The Social Capital Capabilities of Halal Entrepreneurs: A Perspective of Innovative Entrepreneur Capabilities

Abstract

This academic article aims to explain and analyzing the leverages, components, and strategies implemented in building halal entrepreneurs' social capabilities and sustainability, as well as to propose a model of effective halal entrepreneurship that can be used as a guideline to enhance potentials of halal entrepreneurs in the rapidly-changing environments. Mindfulness of being an innovative entrepreneur, it is implemented around several factors: social partnership, innovation process strategy, human resource networking, new markets seized from networking, and benefits and shared investment organization of demand. The theoretical framework is the Social Capital theory. Social capitals are regarded as social structures or organizations to develop living-standard quality and lead political development, economy, and society. All these factors are dependent on social capabilities of entrepreneurs, which relied on (1) the building of network capabilities, (2) creating knowledge and shared visions, (3) learning process and adaptation, and (4) social movements of innovation capabilities. The outcomes of the study suggested halal entrepreneurs to employ internal social capital capabilities, stable social capital capabilities, and dynamic social capital capabilities in operations. The halal entrepreneurs must recognize their own distinctive features from non-halal enterprises in order to create diversity and strengths among the networking members and eventually develop the innovative and sustainable organizations.

1. Introduction

Halal tourism has gained a greater presence over the last decade as the number of prayer rooms and halal food have been increasing in several places such as airports, restaurants, and hotels. Fazal Bahardeen, the CEO of Halal Trip enterprise collaborating with MasterCard, investigated the tendency of Muslims’ traveling behaviors (Battour et al., 2019; Salaheldeen et al., 2019). It was revealed that in general Muslims were likely to travel once a year with their extended family, whereas the young Muslims generations, whose age ranged from 20 and 36 years old, tended to travel more frequently to the new and challenging destinations. Even though younger Muslim generations spent less traveling expenses comparing with their parents’ generations, the frequency of their traveling impacted the traveling expenses of Muslims as a whole (Adinugraha et al., 2021; Mastercard-Crescent Rating, 2020).

Halal businesses have been developing, yet related problems have not been resolved such as competing claims on natural resources, business gaps, and others. Through the development of halal entrepreneurships, business sectors have been affected in following up, controlling, and maintaining the processes. The movements of social enterprises are the representations of exciting engagements of business groups in many provinces to collaborate among themselves, which eventually could build a network and lead to the changes of policies (Hall & Williams, 2019; Sudarsono & Nugrohowati, 2020).

Network management is a necessary and effective approach to employ in solving business problems as they are complicated and resources are limited. Without the collaboration in networking, it is impossible to solve problems alone. The business groups must collaborate in order to achieve the shared goals (Rezaei et al., 2020; Ardito et al., 2019; Robert, Mumin, & Thomas, 2015). Therefore, business networking is popularly used in business organizations in building competing competencies of organizations. Under the harsh competing environments, networking management can help organizations evaluate the processing of internal and external systems all the time (Jafari-Sadeghi et al., 2020; Sanusi et al., 2020; Tjemkes et al., 2017; Walter et al., 2006).

Social capitals are driven by interactions and collaborations in pursuing social practices. The more business groups collaborate, the stronger the networking will be causing the values of learning, perceptions, and information exchanging which are advantageous for economic growth (Carmona- Lavado et al., 2010; Castellacci, 2015; Feldman et al., 2019). The social capitals do not directly provide benefits, yet they facilitate in accessing production factors or other resources throughout the social interactions or social infrastructure such as human capitals, physical capitals, natural resources, etc. (Agustina et al., 2020; Houghton, et al., 2009; Solheim et al., 2020). In other words, social capitals provide benefits in two ways, which are transaction cost and monitoring cost (Andrews, 2010; Ansari, Munir, & Gregg 2012; Davenport & Daellenbach, 2011).

The author, therefore, aims to study the social capital capabilities of halal entrepreneurs to develop a model to identify the significance, components, and strategies used in maintaining the social capitals for the sustainable development. The results of the study can be applied in developing networking management, competing competencies of business, and increasing potentials of halal entrepreneurships in determining networking management suitable within the changing environments of economic, social, political, and technological lenses, which affect the sustainable development of the organizations in the future.

2. Halal Entrepreneurs and Certification

Halal certification is a process to certify the standard quality of food or services regarding the Islamic obligations, quality structure, and quality value orientations, which are determined particular in nations, societies, governments, and consumers. The halal certification is significant in markets and collaboration in global economy. In addition, the relationship between the Islamic religion and halal quality reflects the standardized regulation and ethical processes of halal productivities (Ruzevicius, 2012; Bogan & Sarıısık, 2019).

Codex Alimentarius Commission (CAC), established by the World Health Organization (WHO) and Food and Agriculture Organization (FAO), emphasized the significance and opportunities of halal business and products. Halal was defined as the process of encompassing broad terms of organization; certification of the institutions testifying halal process, safety and standard of food and drink, quality standard of cosmetics, perfume, hygienic products, leather products, and other products to serve needs of consumers that are changing and complex. To work toward integrating and seeking collaboration and networking is needed. In order to build understanding of halal entrepreneurship, the author briefly summarized components and descriptions of detailed requirements of halal certification (The Halal Standard Institute of Thailand, 2008);

1. Entrepreneurial sites:

• Entrepreneurial sites requesting the halal certification must be clean following industrial and entrepreneurial controlled standards.

2. Materials/ingredients of products and retaining:

• Materials/ingredients of products must be allowed to be consumed without harm. The certification must be shown the halal qualification.

• The materials/ingredients used must be clean and safe from animal contamination; dogs, cats, etc.

• The materials/ingredients used in producing halal products must be stored away from non-halal products

3. Cleaning process and water:

• In the cleaning process, the water must be clean and flown through the substances of products in the last step. The water could not be reused in any other processes.

4. Cleaning process of productivity equipment:

• All equipment used in non-halal production must be cleaned following Islamic regulations before using it in halal production processes.

• Equipment applied in halal production processes must be stored without mixing with other equipment used in non-halal production processes.

5. Location of production process:

• Location for halal production must not be contaminated with non-halal substances, zones are separated or using different industries.

• Pets are forbidden in the location of producing processes, and bringing non-halal drinks are not allowed.

6. Personnel:

• Personnel associated with halal production must not be involved in any processes of other non-halal substances such as pork, alcohol, and touching dogs during leisure time.

7. Storing products and logistics:

• Halal products must be stored away from non-halal products even though the products are kept in packages.

• Halal-products logistics must be separated from non-halal products

8. Selling and distributing products:

• Selling and distributing products without packages or removing it must be made known to Halal Affairs, the Central Islamic Council of Thailand. The process of selling and distributing products must be supervised by Muslim personnel.

9. Service provision for halal restaurants:

• The serving location of halal food must not be associated with other non-halal products, alcohol drinks, and sexual activities.

• Gelatin and capsule made from non-halal substances are considered as non-halal products.

3. Social Capital Theory

Jacobs (1991) defined social capitals as the values of working in networks. The relationships of networks are like neighborhood, which cannot be replaced with other power tools. If the social capitals are dismissed, the values and benefits disappear too. Westlund and Larsson (2016) also mentioned that the social capitals composing factual and mutual resources derived from an individual and groups transform into a permanent networking, which are interrelated among the social members. The social capitals are regarded as the social structures or organizations to develop living quality and to lead political development, economy, and society (Cortinovis et al., 2017; Houghton et al., 2009; Crescenzi & Gagliardi, 2015).

To measure the social capitals is not simple as they are built when an individual engage in the group, and they are different from finance capitals. In other words, resources belong to the individual, but the social capitals are the shared benefits from social networking (Burt, 1992; Lengnick-Hall et al., 2011). The social capitals can be categorized into different degree of engagement, firstly the network is knitted because of trustworthiness of community members, being members of the network, and daily engagement between an individual and networking (Sutcliffe & Vogus, 2007; Gillespie & Cornish, 2010; Westlund & Larsson, 2016).

4. Dimension of Social Capital Capabilities

1) Structural dimension of social capital

Structural dimension of social capital can be defined into different levels of engagement intensity in business networking – regular or occasional. Structural administration of networking is divided into four levels: (1) Informal Cooperation – organizations collaboratively work without official memorandum documents; (2) Formal Agreement – organizations work collaboratively under the memorandum defining a scope of functions and responsibilities of each side; (3) Joint-Ventures – organizations invest to build a new organization or project resulting in new activities; and (4) Memorandum of Agreement – two or more organizations engage in building a new enterprise, which is established from networking management (Crescenzi et al., 2013; Inkpen & Tsang 2005; Han, 2006)

2) Cognitive dimension of social capital

To cultivate knowledge, means, and vision of members and networking is crucial. Without interactions among members, social activities and movements will be eventually reduced and obstructed. Therefore, maintaining the frequency of interactions in the network will provide opportunities to work and learn from each other (Adler & Kwon, 2002). For example, to provide opportunities in exchanging information and news, which influence the perceptions of members, to build inspiration in seeking the shared goals, and to create opportunities in learning different thoughts, feelings, beliefs, and behaviors, and to enable members the develop identity and characters of the group, as well as to present the uniqueness of the group to others (Cortinovis et al., 2017; Vogus & Sutcliffe, 2007; Lengnick-Hall et al., 2011).

3) Relational dimension of social capital

Relational dimension of social capital can be identified through the cooperative levels of organizational sections. The cooperation between the organizational level and low-level practitioners can be held by introducing other officials and studying projects of other organizations, making both formal and informal contacts to exchange the information and joining in the organizational collaboration projects as a committee. The cooperation between the organizational level and middle-level practitioners is a systematic and formal exchanging of information, personnel, equipment, and projects. The cooperation can be between the administrative levels of organization or policy-maker levels such as sharing investment, budget allocation, official committee establishment, and memorandum of agreement (Dinda, 2014; Houghton et al., 2009; Tabellini, 2010).

In terms of the theoretical synthesizing, the author clarified the definition and applied it into the concepts to generate the theoretical framework and to articulate the model of adaptation capabilities in competing with other business. It is found that as the limited conditions of business there are two perspectives regarding the definition and factors affecting social capital capabilities (Table 1).

Table 1: Social Capital Perspectives

4.1. Social Perspective

1. Common vision: In networking management, common vision are shared and seen as the eventual objectives of the future. This will move and empower the unity and reduce conflicts, which are the causes of different perceptions or attitudes.

2. All Stakeholders participation: The participation of networking members from all parts are important who can raise an awareness, involved in decision-making, and act out to promote the solidarity.

3. Interaction: The members of networking should do activities together to build interactions, which can be in written and oral forms, exchanging opinions, or participating in conventional meeting. These collective activities can help learning from members and strengthening the networking.

4.2. Economic Perspective

1. Core inflation: Currency exchange rate for general consumers except food and energy costs increases and decreases occasionally, and they are out of control of financial policies.

2. GDP growth: Values of products and services at the final processes in Thailand are determined by the Bank of Thailand. They are pre-determined then announced in public at each yearly quarter, which represented economic situations depressed or inconsistent regarding The Central Bank resulting in lower growth of employments and industrial investments.

3. Baht-to-dollar exchange rate: exchange rate is unstable depending on many factors such as inflation and interests. Selling and buying are also associated in terms of core inflation of exchange rate, interest rate toward exchange rate, and demands of selling-buying to the exchange rate.

4.3. Government Perspective

1. Disparity minimization: The government should focus on solving disparity problems especially to promote living quality of people in every class. Private sections can help solve this problem through mechanical processes as cultivating new entrepreneurship, mentoring systems, and working transformation preparation of agricultural to industrial workforce.

2. Building mechanism for natural resources use: Thailand economy is dependent on the natural resources causing a great damage of nature. However, the tourism of Thailand still can be developed into sustainability. Moreover, risk management must be developed or built with clear mechanisms in administration between the government and private enterprise.

3. Halal certification standards: The tourism industry must be managed according to international standards. SME entrepreneurs should be promoted and developed into world standards including adjustment to tourism dimensions by emphasis community-level engagement so that to decentralize development of travel destinations. The government should enforce the roles of controlling and monitoring to promote and develop strengths of the private enterprise.

4.4. Customer Perspective

To build alternatives from outside is to focus on the needs of customers rather than mixing several products. Customers want to be a part to solve the problem as they aware of their needs, but they just lack skills, materials, resources, and time. Given this, the customers choose to rely on the services. The customers’ perspectives are useful in developing products and services. Rather seeing customers as problems and obstacles, the question to be raised is that how to promote customers’ involvement in adding values of products and services so that to increase customers’ satisfactions.

4.5. Social Capital Capabilities of Halal Entrepreneurs

4.5.1. Capabilities in Constructing Entrepreneurial Network

Regardless of networking types, aligning small points to larger networks are important in fostering activities, contexts, and targets. The engagement across organizations can enhance pragmatic experiences and a power of negotiation with advantage groups. Halal entrepreneurs must collaborate in Business-to-Business (B2B) levels in various patterns such as products exhibitions and business matching, Original Equipment Manufacturer (OEM), border trades, selling agents, budget resources, and international investments. In other words, halal entrepreneurs must operate working processes by aligning small points to the larger regardless of networking levels, which are regional, tripartite, bilateral, and international free trades zones so that to extend working environments including new activities, regions, targets, and new networks. (Battour et al., 2019; Salaheldeen et al., 2019).

4.5.2. Learning Process and Shared Vision

To preserve an environment of learning, meaningfulness, and common vision, networking can be implemented in business, maintaining relationships among members and parties in networking are significant. Without positive interrelationships, activities and moves of networking will be impeded. For instance, the Organization of Islamic Cooperation (OIC), a large organization in the Muslim world, was founded to bring together Islamic nations to perform the roles in global stages with dignity in politic, economic, and social dimensions, and to strengthen the network even though there are political sensitivities related to international relations. As a result, when the parties perceive the necessity of networking, the activities associated with knowledge construction and meaningful communication in Business-to-Business (B2B) or Business-to-Government (B2G) will be held (Abror et al., 2020; Choi et al., 2019; Yagmur et al., 2019).

4.5.3. Learning Process and Adaptation

To construct learning processes of learning and adaptation occurs when a networking share the same values and adjust one another to learn something new and to foster the networking toward sustainability. In halal entrepreneur perspectives, to launch free trades with the countries where halal productivity is developed lead the halal entrepreneurs to study the limitations of trading especially SME to develop production processes and business plan, industrial standard development, as well as eco-friendly productivity processes (Chatzoglou & Chatzoudes, 2018; Liu, 2017).

The larger networking will accumulate experiences, adjust roles, and create relationships with other parties, organizations, and networking in order to construct new knowledge, new approaches, and new solutions, as well as accept differences in various working processes entrepreneurs have to develop:

1. To enforce production potentials of halal products and services.

2. To enforce halal certification processes.

3. To develop potentials of halal markets into global standards.

4. To develop research skills and development of halal scientific information to strengthen halal industrial.

5. To manage and empower an internal stability and development of halal industrial business by promoting halal production of products and services, enhancing standards of halal certification equivalent to religious principles and safety standards.

The guidelines are as following:

1. Training business personnel in order to build understanding of productivities and services of halal principles.

2. Providing guidelines for halal certification trainers.

3. Value adding of the halal products and services congruent with halal standards.

4. Establishing halal trading in international markets.

5. Business matching.

Moreover, the database development should be involved in promoting halal entrepreneurships in Thailand with in-depth information for private enterprises such as trading statistics, analysis reports, and marketing research. The information can respond to the needs of business practitioners and administrators, as well as to empower collaboration in exchanging information resulting in learning communities especially in future industries.

4.5.4. Social Movement of Innovation Capabilities

The development of social activities and movements are constructed to generate innovations and developmental discourses. Entrepreneurial networking in the new era under the cooperation of different parties in a new journey of innovative learning can drive new patterns of working processes so face-to-face interactions may not be required. Rather, the networking involves a sense of belonging, solidarity and sharing, friendship and brotherhood as an entrepreneurial network. Innovativeness will be started from processes of an entrepreneurial network that are likely to work independently, focus on collaboration, and help each other in a time of need by applying suitable communication technology. For example, halal food industries and tourism enterprises are highly needed especially in Muslim markets. The halal entrepreneurs may apply the strategies to connect with halal food industries, which can be called halal food gastronomy tourism. The integrity of the two strengths of halal food industries and tourism enterprises can provide new traveling experiences as well as culinary experiences for customers. This cooperation across organizations as networking is beneficial for halal enterprises in enhancing competitiveness capabilities in the markets (Fadahunsi & Kargwell, 2015; Idris & Rahman, 2017).

5. Innovative Entrepreneur and Sustained Capabilities of Halal Entrepreneurs

Innovation is regarded as a crucial part of entrepreneurship in building business competitiveness, marketing opportunities, and business achievement. The innovation is the result of entrepreneurs changing to make a difference in their business. Therefore, it seems entrepreneurship and innovation are strongly correlated (Drucker, 1994; Guo et al., 2017; Kanungo, 1999; Zhao, 2001). Concepts of innovation have been studying for several years (Sundbo, 1998), and the theoretical notions of innovation can be summarized in three perspectives, namely, the entrepreneur perspective, the technology-economics perspective, and the strategic perspective.

The core value the entrepreneurs should pay attention to is the support infrastructure for halal certification requirements. Governmental sectors must play roles in providing services for the entrepreneurs like networking building, business matching, target marketing analysis, and providing other marketing services. With the concepts of innovativeness, entrepreneurs play vital roles in processing innovation development. On the other hand, the innovation itself influences the achievement of entrepreneurs in which they are positively interwoven (Zhao, 2005). In a perspective of entrepreneurship, entrepreneurs are the persons who operate a new enterprise in the basis of new thoughts mixing with previous conditions into the innovation resulting in self and social sustainability (Johnson, 2001). An example of innovative marketing is to differentiate perceptions of customers, especially non-halal target groups on the quality and safety of products. This will influence the customers to be satisfied and confident in halal-labeled productivity.

Legge and Hindle (1997), and Dorf and Byers (2008) emphasized that being an entrepreneur required the leadership of the team and organization to seize new opportunities to create innovativeness. In addition, Drucker (1994) extended the notion that research capability is necessary as it helps in designing and changing thoughts into innovations throughout the process of marketing, and the capability in exploiting the innovation in the enterprise is required.

For discussion on social capital capabilities and innovative entrepreneur and sustained capabilities of halal entrepreneur, the author separates the elements – variable, component, leverage of social capital capabilities, innovative entrepreneur and sustained capabilities, according to Table 2.

Table 2: Component Leverage of Social Capital Capabilities and Innovative Entrepreneur & Sustained Capabilities of Halal Entrepreneur

Social capabilities are the knitting of social relationships of an organization by exploiting the shared resources. The common vision of entrepreneurs or organizations is the core to unify the networking, which is interrelated in terms of tasks or parties. The other factors like Social Perspective, economic Perspective, Government Perspective, and Customer Perspective also influence an accumulation of social capital capabilities, which are driving social movements of each networking in different waves and targets. Hence, the strategies to exploit the shared social capitals are (1) to empower the potentials of halal productivity and services, (2) to enforce halal certification processes, (3) to develop halal markets potentiality into global standards, (4) to develop research and development skills of halal’s scientific findings to strengthen halal industries of Thailand, and (5) to manage and empower the internal stability and development of halal enterprises. The relationships of social capital capabilities of halal entrepreneurs in a perspective of innovative entrepreneur and sustained capabilities are illustrated in Figure 1.

Figure 1: A Model of Social Capital Capabilities of Halal Entrepreneur: A Perspective of Innovative Entrepreneur and Sustained capabilities

The development of a halal innovative entrepreneur is derived from several factors such as social partnership strategies, association of human resource management, new markets issued from networking, mutual benefit, and shared investment organization of demands. Figure 1 illustrates the analysis of uncontrollable environments composed of the social perspective, economic perspective, government perspective, and customer perspective. These three perspectives will influence activities of social capitals as a network of entrepreneurs of organizations resulting in quality living and successful development. The three dimensions of social capital mentioned affect the social capabilities of entrepreneurs, which consist of four components –entrepreneurial network, creating knowledge and shared vision, learning process and adaptation, and social movement of innovation capabilities.

Each component contains the means of collaboration and networking leading to overall achievement, cultivating cultural acceptance of differences within members in an organization, and intellectual specialty, which are the foundation of diversity and strong networking. When all components of social capabilities are activated, the outcome will be generated in the form of innovativeness of entrepreneurial networking to solve problems of community and create sustainability for business especially tourism enterprises. As the City and Community Innovation Challenge project has been implemented, the networking can build the network of communities, startups, and halal entrepreneurs pushing for concrete results. For example, community-based tourism platforms play a role in introducing interesting places, villages, and creative shops to tourists who have a passion for backpacking or self-traveling, especially Muslims who want to experience locality.

6. Conclusion

The social capital capabilities of innovative entrepreneurs applied in sustainable ways can be managed in three aspects.

1. Internal Social Capital Capabilities is to manage internal entrepreneurial network of the organization itself to prevent consuming outsources. The internal networking is that entrepreneurs freely perform toward productivity regarding their capabilities. However, the productivity should not be duplicated, and a mediator of the central organization will coordinate with entrepreneurs.

2. Stable Social Capital Capabilities are occurring in the networking management when some entrepreneurs contact external organizations in order to share resources. The mediator of the central organization will draft the contract with external organizations.

3. Dynamic Social Capital Capabilities are the networking management, which are different from internal networking and sustainable networking. In particular, this network emphasizes collaboration with external organizations, and the central organization is still the main hub while other resources are employed from external organizations. These three implications of social capital capabilities will enhance entrepreneurs’ operations and provide the guidelines for tourism enterprises in determining strategies of networking management in the current rapidly-changing environments.

Future research should focus on each dimension of social capitals, for example, structural dimension of social capital consisting of 1) social networks, 2) social trust, 3) customer participation, 4) government resources, and 5) socio-economic variables. This will show the essence of social capital building, which integrates other research findings into factual practices. Another important issue is to apply factors in building a model or the structural equation model, which is a theory building, inductive model, or qualitative research employing free parameters to represent causal relationship between external, internal, and interference variables able to apply descriptive statistics in finding the outcome of the research model as well as the statistics to support the research model.