The role of social and human capital among nascent entrepreneurs
Section snippets
Executive summary
Our knowledge about individuals who navigate various obstacles at the very earliest stages of entrepreneurial activity remains limited. Many people who begin the process of starting a new business fail to achieve their goal, while others are quite successful. Do individuals who attempt to start businesses begin with different levels of human or social capital? Do these endowments affect their rate of success?
Previous research excludes many of the efforts that eventually result in termination
Human capital and the entrepreneur
Human capital theory maintains that knowledge provides individuals with increases in their cognitive abilities, leading to more productive and efficient potential activity Schultz, 1959, Becker, 1964, Mincer, 1974. Therefore, if profitable opportunities for new economic activity exist, individuals with more or higher quality human capital should be better at perceiving them. Once engaged in the entrepreneurial process, such individuals should also have superior ability in successfully
Design
Studies based on samples of established firms sometimes deal with questions related to the earliest stages of development, such as start-up motivations or how resources for the would-be business were acquired. This approach has serious shortcomings. Firstly, it has been estimated that only half of all aspiring business founders succeed in creating new organizations that are ever recorded in public records (Aldrich, 1999). Therefore, even samples of very young firms, where few have failed after
Results concerning human capital
Table 1 presents logistic regressions for the combined samples of control versus nascent entrepreneurs.
Eq. (1) examines the probability of being a nascent entrepreneur for the entire sample of 971 individuals, control group and nascents. Thus, it tests group differences regarding discovery. The goodness of fit Chi-square of 977 tests the null hypothesis that the coefficients for all of the terms in this model, except the constant, are zero (like an f test in regression). Chi-squared and log
A summary and interpretation of the results
Our study empirically examined individual factors leading to both opportunity discovery and exploitation. We examined, at the individual level, tacit and explicit human capital factors, as well as bridging and bonding social capital, and we did so by including comparisons with a control group of non-nascent entrepreneurs, as well as longitudinal study of a population of nascent entrepreneurs.
Summarizing our human capital findings, we found effects of both tacit and explicit knowledge primarily
Acknowledgements
This research owes intellectually to The Entrepreneurial Research Consortium (ERC), a temporary association of 30+ university centers and 100+ scholars who are carrying out the US Panel Study of Entrepreneurial Dynamics (PSED). We have in large part adopted the design developed by the ERC for its US study (in which we were also involved). The Swedish study has been made possible through financing from the Swedish Foundation for Small Business Research, the Knut and Alice Wallenberg's Foundation
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Both authors contributed equally to the writing of this paper and are listed alphabetically.