Overcoming Bureaucratic Barriers: Bridging Social Capital and Informal Legitimacy in Immigrant-Owned SMEs in South Africa

Boris Urban () and Mahad Moti ()
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Boris Urban: University of the Witwatersrand
Mahad Moti: University of the Witwatersrand

A chapter in Entrepreneurship and Human-Centric Business Strategies for Social and Economic Resilience, 2026, pp 29-43 from Springer

Abstract: Abstract Immigrant entrepreneurs operating in emerging markets often face systemic barriers to formal financial capital, making the interplay between human and social capital critical to venture success. This paper advances a reframed theoretical lens that positions bonding and bridging social capital not merely as moderators but as active conversion mechanisms through which human capital is transformed into financial capital. Drawing on capital conversion theory and embeddedness perspective, the model conceptualises human capital comprising education, skills, and experiential knowledge as a latent asset requiring mobilisation via network ties to realise economic value. Bonding capital, rooted in strong, trust-based ties within close-knit communities, functions as a capital preservation channel, offering stability and low-risk intra-community finance, yet often limiting growth potential due to insularity. Bridging capital, formed through weaker, diverse ties to heterogeneous networks and institutions, operates as a capital expansion channel, providing access to larger, more diverse funding pools, but exposing entrepreneurs to greater legitimacy challenges and institutional gatekeeping. This conversion-focused approach integrates the three capitals into a causal pathway model, illustrating how tie types influence both the velocity and scale of capital transformation. The aim is to develop a capital conversion model that explains how immigrant entrepreneurs in emerging markets specifically South Africa transform human capital into financial capital through bonding and bridging social capital. Grounded in the South African immigrant entrepreneurship context, the framework highlights the strategic importance of maintaining a portfolio of ties to balance stability and growth. The study employs a quantitative, cross-sectional survey targeting immigrant-owned small and medium enterprises (SMEs) in South Africa. It tests the moderating effects of social capital on the relationship between human capital and access to financial capital, using statistical analysis to validate the proposed causal pathways. The study offers theoretical contributions to social capital research, practical insights for immigrant entrepreneurial strategy, and policy implications for designing hybrid network-building programmes that facilitate effective human-to-financial capital conversion in resource-constrained environments.

Keywords: Immigrant entrepreneurship; Social capital; Bridging; Bonding; Human capital (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-981-95-6415-6_3

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DOI: 10.1007/978-981-95-6415-6_3

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