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Social capital has become significant resource for all the organizations in order to achieve better business performance and larger market share. Social capital is comparatively more important for small medium enterprises SMEs whose scope of working is limited and mostly these SMEs work in particular setting where organizations have more competition and less resources. Businesses all around the world are facing emerging challenges regarding working systems, legitimacy and customer need analysis. Corporations today face problems linked with internal factors as well as external factors. Internal factors are a bit easier for the firms to manage and regulate according to the vision of the company but external factors are beyond the control of the corporations and deep study is required to manage the working of the company according to the external forces which are working in the external environment of the corporation. Different theories tried to address this socio economic problem of business in contemporary world but little attention has been given on High Performance Work System which is becoming key factor in the growth of business and development of new enterprise. Successful business in Pakistan also faces internal and external threats which can be mitigated with the help of High Performance Work System. Our study has explored the link between business development and High Performance Work System. The link between business performances with work system is gaining importance in the field of human resource management and the most important element in this relation is high performance work system. The developing studies on high performance work system is making room for the understanding of managers that how it influence the firm performance. Previous research has revealed mixed results of high performance work system with relation to business performance but still there is a ‘black box’ in this area which is directly related to the human resource management. Many researchers have come up to the conclusion that HPWS has direct or indirect impact on business performance. In this study the researcher has tried to explore the most important part of HPWS which is human resource management and within the paradigm of human resource the researcher has worked on staffing, job description, training, participation, mobility, incentive reward, appraisal, job security, networks building and team learning behaviour. Social capital is measured through cognitive, structural and relational dimensions. Business performance is computed through financial, operating and innovative measures. ix The study aims to explore a high performance work system in social capital perspective in which organization can maintain and develop the competitive advantage through internal firm structure. The study also explores the link of leadership styles to enhance the SMEs business performance by social capital. The study is based on strong theoretical foundations in which researcher has worked primarily under the umbrella of social capital theory.It attempts to prove the structural link between HPWS and business performance using 625 respondents of SMEs sector. Data was collected through questionnaires. Considering the limitation of SPSS and AMOS, this research has been conducted by using SMART PLS that has the capacity to manage both formative and reflective form of models. For structural model, test of predicative and coefficient of determination have been applied and before the path coefficient, validity and reliability was checked by the researcher. The study unfolds structural relationship between HPWS, social capital, leadership styles and business performance. The model developed in the study is effective in enhancing the business performance of SMEs through social capital and leadership styles. This research reveals that HPWS plays pivotal role in SMEs business performance and its role differs in different organizations. One of the basic elements regarding HRM has direct influence on business and this is leadership style and leadership empowerment.
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