This study analyzes the effects of relationship capital (RC) on the growth of firms. Social capital (SC) scholars suggest that a firm’s relationships drives its growth strategies, but extant literature on SC fails to explain how relational aspect of SC leads to growth of a firm. Built on the resource based theory of the firm and knowledge of SC, this research defines RC as improved capabilities of the firm in combining various resources, and tests whether the existence of RC in the relationships of a firm affects its growth strategy performance. The results from 347 European firms suggest that relational perspective of SC improves firms’ capability to achieve growth and plays a positive role in small firms’ competitiveness. The study also opens up some research avenues for an investigation of the effects of trust and commitment, as the two constructs of RC, on a firm’s capabilities.