Industrial clusters are groups of enterprises, institutions and organizations in a particular industry in close geographic proximity, resulting in efficient collaborative synergy. Such clusters have long been examined by geographers, economists and sociologists (Novelli et al., 2006; Porter, 1990; Rosenfeld, 1997); more recently, tourism researchers have started to study tourist destinations as clusters. Most of these studies have been based on Porter’s (1990) Diamond model, concentrating on structural and macro aspects of tourism clusters, including spatial proximity, efficiency and competitiveness, while overlooking micro aspects such as the social and cultural relationships between individual companies (Chuluunbaatar et al., 2014; Kim and Wicks, 2010; Tinsley and Lynch, 2007). This study focuses on two aspects of tourism clusters: (1) the small-scale characteristics of tourism clusters; and (2) cluster facilitators. The first aspect addresses the nature of tourism clusters. Unlike manufacturing, tourism products consist of both goods and services from diverse enterprises including numerous small- and medium-sized enterprises (SMEs), which, compared to large enterprises, struggle with capital requirements, research and development, human resource demands and information costs (Iordache et al., 2010; Michael, 2003; Novelli et al., 2006; Thomas et al., 2011). This puts SMEs at a distinct competitive disadvantage, making the formation of close networks among SMEs critically important to their survival and growth. The second aspect addresses factors that give tourism clusters competitive advantage. Social capital is thought to empower open and efficient exchange of information and resources between companies (Inkpen and Tsang, 2005; Novelli et al., 2006; Porter, 1990; Rosenfeld, 1997), enriching relationship networks for the knowledge sharing necessary for companies to flourish (Martínez-Pérez et al., 2016; Michael, 2003; Thomas et al., 2011; Werner et al., 2015) and innovate (García-Villaverde et al., 2017; Hausman, 2005; Lai et al., 2014; Tsai, 2016). It is necessary to identify how tourism clusters can facilitate SME knowledge sharing and innovation. Tourism research has not addressed which kinds of social capital stimulate knowledge sharing within a cluster (Martínez-Pérez et al., 2016; Shaw and Williams, 2009; Thomas et al., 2011). Some studies have explored social capital and knowledge sharing in large enterprises but have not addressed its impact either on performance and innovation of SMEs or on tourism clusters, giving no insight into sound policy for tourism clusters and small business sectors. We seek to fill this knowledge gap by focusing on the relationship between knowledge sharing, innovation and tourism performance within the Bomun Complex, the first national tourist district established in South Korea. It opened in 1979 in the historic city of Gyeongju, designated by UNESCO as a World Heritage Site. The Bomun Complex is a suitable sample tourism cluster for our study with SME hotels, restaurants, entertainment facilities and shops. This study addresses two questions. First, does social capital drive SME innovation and performance? Second, if so, what is the structural relationship among social capital, knowledge sharing, innovation and performance in SME-dominated tourism clusters? Our findings contribute to the theory of tourism clusters and how SMEs function in terms of social capital, knowledge sharing and innovation, with practical implications for facilitating social capital formation and knowledge sharing in tourism clusters.