Introduction: In recent decades, open innovation has become a central strategy for value creation and competitive sustainability, shifting focus from internal resources to external collaboration, networked interactions, and knowledge sharing. This approach enables organizations and local communities to enhance knowledge capabilities and market performance (Rhees et al., 2020; Prieto et al., 2018). However, voluntary participation in open innovation often encounters challenges—including selective knowledge sharing, doubts about knowledge value, and fears of misuse—that can limit its effectiveness in local markets (Lam et al., 2021). Sustainable value creation through open innovation relies on trust-based, networked environments where knowledge flows freely (Radziwon & Bogers, 2019). Social capital—comprising structural (network ties), relational (trust, reciprocity), and cognitive (shared understanding) dimensions—provides the foundational infrastructure for effective knowledge management and open innovation (Salehi et al., 2022; Miković et al., 2023). It shapes perceived knowledge quality, strengthens collective collaboration, and enables efficient resource utilization. Knowledge management serves as a pivotal mediating mechanism, transforming social resources into economic and competitive outcomes (Lam et al., 2021). Empirical studies confirm that it translates social capital into sustainable performance, particularly in emerging markets (Tajpour et al., 2022). Nevertheless, social capital alone is insufficient: knowledge-hiding behaviors can erode trust, obstruct knowledge flows, and undermine innovation, thereby threatening both learning and social sustainability (Fawzi, 2023; Arin et al., 2021). Community leadership emerges as a critical moderating force. In non-institutionalized local settings, informal leaders—trusted individuals without formal authority—facilitate coordination, motivate participation, and reinforce trust, thereby amplifying the positive effects of social capital (Carvalho et al., 2021). Such leadership also cultivates future leaders, aligning with Sustainable Development Goal 16's emphasis on inclusive, participatory governance (Pourvati et al., 2021). Despite extensive research on social capital, knowledge management, and open innovation, most studies examine these variables in isolation or through linear relationships. Strategic management, however, demands understanding how these capabilities synergize to generate sustainable competitive advantage. Existing literature offers limited insight into their combined mechanisms within local markets, and the boundary roles of behavioral factors (e.g., knowledge hiding) and institutional enablers (e.g., community leadership) remain underexplored. Moreover, while developmental outcomes of social capital are documented, its competitive implications at the market level receive less attention. Addressing these gaps, this study investigates how social capital, configured through knowledge management and open innovation, drives competitive outcomes in local markets. By integrating structural-relational, behavioral, perceptual, and institutional dimensions into a multi-layered model, the research elucidates the pathways through which social capital fosters sustainable competitive advantage. The findings underscore that reducing knowledge hiding and strengthening community leadership are essential for activating knowledge-based capacities. Consequently, policymakers and managers should prioritize building social capital, developing knowledge-sharing mechanisms, and promoting inclusive leadership to enhance competitiveness and sustainability in local market ecosystems.
Method: The present study is applied in purpose and descriptive-analytical in method, employing a survey-based quantitative approach. The statistical population comprises economic and institutional actors active in rural local markets of Urmia County who play roles in the creation, exchange, and utilization of knowledge resources. These actors participate in local market networks through production, distribution, cooperative, and managerial activities, influencing knowledge and innovation flows via their networked relationships. Accordingly, the population includes farmers engaged in local product value chains, members of rural cooperatives, local managers, and village council members who contribute to economic decision-making, network coordination, and common-pool resource management. As key players in the local market ecosystem, these groups engage in knowledge-based and innovative interactions, providing a suitable context for examining the dynamics of social capital, knowledge management, and open innovation at the market level. Given that rural local markets possess distinct institutional structures rooted in social networks, analyzing the relationships among social capital, knowledge capabilities, and performance outcomes among these actors enables elucidating value-creation and competitiveness mechanisms in such contexts. Since this population consists of diverse groups with varying characteristics and roles, stratified random sampling was employed. The population was divided into homogeneous strata based on social role and type of activity, and respondents were randomly selected from each stratum. Using Slovin's formula and accounting for potential non-response, the required sample size was estimated at 400 participants. Data were collected via a structured questionnaire comprising three sections: respondent demographics, conceptual items measuring key variables (social capital, open innovation, knowledge management, sustainable development, perceived knowledge quality, leadership, and knowledge hiding) rated on a five-point Likert scale, and survey instructions. Instrument validity was confirmed through content, convergent, and discriminant validity assessments, while reliability was evaluated using Cronbach's alpha and composite reliability. Data analysis was conducted using SPSS and Smart-PLS software through structural equation modeling, assessing model fit, predictive power, and hypothesis testing.
Results: The analysis confirmed that the measurement model was reliable and valid. All factor loadings exceeded 0.40, except for one item in sustainable development, and all t-values were above 1.96, indicating significant indicator validity. Reliability coefficients for all constructs were above 0.70, showing sufficient internal consistency. Convergent validity was established as all AVE values were above 0.50, and discriminant validity was confirmed using the Fornell-Larcker criterion, with each construct correlating more strongly with its own indicators than with others. Structural model evaluation revealed that R² values for most endogenous variables were moderate to strong, indicating that independent variables explained a substantial portion of variance. The Q² index demonstrated acceptable predictive relevance, and the overall Goodness-of-Fit (GOF) confirmed satisfactory alignment between the observed and predicted model values. Together, these results indicate that the hypothesized relationships among constructs are supported, the measurement and structural models are robust, and the model can reliably predict the effects of social capital, knowledge management, and innovation processes on sustainable development in rural communities.
Conclusions: The findings substantiate that social capital serves as a foundational enabler of knowledge management processes and perceived knowledge quality, cultivating collective learning and cognitive synergy through dense trust-based networks and reciprocal relationships. Knowledge management, in turn, functions as a critical driver that transforms relational resources into actionable innovation and sustainable developmental outcomes by enabling evidence-based decision-making and optimizing scarce resource allocation. Open innovation demonstrated a statistically significant positive effect on sustainable development and operates as a potent mediating mechanism that amplifies social capital's impact by channeling external knowledge inputs into locally adapted solutions. Similarly, perceived knowledge quality emerged as an effective mediator, confirming that trust alone is insufficient without confidence in knowledge relevance, reliability, and applicability. Conversely, knowledge hiding—manifested as deliberate concealment or evasion of knowledge sharing—significantly weakens these constructive pathways by eroding trust and obstructing knowledge flows. Critically, community leadership functions as a pivotal moderator: by nurturing psychological safety, recognizing contributors, and establishing transparent communication channels, effective leaders attenuate knowledge hiding tendencies while reinforcing innovation-enhancing dynamics. These insights underscore the necessity of deliberately strengthening social infrastructure, institutionalizing participatory knowledge management systems, incentivizing open innovation practices, and cultivating adaptive leadership—particularly in rural contexts where informal trust networks compensate for weak formal institutions and become the bedrock of sustainable transformation.