads of business units of each village-owned enterprises. A total of 120 respondents participated in this analysis. The research hypotheses were tested using the partial least squares-structural equation modeling. The outcomes demonstrate that social capital and transformational leadership significantly positively affect enterprises’ performance with a p-value < 0.05, and the ability to innovate is proven to be a mediator with a p-value < 0.05. This study is relevant to the government program related to community welfare and offers implications for rural enterprises to improve social capital, leadership capabilities, and innovation.

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    • Figure 1. Structural equation model test results
    • Table 1. Characteristics of respondents
    • Table 2. External load value
    • Table 3. Value of coefficients of determination (R2)
    • Table 4. Hypotheses testing results
    • Conceptualization
      Hariadi Yasni, Poppy Nurmayanti
    • Formal Analysis
      Hariadi Yasni, Poppy Nurmayanti, Yuni Rianti
    • Funding acquisition
      Hariadi Yasni, Yuni Rianti
    • Software
      Hariadi Yasni
    • Supervision
      Hariadi Yasni
    • Writing – original draft
      Hariadi Yasni, Yesi Mutia Basri, Poppy Nurmayanti
    • Writing – review & editing
      Hariadi Yasni, Yuni Rianti
    • Data curation
      Yesi Mutia Basri, Poppy Nurmayanti
    • Investigation
      Yesi Mutia Basri
    • Methodology
      Yesi Mutia Basri, Yuni Rianti
    • Project administration
      Yesi Mutia Basri, Poppy Nurmayanti
    • Resources
      Yesi Mutia Basri, Yuni Rianti