Social and External Capitals and Growth Strategies of Firms: Do Investment Opportunity Mediate in the Relationship?

Abstract

This study assessed the mediating effect in the relationship between social and external capitals and growth strategies of listed non-finance firms in Nigeria.  A total of seventy-five (75) firms were studied during the period 2012-2019.Secondary data of social and external capitals, growth strategies, and investment opportunities were obtained from the annual reports and accounts of the firms. Data obtained were analyzed using both the descriptive (mean, median, minimum and maximum values, standard deviation, kurtosis and skewedness); pre-estimation results (correlation matrix, fixed and random effects, and structural equation modeling); and post-estimation results (variance inflation factor, and Hausman specification test). The random effect result showed that while firms' social and external capital positively relate with growth strategies, the structural equation modeling result revealed that investment opportunity mediates in the relationship between social and external capitals and growth strategies of the studied listed non-finance firms in Nigeria.  Given the findings of the study, it was recommended among others that firms should increase their level of investments so as to further enhance their growth strategies and social and external capitals; investments should be targeted at the physical assets of the firm.  More so, management of firms should increase the level of social capitals as it has been proven that social capital positively affects growth strategies of firms.