Despite being recognised as drivers of innovative development, Micro, Small, and Medium-Sized Enterprises (MSMEs) frequently confront resource limitations. Therefore, enhancing the ecosystem is contingent on the entrepreneurs’ social capital, which is crucial for the success of MSMEs. This study applies the social capital approach to analyse the entrepreneurial ecosystem enrichment and its impact on the innovation process of cosmetics MSMEs. The qualitative case study of six cosmetic manufacturing MSMEs explores that social capital is a multifaceted asset to MSMEs. Through an in-depth thematic analysis of three dimensions of social capital (structural, relational, and cognitive), this study states that the innovation process is supported by the synergistic transformation of one dimension of social capital into another. Entrepreneurs sharing the common norms, rules, and language enrich their cognitive as well as relational aspects of ecosystem. The study suggests that as network ties, trust, and norms collectively influence innovation in firms, hence, social capital needs to be studied with its contextualization in the ecosystem.

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A SOCIAL CAPITAL APPROACH TO ENTREPRENEURIAL
ECOSYSTEM AND INNOVATION: CASE STUDY OF COSMETIC
MANUFACTURING MSMES
Dr. DEEPMALA BAGHEL
Assistant professor, Indian Institute of Management Nagpur
Email: deepmala@iimnagpur.ac.in
Abstract
Despite being recognised as drivers of innovative development, Micro, Small, and Medium-Sized Enterprises
(MSMEs) frequently confront resource limitations. Therefore, enhancing the ecosystem is contingent on the
entrepreneurs’ social capital, which is crucial for the success of MSMEs. This study applies the social capital
approach to analyse the entrepreneurial ecosystem enrichment and its impact on the innovation process of
cosmetics MSMEs. The qualitative case study of six cosmetic manufacturing MSMEs explores that social capital
is a multifaceted asset to MSMEs. Through an in-depth thematic analysis of three dimensions of social capital
(structural, relational, and cognitive), this study states that the innovation process is supported by the synergistic
transformation of one dimension of social capital into another. Entrepreneurs sharing the common norms, rules,
and language enrich their cognitive as well as relational aspects of ecosystem. The study suggests that as network
ties, trust, and norms collectively influence innovation in firms, hence, social capital needs to be studied with its
contextualization in the ecosystem.
Keywords: Entrepreneur, Innovation, Cosmetics, MSME, Social capital, Trust.
I. INTRODUCTION
In today’s knowledge-based economy, entrepreneurship has been hailed as a key feature that
relies on innovation as its fuel. Innovation is a phenomenon realized through an infusion of
multiple economic, technical, strategic, organizational, industrial, and social components.
Since innovation entails the production, development, and application of novel concepts or
behaviours, it requires cooperation, collaborations, and multiple interactions among different
ecosystem actors (Eckhardt et al., 2018; Rosenberg, 1982; Reidolf, 2016; Ouechtati et al., 2022;
Williams and Edge, 1996). The ecosystem discourse is extensively studied to analyze the
structure, relationships, and exchanges among players, groups, and organizations (Foguesatto
et al., 2021; Gomes et al., 2018). Existing research shows that a company's innovative growth
should include both technical skills and the incorporation of socio-cultural capital acquired
through contact networks and group learning (Rosenberg, 1976; Tsai & Ghoshal, 1998).
However, the most important theoretical understandings of innovation obtained over time focus
solely on technological aspects. There is limited empirical research on the novel hypothesis
proposed by social capital as measures of innovation, which typically concentrate on how
social networks help entrepreneurs bridge resource gaps by connecting them with external
resources like advisors, investors, partners, and early-adopter customers. Thus, this study
proposes that analysing social capital and its three dimesons is crucial for examining the
complexities of the entrepreneurial ecosystem. Micro, Small, and Medium-Sized Enterprises
(MSMEs) experience challenges related to infrastructure and resources (Eckhardt et al., 2018).
Hence, among all social variables, entrepreneurs’ social capital plays a crucial role in the
innovation process by serving as a valuable resource that facilitate MSMEs navigate various
limitations.
This study aims to demonstrate how social capital strengthens the entrepreneurial ecosystem
and propels MSME innovation. To achieve the goal, the research adopts Gabbay and Leenders'

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(1999, p. 3) definition of “corporate social capital” as “the set of tangible or virtual resources
that accrue to a corporate player through the player's social relationships, facilitating the
attainment of goals” and offers a realistic framework for the goal attainment of MSME
entrepreneurs. Consequently, this study analyses various types of structural social capital
(personal networking: kinship, friends, and ethnic ties; professional networking: business,
research, and supplier network and assets). The relational aspect of social capital (personal and
professional connections) and the cognitive aspect of social capital (reciprocal trust). A setting
composed of the entrepreneur’s culture, social structure, and trust-forming norms, codes, and
common language along with personal and professional networks. This research applies social
capital theory to realize the importance of connections and collaboration for resource
generation for innovation.
Overall, this study makes certain crucial contributions. First, it adds to the theory of innovation
a comprehensive view of social processes that produce a sustainable firm ecosystem. By taking
intersecting perspectives of three dimensions of social capital (structural, relational, and
cognitive) this research extends the knowledge of social capital and its subtle contribution to
the innovation process. It also adds the ecosystem as a theoretical metaphor for studying
MSMEs.
To address the objectives, the paper is structured as follows. The following section provides a
basic overview of an entrepreneurial ecosystem, innovation, and social capital. The further
section displays the methodological framework applied for the data collection and analysis.
Afterward, the paper concentrates on the discussion that consists of the analytical and empirical
factors lending support to the claim. The conclusion discusses the paper's contributions,
research limitations, and future study potential.
II. THEORETICAL FRAMEWORK
Entrepreneurial ecosystem
The ecosystem as a theoretical metaphor is widely used in the study of high-growth
entrepreneurship (Foguesatto, et al., 2021; Spigel, 2017; Audretsch and Belitski, 2016).
Although ecosystem as a concept has grown in prominence, it has not yet attained complete
comprehension in innovation research (Adner, 2017). In recent literature, a discussion has
emerged to convey the multidimensionality of an innovation-supporting ecosystem, termed the
innovation ecosystem. (Foguesatto, et al., 2021). The entrepreneurial ecosystem has been
defined differently in different literature. The entrepreneurial ecosystem is also characterised
as constructed on networks between various small enterprises that collaborate and compete in
the same industry at a similar time (Adner, 2017). It differs from a cluster, in which businesses
locate nearby to service larger clients and, as a result, share knowledge (Westlund, and Bolton,
2003). In an entrepreneurial ecosystem, specific attributes are not isolated, but rather interact
with each other in ecosystem (Spigel, 2017). Therefore, social capital is a better option to
investigate the enrichment of the ecosystem (Stam, 2015). System theories seek to explain the
elements of the system that makes an ecosystem as a whole (Isenberg, 2011). Whereas the
configuration approach focuses on the composition of the ecosystem and interactions of its
elements (Spigel, 2017). Another essential stream is social network theory, which permits the
measurement of element interactions. This research, therefore, applies social capital theory to
gain a deeper understanding of this mechanism. The objective is to comprehend the ecosystem,
as the combination of contexualised cultural perspectives, social networks, capitals, and socio-
cultural systems.

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Social Capital
The literature asserts that social capital represents a valuable source encouraging relationships
among agents that are stable and productive over time (Granovetter, 1985; Coleman, 1988;
Burt, 1992). Bourdieu (1986: 248) defines social capital as, “the aggregate of the actual or
potential resources which are linked to possession of a durable network of more or less
institutionalized relationships of mutual acquaintance and recognition. Bourdieu (1986) used
it at an individual level to explain societal phenomena like e.g. reproduction of inequalities,
Coleman (1988) applied it to the study of norms and social action, and Putnam (1995) applied
it at the social phenomenon level of civic engagement in a community’s prosperity and
emphasizes community membership, engagement in informal gathering and social trust in
shaping the social capital.
Dimensions of social capital
In literature, we witness three dimensions of social capital: the structural, the cognitive, and
the relational (Nahapiet and Ghoshal, 1998; Soetanto and van Geenhuizen 2015). The basic
premise of social capital theory proposes that these dimensions provide specific resources to
the ecosystem that benefit the members by strengthening their core competencies (Soetanto
and van Geenhuizen 2015; Foguesatto, et al., 2021; Thomas and Autio, 2013). The structural
dimension refers to the general pattern of connections between a person’s networks at a given
time. It includes traits such as network ties between individuals and organizations. The
relational dimension is all about the character of interpersonal relationships formed via
prolonged interaction. Relational aspects are exhibited through relationship-related trust and
norms. The cognitive dimension refers to communities’ shared systems of meaning. Language,
common codes, and shared anecdotes are essential aspects of the cognitive dimension.
Individuals gain a sense of belonging to a group as a result of shared meanings, which supports
the development of standardised business codes and vocabulary. The social capital theory is
based on Burt’s (1992) structural holes approach and Granovetter’s (1985) strong and weak
ties approach. It basically proposes that social capital is generated by network ties that provide
access to resources, and in turn, these resources create a strong ecosystem that benefits all of
its members (Nahapiet and Ghoshal, 1998; Spigel, 2017; Thomas and Autio, 2013). When it
comes to cosmetics, the connections among MSMEs' members help foster knowledge
generation, idea exchange, leading to innovation, sustainable growth, and competitiveness.
This study suggests that all these factors play a role in the innovation potential of cosmetics
entrepreneurs, both on their own and together.
Social Capital and Innovation
For this research, we take innovation as the development of something new using existing
resources (Rosenberg, 1976). Numerous research streams examine innovation as a social
process shaped by the interaction of scientific discoveries, institutional variables, and
socioeconomic mechanisms (Rosenberg, 1976). The sociology of technological change relied
heavily on Kuhn's statements that the enterprise of science and technology has been dominated
by socially embedded research paradigms, whereas technological evolution is a socially rooted
process for the social construction of technology perspective (Mackenzie and Wajcman, 1985).
According to the Social Shaping of Innovation approach, social, institutional, economic, and
cultural factors influence the direction and rate of innovation, the form of technology (artefacts
and practices), and the effects of technological development on different groups in society
(Williams and David, 1996). This literary discourse helps us comprehend the relationship
between various technical (R&D, knowledge sharing, and technological capability generation)
and social capital in cosmetics MSMEs.

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As the embeddedness approach demonstrates that knowledge resides in several (material and
human) sources, its acquisition needs sharing and exchange within networking members of an
ecosystem (Granovetter, 1985). Similarly, the discursive framework that links social capital
and innovation argues that firms do not innovate in isolation and local actors share informal
interdependencies and problem-solving strategies (Dakhli & De Clercq, 2004). Recent
management discussions have begun to emphasise the ecosystem model in which knowledge
and related resource sharing happens not only by the number of networking with other actors
but also by their nature and level of mutual interdependence (Thomas and Autio 2013).
Furthermore, an ecosystem is in dynamic state wherein living organisms and their relationships
co-evolve, and results in the inclusion of actors into its social structures, cultural values, and
networks of ties. Therefore, we may claim that cosmetic MSMEs’ innovation capabilities are
substantially impacted by their socially imprinted norms, values, and beliefs (Granovetter,
1985). However, there is mutual awareness among actors that demonstrates behaviour
standards, collaboration goals resulting in shared values, and an external collective identity
(Thomas and Autio, 2013).
In recent decades the growing focus on social capital has empowered researchers to study
socio-cultural knowledge origins and their role in innovation (Dakhli & De Clercq, 2004).
Social capital scholarship studies both the network and the assets that can be mobilized through
it in an ecosystem (Bourdieu, 1986; Burt, 1992). Corporate innovation research often discusses
how market ties affect performance (Westlund & Bolton, 2003). However, the association
between an entrepreneur's personal networking and corporate innovation success is
inadequately investigated.
III. METHODOLOGY
This study uses qualitative methodology to investigate entrepreneurs' ecosystem. The focus is
on the complexity of the social world and how cosmetic MSMEs develop their practices within
their larger socio-cultural contexts, as well as how the emerging entrepreneurial ecosystem
affects their ability to innovate using social capital (resources). To offer richer, more complex
perspectives on innovation and social capital, the six chosen cases were examined using an
ethnographic methodology. Ethnography is helpful for evaluating societal concerns, where the
researcher focuses on “other people's interpretations of what they and their compatriots are up
to” (Geertz, 1973:9). This research concentrates more on the entrepreneurs’ experiences of
knowledge production, resource development for R&D, and innovation management with the
help of accessible social capital than it does on the innovation process itself. Therefore,
individual cases of innovation are not discussed in detail.
Unit of analyses
The research was conducted in Mumbai’s Cosmetic and Herbal Cosmetic Industrial cluster.
The six MSMEs were selected as cases to get a distinctive setting to examine the phenomenon
under investigation. MSMEs are businesses regulated and governed by the MSME Act of 2006.
The business of natural cosmetics (Ayurveda/herbal) in India is witnessing the fastest growth
at the rate of 15-20% per year, which is much higher than India’s overall cosmetics business
which has a growth rate of 7-8% and 3.00% (CAGR 2024-2028).
(https://www.statista.com/statistics; Datta and Paramesh, 2010). Since 2020, owing to the
government’s ‘voice for local’ initiative, the beauty and cosmetics market in India saw an
increase in indigenous companies with increasing demand for natural and organic products
(The Hindu, 2020).

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Table 1 presents an overview of the six selected cases, and Table 2 describes the socio-cultural
features of cosmetics MSME Entrepreneurs, which helps understand their relationships and
culture. An in-depth evaluation of entrepreneurs’ socio-cultural backgrounds helps understand
the influence of these parameters in social capital leading to the innovation process.
Table 1: Overview of selected cases
Table 2: Socio-cultural aspects related to the Cosmetics MSME Entrepreneurs
Sampling
The selected sampling method was purposive or judgmental sampling. This is based on the
typicality of the cases to be included in the sample. The case study facilitates a holistic
understanding of cultural systems of action, or sets of interrelated behaviours by social actors
(Yin, 2013). Sample cases must be taken for theoretical reasons, i.e., to expect comparable
(literal replication) or contrasting (theoretical replication) results or to eliminate alternative
explanations. Accordingly, multiple cases are picked following a conversation with
government personnel (MSME-Development Institute office, Mumbai) engaged in cosmetic
cluster development to satisfy objectives. Cases that indicate product/process/marketing
innovation potential are considered.
Participant observation and in-depth interviews serve as the key techniques of data collection.
Entrepreneurs, their families, suppliers, workers, and consumers were interviewed. Informal
discussions yielded positive results for discussing entrepreneur social capital acquisition and
its application in the innovation process, forming their ecosystem. Table 3 contains profiles of
cosmetic MSMEs and interviewees. Recognizing the relevance of cosmetic MSMEs’
Cases Establis
hment
year
Units Number of
Employees
Product Profile Dominant buyers Main Markets
KC 1992 1 15 Herbal,Ayurvedic
cosmetics
Beauty parlors, Distributors,
Malls, Hotel
National,
International
SO 1999 2 20 Cosmetics Beauty parlors, spas, resorts National,
JV 2009 1 35 Toiletries/Herbal
Cosmetics
Distributors, Malls, parlors,
spas, resorts
National,
International
BSH 1985 1 10 Ayurvedic soaps Seminars, beauty parlors,
shops, distributors
National,
FL 1957 4 400 Herbal cosmetics Shops, hotels, malls, big
cosmetics companies
National,
International
SN 2007 1 10 Herbal, marine spa
products
Distributors, Retail
showrooms
National,
International
Source: Interview
Entrepreneur Sex Age
(Years)
Education Ethnic
background
Family
background
Family
type
KC F 52 B. Com Jain-kachhi Service Joint
SO M 52 SSC Jain Business Joint
JV M 45 Chemical Eng. Jain Service Joint
BSH M 45 MA Jath Service Nuclear
FL M 78 Engineer Jain Business Joint
SN M 50 MSc. (Organic chemistry) Marathi Service Nuclear
Source: Interview

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entrepreneurial ecosystem, the unit of analysis was enlarged to incorporate social interactions
between entrepreneurs and groups (incubators, research labs, government training institutes,
raw material suppliers, distributors, customers, and family members).
Table 3: Profile of cosmetic MSMEs and interviewees
Firms Interviewees
Firm KC - A manufacturer and exporter of
Herbal, and Ayurvedic cosmetics. Established in
1992.
KC1 (CEO), KC2 (wife, head marketing and R&D),
KC3 (chief technical officer), KC4 (supplier), KC5
(consumer), KC6 (area distributor), KC7 (local research
lab)
Firm SO - A family firm set up in 1985, since
then engaged in Ayurvedic Soap manufacturing.
SO1 (CEO) SO2 (brother, Head of R&D), SO3
(customer beauty parlor)
Firm JV - Manufacturer, exporter, and retailer of
Ayurvedic and Herbal Cosmetics, begun
operations in 1996.
JV1 (Father of CEO), JV2 (CEO), JV3 (employee), JV4
(supplier), JV 5 (Head of R&D and Marketing)
Firm BSH - Set up in 1999, a manufacturer and
exporter of synthetic cosmetics
BSH1 (head of firm), BSH2 (cousin of the head and
technical advisor of firm), BSH 3 (employee), BSH4
(consumer)
Firm FL - Established in 1974, this firm is
engaged in manufacturing synthetic as well as
Ayurvedic cosmetics.
FL1 (head), FL2 (employee), FL3 (raw material
supplier), FL4 (university incubator), FL5 and FL6
(customer-salon owner), FL7 (consumer)
Firm SN- A manufacturer since 2007 later on
also become consultant in the area of
cosmeceuticals, nutraceuticals and cosmetics.
SN1 (CEO), SN2 (employee of firm), SN3 (wife of
CEO), SN4 (Guru or teacher ayurvedacharya), SN5
(consumer), SN6 (raw material supplier), SN7
(distributor), SN8 (consumer)
Other Interviews (OT) OI1 (Government officials), OI2 (local research lab),
OI3 (Incubators), OI4 (Food and Drug officer), OI5
(resort who is consumer), OI6 (coordinator)
Total Interviews 41
Source: Interviews by author
Analysis of data
The research uses thematic content analysis. Transcribed interviews, observations, and
informal discussion notes were analyzed using Braun and Clarke (2006)'s thematic analysis.
Data is coded to avoid the unique difficulty of finding trends in various case studies. A pre-
existing code system from the interview guide was used to code data and generate themes.
Speech acts captured verbatim are also used to record essential notions. Summary tables that
the literature interprets were created by continuously analysing and grouping codes, concepts,
topics, and sub-themes by social capital dimensions. Each case generates inter-site matrices
with respondent attributes and cross-case analysis data. Additionally, several examples and the
triangulation method are used to ensure results validity and dependability (Yin, 2013; Mathison
1988). Primary (interview) data was complemented by secondary (document analysis,
government and company websites, non-participative observation) data.
IV. FINDINGS
Cosmetics MSMEs Ecosystem and Dimensions of social capital
Thousands of cosmetics MSMEs in Mumbai are engaged in different capacities with the
peculiarity of having a strong social base. The cosmetics manufacturing MSMEs (cosmetics
MSMEs) is a successful industrial sector in Mumbai that rely on the traditional knowledge of
Ayurveda/herbal. Therefore, the knowledge sources make these MSMEs distinct from
conventional cosmetics manufacturers (Baghel, et al., 2014). The ecosystem of cosmetic

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MSMEs displays distinct characteristics due to Mumbai city’s uniqueness. Mumbai maintains
a unique identity as a mecca of fashion, the financial hub of India, a home for countless
immigrants, and a confluence of various cultural influences. The local MSMEs are involved in
a variety of complementary yet distinct activities that link them horizontally and vertically,
primarily building caste- and region-based groups and societies. Research establishes that local
enterprises can improve product quality through knowledge acquisition, learning by doing, and
state- and regional-funded research and development (R&D) initiatives (Ouechtati et al., 2022).
Large intra-cluster trade, local raw material supplier linkages, long-term local partnerships,
skilled workforce availability, rapid assistance of advanced technology, and national, regional,
and international linkages are ecosystem-level characteristics that facilitate entrepreneurs’
access to social capital. Social capital is a complex phenomenon, hence cannot understand
through a single factor. In fact, it requires many different dimensions to consider the dynamic
existence of the social context in the process of innovation. Therefore, by taking an exhaustive
view of social capital this study focuses on three dimensions of social capital. The following
sections explore each dimension of social capital in detail.
The structural dimension
The individual’s location within the network becomes more significant than the individual as
resources are enmeshed in social relations (Dakhli and De Clercq, 2004). The structural
dimension of social capital helps us understand an entrepreneur's role in ecosystem members'
networking connections and resources' embeddedness in social networks (Nahapiet & Ghoshal,
1998). Social capital growth depends on who you contact (Burt 1992). Most important to
entrepreneurs' social capital are their social networks, which include strong kinship ties based
on decades of reciprocal interactions, a close group of professional networks, and hierarchical
employee-employer relationships (which may or may not be exploitative). Family, friends, and
ethnic relations make up entrepreneurs' personal networks. They also work closely with
professional networks of raw material suppliers, distributors, and direct customers (beauty
parlour, spa, and resort owners). Research consultancies, government, and public labs meet
entrepreneurs occasionally. Entrepreneurs maintain formal contacts with government
regulatory organizations, research institutes, and trade groups like the Indian Women's
Industrial Network, Indian Home & Personal Care Industry Association, and Association of
Cosmetics and Toiletries Manufacturers. Entrepreneurs participate and improve themselves in
this dynamic ecosystem. Many entrepreneurs said that in current world of teamwork and
synergy, no one can succeed alone.
Diverse social networks affect entrepreneurial performance differently. As entrepreneurs use
structural embeddedness to get information and resources, it spurs innovation. Just as not all
networks contribute equally, not all networks are accessed equally for the same purpose. As
we will see in the coming sections, improving the structural dimension of social capital always
helps ecosystem members coordinate and collaborate.
Personal networks (kinship, friends, and ethnic ties)
In India, traditionally, businesses continue to be family and community-oriented. Although
they are influenced by modern lifestyles, their roots often embody community norms and
values. The same goes with cosmetics consumption, which is although influenced by modern
discourses, is very well embedded in the socio-cultural context (Jones, 2010). Therefore,
fostering value-added products necessitates considering people’s socio-cultural traits, behavior
patterns, and emotions. As BSH2 states that “businessperson’s personal networks increase their
likelihood of decoding customer aesthetic beliefs and developing culturally relevant products.”
Informal social gatherings like marriages, birthday parties, and festivals usually act as a social

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space where an ecosystem gets enriched with discussions on beauty, wellness, and lifestyle
forming common ground for strengthened stable and value-added relationships. As narrated by
KC1,
“We commonly encounter relatives and friends at parties who grumble about
existing beauty products or discuss various beauty issues. During such discussions,
our group frequently discovers synergies, such as if I don’t have a specific raw
material, I’ll inquire and find out that my friend has it, and I will purchase it from
him.”
In the cosmetic MSMEs ecosystem, the presence of coordinating entities fosters value creation
through entrepreneurs’ personal ties generating knowledge and resources that these
entrepreneurs apply to enrich their technical ability.
Cosmetics MSMEs often include friends and family in beta testing new products before their
public distribution. It provides multiple advantages for companies, including avoiding
significant losses from failed products and providing ample time and testing before the pre-
launch phase to enhance the final product. Furthermore, involving close connections to try out
beauty goods before they are officially released offers the innovator dependable feedback. As
JV2 highlights, “After creating a new product, I first give it to my family. As per their review
adjustments are done in the final product”.
The significance of social capital derived through personal networks appears to be more
pronounced for entrepreneurs who lack the human capital accumulated via education and
professional experience. As in the case of ‘SO1’ who lacks both a degree in cosmetic science
and professional expertise. Nonetheless, this lack in human capital appears to be compensated
for by the entrepreneur’s social capital derived through personal ties. As he states
“My father used to own a small soap manufacturing unit. During my school years,
while assisting in his business, I met his associates and other members of the soap-
making community. When I acquired full responsibility for this firm following his
passing as the eldest son, I benefited from already existing networks. I still have
many friends and community members for support.”
Personal network-based collaboration that is well-organized is the foundation of many
entrepreneurial endeavours. This confirms what Burt (1992, p. 9) asserts regarding friends,
colleagues, and personal interactions as chances for actors to utilise their intellectual, financial,
and human capital.
Professional networks (govt and private groups, suppliers, and customers)
The ecosystem also includes professional networks that serve as providers of knowledge,
information, and resources (material, and non-material). As KC3 points out, “In business,
knowledge alone is not sufficient. Who you know has a stronger influence on your growth.”
Their professional networks are comprised of reliable and effective communication channels
that have evolved across organizational boundaries over time. In Ayurveda cosmetics, identical
substances are used for different solutions; as a result, entrepreneurs are frequently interested
in the properties of a certain ingredient. SN1 (entrepreneur) explained that
“Multiple ingredients, such as plant extracts, are used to treat a variety of skin
conditions, but we know very little about them. During such time we consult raw

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material suppliers or lab technicians. This individual (pointing to raw material
supplier SN6) informed me that cosmetic compounds comprising plant stem cells
are currently fashionable.”
In response to this, SN6 adds, “Entrepreneurs frequently convey to us their demand for certain
ingredients as well as specific solutions or remedies for specific problems, and
sometimes during our discussions we come across a whole new idea.” The benefits of raw
material suppliers for enterprises are not only the provision of raw materials but also the
technical expertise required to extract the most value from a substance (Biswas, 2007).
For cosmetics MSMEs, this aligns with what Tidd and Bessant (2009) say “networking
presents a powerful solution to the resource problem – no longer is it necessary to have all the
resources for innovation under one roof provided you know where to obtain them and how to
link up with them” (p. 149).
In professional networking, beauty parlours are one of the much sought-after networks by these
entrepreneurs. With the development of web marketing tools, cosmetics end-users can be
reached directly. However, it’s hard to understand how different people see beauty. Hence,
beauty parlours have become the best medium to figure out what people want from beauty
products and services. Beauticians in beauty parlours serve as consultants for people’s beauty
issues (Baghel, et al., 2014). Consequently, this face-to-face communication ecosystem
strengthens entrepreneurs’ conceptual and social understanding of beauty often resulting in the
creation of innovative beauty products. As the ‘SN’ expresses, “during one of my conversations
with a salon owner, I became aware of the emerging health risks among beauty product users
due to the use of unhygienic cosmetics. Then I realised the need of having one time use tiny
containers for products to prevent waste and preserve hygiene, which seems difficult to
attain with large bottles.” The beauty parlors provide a relevant field environment of beauty
that serves as a catalyst for the innovation process. He further elaborates,
“After consulting the bottle supplier, I commence my hunt for a bottle that is
financially feasible for a small parlor without sacrificing quality. As a result, I am
launching single-use containers for facial products.”
By offering user accounts, parlours help entrepreneurs navigate information-deficient MSMEs
environments. Moreover, a trust-based system between beauty salons and cosmetic MSMEs is
stable and shared among its members. Consequently, this relational dimension also exists and
is strongly interdependent on the structural dimension.
The relational dimension
The norm and trust that determine the strength of relationships (Coleman, 1988) and promote
coordination and collaboration between actors for mutual gain are at the heart of this dimension
(Putnam, 1995:67). Entrepreneurs’ social network integration strengthens their participation
and acceptance of a normative professional environment. This normative structure is
contributory to the establishment of trust, leading to communication and cooperation between
different players in cosmetic MSMEs’ ecosystem. The relational dimension is got cemented
through entrepreneurs’ family environment and their values system (Shi, et al., 2015). The
structural position of entrepreneurs has created strong ties between them and their family,
friends, and community people that allow them to use community resources. For example, JV,
the entrepreneur, expresses

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“We benefit from our close networks of community people. I trust them, which is
why I use their knowledge and information; our relationship is guided by mutual
understanding”.
Specifically, it has resulted in norms and behavioural patterns more suitable for cosmetics
business development. SN1 described these tacit underpinnings, “the family plays a crucial
role in terms of the socialization and familiarization of entrepreneurs with entrepreneurial
values related to the Ayurveda/herbal cosmetics manufacturing”.
To manufacture cosmetics, MSMEs usually employ tacit knowledge of Ayurveda/herbal, the
embodied form resided in family traditions (Agrawal, 1995). Therefore, embeddedness in
social networks and a normative understanding favourable to Ayurveda cosmetics production
are shaping cosmetics manufacturing practices. Through a familial socialisation process,
entrepreneurs strive to internalise and normalise the circumstances that foster their businesses.
As FL1 states, “I encourage my children to get an education in chemical or organic chemistry
which will benefit our business. Then reading Sanskrit texts are regular habit inculcated in
them. This I learn from my father”. Here we see the habitus being shaped by every day practices
without dictating what is appropriate for the discourse. Rather, social networking implicitly
inculcates the knowledge relevant as per the social context. Precisely, Putnam (1995) sees it as
a generation of taste owing to community participation. Here, the generation of social capital
is contingent on trust originating from common descent and hence common socialization. On
asking about whether his way of doing business bears the imprints of his family culture, the
SO1 responded,
“Well, yes. We grew up seeing our father engaged in the Ayurveda business,
discussing it. In our family, we are always engaged in discussions at the dinner
table that revolve around Ayurveda and herbal soaps, people’s current perceptions
of cosmetics and toiletries, so it is naturally ingrained in our system.”
Moreover, other members of the ecosystem who adopts the norms, and develop similar trust in
entrepreneurs are professional networks (suppliers, distributors, and customers). Here, trust is
the result of absolute faith in each other’s competence and commitment, which governs their
relationships. The beauty salons both as direct customers and mediators between end-users and
producers are an integral part of the professional networks of entrepreneurs whose networking
is founded on a profound trust in one another’s abilities. The entrepreneur F1 states, “Beauty
parlours are a place for introducing your brand to end users and fostering trustworthy
relationships with them. Due to their expert position in the beauty market, beauty salons
become a valuable source to contact customers”. When beauty salons trust cosmetics MSMEs
as credible distributors, they offer their help. Thus, mutual faith in each other’s competency is
crucial for networking and maintaining ties among cosmetics MSMEs’ ecosystem participants.
Entrepreneurs exhibit their allegiance and trust in the community, as Putnam (1995) suggests.
There is a strong bond of loyalty, solidarity, and mutual respect among the members. “We
come from different areas of expertise, but we are linked and exchange knowledge with those
we have confidence in.” An examination of the social capital’s relational aspect indicates that
members must respect the obligations of the ecosystem to build trust in their relationships.
The cognitive dimension
Cosmetic entrepreneurs are emphasizing cognitive social capital through shared interactions
and mutual aims. A common framework for interpretation is established by language, codes,
storytelling, and entrepreneurial culture as described by Nahapiet and Ghoshal (1998) and

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Inkpen and Tsang (2005). The members in this ecosystem share a common understanding of
Ayurveda knowledge, cosmetic preparations, marketing, and MSME issues, which frequently
leads to “shared representations, interpretations, and systems of meaning among parties”
(Nahapiet and Ghoshal, 1998). The cognitive framework of MSMEs is rooted in India’s
sociocultural milieu of natural beauty. Modern and historical cosmetic industry technical
advances have inspired their Ayurveda cosmetic manufacturing concepts. These entrepreneurs
have created a shared culture in which they create codes, narratives, and a language and use
the same entrepreneurial support mechanisms to achieve their aims. They subtly share beauty
business conventions, values, principles, and policies with each other's trusted networks.
‘meaningful communication’ based on a shared ‘interpretive framework’ mobilizes resources.
Communicative language, codes, and narratives help entrepreneurs obtain commercial
resources for natural cosmetics (Bourdieu, 1986). “The business language is natural to me and
an integral part of my everyday life, as we routinely have comparable conversations at home,”
says the BSH2 technical advisor and entrepreneur’s cousin. The common environment of
beauty in beauty parlors and spas allows ecosystem members to communicate and generate
new beauty product ideas. The parlour owner, an Ayurveda ingredient supplier, my guru, and
a local distributor who handles marketing make up our team of five. Knowing Ayurveda's
beauty benefits makes us trust each other.” Entrepreneurs share beliefs and cultural ethics for
business and resource generation. Their education and cosmetics industry experience have
given them insight, decision-making abilities, and values. All of this fosters an environment in
which entrepreneurs collaborate to benefit from one another’s expertise.
Establishing partnership firms with tight-knit networks is a common phenomenon. N1 says
“my first commercial endeavour was a collaboration with a college classmate who was also a
chemical engineer.” Eklinder-Frick et al. (2014) and Wang et al. (2017) also address how
regional business alliances boost innovation and entrepreneurship. Associational activity, a
crucial component of social capital (Wang et al., 2017), typically leads cosmetic MSMEs to
recognize opportunities and innovate. Entrepreneurs benefit from joining professional bodies,
organizations, conferences, workshops, and trade fairs. Creating “shared systems of meanings”
during professional meetings also involves cognition (Nahapiet & Ghoshal, 1998). In these
meetings, meaningful conversation and discussion to optimize entrepreneurial processes are
encouraged. As states entrepreneur from KC1.
“You are more likely to meet like-minded people in your line of work. You
understand the rules and regulations, as well as what is and is not sellable in the
beauty industry.”
Entrepreneurs engage in participatory activities that lead to the development of a cosmetics
habitus through their collective comprehension of norms, values, and the rules of the social and
cultural context. Nevertheless, the habitus created through engagement in social activities does
not benefit all individuals equally. Entrepreneurs' different socialization processes lead to
varying habitus formation, influencing their views on business operations and impacting their
success in public arenas. Entrepreneurs from non-business families are acknowledged to
possess less relational and cognitive social capital compared to entrepreneurs from family-
owned firms (Tidd and Bessant, 2009). Non-business family entrepreneurs may feel
disoriented during business events due to their lack of common norms and values in
socialization. For example, as SN1 indicates,
“I am a member of AISSCMAi
, but I rarely attend the meetings as there is a huge
lobby that works there, like caste and community lobby. Your personal relations

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are more important. In my earlier days, I couldn't grasp the code phrases people
use thus I felt lost. Now I have enough vocabulary.”
Concisely, quotes from the interviews reinforce that entrepreneurs’ cognitive social capital is
heavily influenced by their structural and relational dimension of social capital.
The cognitive aspect is seen to be developing inside the informal organizational structure of
cosmetics MSMEs. Entrepreneur KC1 says, “I communicate with my employee each and every
detail of the business, we work as a family where everyone shares their view on cosmetics
manufacturing”. Informal communication between entrepreneurs and employees increases
trust and cooperation by involving individual interpretation. JV3, an employee says, “We
frequently have informal get-togethers with our boss after work to discuss business-related
matters, such as the creation of new products and their enhancements.” As a sole proprietor, an
MSMEs entrepreneur is related to every department. Personal task management affects
meaningful employee interactions and a culture that promotes cognitive social capital growth.
Entrepreneurs learn and share by incorporating employee, supplier, consumer, and personal
network input into decision-making (Westlund, and Bolton, 2003).
Social capital and innovation process
Innovation is a process that generates value by creating new entities or integrating existing and
new resources. Firms must mobilise resources and acquire new skills and knowledge in order
to innovate. However, resource management is an expensive process for small firms
(Rosenberg, 1982). The ecosystem is conducive to resource mobilisation and usage, enabling
entrepreneurs to create value by granting them access to intellectual, financial, and cultural
resources (Bourdieu, 1986). Specific to the innovation potential of the firms, literature has
extensively discussed the relevance of social capital in the development of intellectual capital
and technological advancement leading to innovation (Eklinder-Frick et al., 2014; Wang et al.,
2017; Dakhli and de Clercq, 2004). However, this research suggests that although each
individual dimension contributes, all three dimensions of social capital are interrelated and
interdependent, hence operating synergistically to improve the innovation performance of these
MSMEs. This supports the research, which states that three dimensions of social capital are not
mutually exclusive but interconnected (Ouechtati, et al., 2022)
Similarly, different dimensions of social capital together influence the innovation process
owing to these dimensions capable of converting into each other (Wang, et al., 2017). The
structural dimension influences the acquisition and utilisation of knowledge by providing
entrepreneurs with resourceful networks. It has been noted that entrepreneurs cultivate social
relationships with whom they maintain frequent interaction and produce new knowledge
pertinent to the development of their business. The relational component provides information
about the quality and content of social networks that support innovation in cosmetics MSMEs.
The ‘collective mind’ of social networks engaged in innovation is expressed in the cognitive
components that act as a base for idea generation, deriving the know-how, technology, and
resources from multiple sources.
The language of cosmetics manufacturing has spawned ecosystem-specific codes and concepts,
as well as a structure in which enterprises share expertise, and financial and other resources.
The entrepreneur SN1 reveals the necessity of possessing high-quality, resource-rich networks.
“My previous job at a cosmetics firm taught me cosmetics manufacturing. My
experience has helped me discover new technologies and develop new things by

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combining what I've learned from prior supervisors with input from my family,
consumers, and raw material suppliers. My latest Herbceuticals breakthroughs
combine cosmetic technology and herbal understanding. This is a niche product
commonly used in cities, but I developed it with native herbs and sold it to native
requirements, such as Himalayan apple fruit for Himalayan resorts. I thought of
this at a Himalayan trade show.”
The embodiment of common notions of beauty is woven into the social fabric of society.
Therefore, for entrepreneurs professional and personal gatherings frequently serve as fertile
ground for the development of novel ideas and concepts. Thus, we observe that innovation
results from the combination of tangible and intangible capital, as well as unpredictable and
extended interactions between entrepreneurs and their networks.
The relevant knowledge used in the innovation process is Ayurveda/herbal knowledge that
exists in the family traditions of entrepreneurs, mostly in tacit form. Knowledge is not
individually located but exists in the collectivity of relationships. The transfer of tacit
knowledge requires extensive face-to-face interactions and the development of social relations
that fundamentally influence its transfer (Agrawal, 1995). JV2 states “I learned ayurvedic
formulations from my father, who learned them from his local teacher. Ayurvedic expertise
runs in our family. Therefore, we can afford to conduct business.” Entrepreneurs’ personal and
professional ties are characterised by a wealth of information, allowing them to amass a high
order of social capital. For entrepreneurs, their relationships are not just resources but part of
their life. These social networks are founded on gratitude, reciprocity, respect, friendship, and
mutual knowledge and recognition among social actors. The entrepreneurs in most cases testify
to the sharing of expert knowledge and practices with family and close community friends.
Thus, a common occurrence is that trust-based relationships are cherished for sharing
technological knowledge and tools to satisfy the market demand.
Common language, codes, and norms related to cosmetics and beauty have resulted in the field
of beauty (Baghel, et al., 2014). Within this schema, entrepreneurs aptly exploit the current
symbolic value of Ayurveda/herbal cosmetics as a pure form for human wellbeing. Hence, we
witness the frequent use of the words like natural ingredients, the craze for natural cosmetics,
multipurpose beauty products, and healthy lifestyle-based products as inputs in their ideas by
these entrepreneurs. Here, common norms are acting as a base to form the relationships
between the firms. The expression of SO1, an entrepreneur explains how the development of
incremental innovation happens from already generated ideas of beauty and the circumstances
under which social capital is exploited, “our involvement in the family firm, which is already
involved in cosmetics manufacturing, instills the principles required to produce
Ayurveda/herbal cosmetics. Our ongoing relationships with suppliers, distributors, and
customers provide us access to market gaps and possible opportunities, which shape our
decisions regarding new product development. My almond-based soap, for instance, exploits
the popular adage that almonds provide us with strength. I applied this concept to contemporary
soap production and launched my almond-shaped soap to the market. The same natural
ingredients are used.”
Entrepreneurs decode values, norms, behavioural patterns, and perceptions with the help of
networks to embody acceptable symbolic meanings in the beauty field. The goal is to provide
goods that adhered to field-specific standards and could meet user demand. This is in
accordance with a previous study, which shows that entrepreneurs may take honest criticism
and genuine feedback on their products because of their ties (Wang et al., 2017; Jack, 2005).
A significant argument that the study posits is that complex communication networks accord
continuity to knowledge development. Therefore, innovation can be established as a process

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perform through social influences and interactions (De Clercq and Voronov, 2009). It is not
that these actors contribute on their own; rather, the entrepreneur has to maintain and facilitate
the communication flow to reap maximum benefits.
V. DISCUSSION AND CONCLUSION
This study demonstrates how different dimensions of social capital contribute subtly to the
innovation process of cosmetic MSMEs. It illustrates that the transformation of one dimension
of social capital into another within the ecosystem enriches the innovation process. The
possession and transmission of Ayurveda/herbal knowledge and resources within personal and
professional networks form a complex web of interdependent ties (structural dimension). This
structural aspect fosters partnerships through common norms and trust (relational dimension).
In addition, an entrepreneur's position in the network is strengthened by common goals
(cognitive dimension), which aids the search for and mobilisation of ideas, partners, and
resources for innovation. Thus, the significance of this research lies in its attempts to explain
how networks, trust, and norms all contribute to MSMEs’ innovation success in a holistic
manner.
The results contribute to the social capital and innovation management literature. Extant
research on social capital for innovation mostly focuses on firms’ access to tangible external
resources, such as distribution channels, and external firms (Eklinder-Frick et al., 2014;
Thomas and Autio 2013). In contrast, this study highlights the significance of social capital in
gaining access to both tangible and intangible resources for innovation. Strong evidence exists
for MSMEs’ local market affiliation and industry norms that progressively promote the
resource-rich feature of collaborative work culture (Ouechtati et al., 2022; Reidolf, 2016; Jack,
2005).
Much of the discussion surrounding network configuration in the literature has centred on
Granovetter’s (1977) concept of weak vs strong ties. Families, friends, and communities can
be classed as strong ties in terms of entrepreneurs’ personal networks because they exhibit
multiple interactions among themselves (Coleman, 1988). In MSMEs, patenting is still not
frequently accessed to protect novelty; thus, knowledge is kept secret through social networks
to gain a competitive advantage. Most cosmetics MSMEs are family enterprises where
innovation is kept secret within the family. Even though there is informal communication
happens between entrepreneurs and diverse networks, it is witnessed that Ayurveda knowledge
necessary to make innovative cosmetics is transferred from one generation to another in tacit
form. This aspect again makes strong ties an important form of social capital, contributing to
innovation processes in MSMEs.
However, the question that needs to be raised is whether the professional ties of entrepreneurs
should be classified as either strong or weak ties. As stated previously, there were close and
frequent connections between entrepreneurs and their suppliers, distributors, and beauty salons
(as a consumer). There are also cases in which professional networks include friends and
community members. Given the diversity of connections and, in particular, the overlap between
personal and professional relationships, it is disputed whether the distinction between strong
and weak links is always required. This study, hence argues that not all business networks fit
neatly into the divide between strong and weak ties.
In assessing the importance of social capital in innovation, network quality and content are
more crucial than network density. Regarding cosmetics MSMEs, the majority of entrepreneurs

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are connected by a small number of ties, where they benefit from the quality of their networks.
Thus, the findings contradict the existing literature on entrepreneurial networks, which suggests
that a greater number of links leads to a more extensive network that favours the organisation
(Dubini & Aldrich, 1991).
According to earlier research, start-ups may benefit from strong ties in the beginning but later
on, in the firm’s life cycle, they may become overly dependent on their network of strong links,
which makes their networks detrimental to the performance of the firm (Davidsson, and Honig,
2003). Entrepreneurs are content with their networks and fail to extend their reach, which
hinders their ability to find further networks for resources (Jack, 2005). Contrary to
this, cosmetic MSMEs typically engage with both strong and weak ties, albeit for different
reasons. Networking with strong ties often seeks to gather innovative information (in this case,
Ayurveda knowledge), whereas weak ties are contacted to collect leftover resources. Therefore,
early networking with strong ties does not hurt these MSMEs, as they know how to use it.
Moreover, it is witnessed that firms, who better able to balance both strong and weak ties are
benefitted from both ties.
ATN studies often face criticism for emphasizing networks with experts and research labs and
technical areas, and it often neglects the wider institutional context (Williams, & Edge, 1996)
in which innovators are situated. This calls for broadening the ecosystem-based analysis to the
network theory in order to extend its reach beyond the laboratory and adjust it toward the
complexities inherent in social networking.
The findings indicate that social capital exists in social interactions, but its development
depends on actual practices of trustful relationships, codes, languages, and norms. Exploring
three dimensions of social capital helps to understand the complexities with which social
capital becomes productive or detrimental to the process of innovation. In this way, this
research suggests that researchers, as well as policymakers, need to remain vigilant for different
dimensions of social capital to realize the subtleties inherent in social capital. This will also
include notification of the community ecosystem along with individual relations while
designing interventions. While networks show resources, the habitus of the entrepreneurial
ecosystem helps us to understand the usability of those resources and thereby facilitate their
full realization for innovation. This study highlights the need for studying the ecosystem-based
rich description of business-related familial and ethnic linkages that constitute a tightly knit
community-based trade enclave, embodying traditional skills, knowledge, and resources.
This research thus proposes that, in addition to technological indicators, ecosystem-based
studies will exert a considerable impact on our holistic understanding of the innovation process.
Specifically, in the future, for resource-constrained MSMEs, robust empirical evidence-based
research is needed to explore ecosystems that significantly influence the entrepreneurial
process of social capital generation for innovation.
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i
All India Small Scale Cosmetic Manufacturers Association