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Knowledge and innovative entrepreneurship - social capital and individual capacities

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  • Cantner, Uwe
  • Michael, Stuetzer

Abstract

A central development within the management literature has been the growth of nascent entrepreneur research analysing on--going venture start-up efforts and/or firms in gestation over time (Davidsson, 2006). New ventures have an important effect on economic development. They are credited for the transfer of innovations into the market (Schumpeter, 1934; Acs and Plummer; 2005) and creating regional employment (e.g. Fritsch and Mueller, 2004). Central questions in nascent entrepreneurship research concern the characteristics of the venture creation process and the factors affecting performance of these firms (for an overview see Davidsson, 2006). Among other factors considered in the literature, the social embeddedness of the entrepreneur has been found to play a pivotal role (Davidsson and Honig, 2003). Social capital enables entrepreneurs to access resources (Florin et al., 2003) or novel information (Uzzi, 1997) in order to create opportunities (Baker and Nelson, 2005). During the venture creation process, most firms suffer from substantial resource constraints (Shepherd et al., 2000) and use their personal networks as a means to access resources and information far below market price (Elfring and Hulsink, 2003). However, a sizeable gap exists in the burgeoning social capital literature on the subject of team start--ups. A most prominent finding is that team start--ups are more successful than solo start--ups (e.g. Lechler, 2001). One of the offered explanations is that entrepreneurs can combine their abilities and financial capital in a team, giving them an advantage above solo entrepreneurs (e.g. Gartner, 1985; Stam and Schutjens, 2006). Sometimes explicitly (e.g. Colombo and Grilli, 2005; Stam and Schutjens, 2006) but more often implicitly (e.g. Davidsson and Honig, 2003; van Gelderen et al., 2005), the same argument is applied to the usage of social capital, i.e. that the social capital from individual team members is combined to provide an advantage for teams over solo entrepreneurs. As yet, to our knowledge, no study has explicitly analysed whether, compared to solo entrepreneurs, more social capital is found within teams and whether this leads to their better performance. In this chapter, we approach these two questions and empirically explore the use of social capital of solo entrepreneurs and entrepreneurial teams during the venture creation process. In doing so, we refine the empirical concept of social capital in that we do not look at its mere existence but focus on its use in terms of concrete support (e.g. advice on the business plan, marketing, or research and development - R&D) for the entrepreneurs. We address two major research questions. The first concerns the differential use of social capital. Do solo entrepreneurs rely more often on social capital than new venture teams, or is it the other way around? How do both types of start--ups use social capital? More precisely, we investigate the relationship between social capital and other characteristics of the new venture and its founders (e.g. human capital). The second research question then turns to the effect of social capital on subsequent new venture performance. Appropriate hypotheses in this study are tested using a dataset of 456 start--ups in innovative industries in the German state of Thuringia. The reminder of this chapter is organized as follows. In Section 2, we review the theory and previous research on social capital in order to generate six testable hypotheses. In Section 3, we describe the dataset and the methods employed to measure the use of social capital. We then present (Section 4) the results of our analysis. The chapter concludes in Section 5, where we interpret and discuss the results and draw some conclusions.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 52482.

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Date of creation: 2013
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Handle: RePEc:pra:mprapa:52482

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Keywords: Social capital; human capital; new businesses;

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References

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  1. Mikael Samuelsson & Per Davidsson, 2009. "Does venture opportunity variation matter? Investigating systematic process differences between innovative and imitative new ventures," Small Business Economics, Springer, vol. 33(2), pages 229-255, August.
  2. Christian Lechner & Michael Dowling, 2003. "Firm networks: external relationships as sources for the growth and competitiveness of entrepreneurial firms," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 15(1), pages 1-26, January.
  3. Michael Fritsch, 2004. "Entrepreneurship, entry and performance of new business compared in two growth regimes: East and West Germany," Journal of Evolutionary Economics, Springer, vol. 14(5), pages 525-542, December.
  4. Michael Fritsch & Pamela Mueller, 2007. "The persistence of regional new business formation-activity over time – assessing the potential of policy promotion programs," Journal of Evolutionary Economics, Springer, vol. 17(3), pages 299-315, June.
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  6. Scott Shane & Daniel Cable, 2002. "Network Ties, Reputation, and the Financing of New Ventures," Management Science, INFORMS, vol. 48(3), pages 364-381, March.
  7. Presutti, Manuela & Boari, Cristina & Fratocchi, Luciano, 2007. "Knowledge acquisition and the foreign development of high-tech start-ups: A social capital approach," International Business Review, Elsevier, vol. 16(1), pages 23-46, February.
  8. Cooper, Arnold C. & Bruno, Albert V., 1977. "Success among high-technology firms," Business Horizons, Elsevier, vol. 20(2), pages 16-22, April.
  9. Chandler, Gaylen N. & Honig, Benson & Wiklund, Johan, 2005. "Antecedents, moderators, and performance consequences of membership change in new venture teams," Journal of Business Venturing, Elsevier, vol. 20(5), pages 705-725, September.
  10. Lumpkin, G. T. & Dess, Gregory G., 2001. "Linking two dimensions of entrepreneurial orientation to firm performance: The moderating role of environment and industry life cycle," Journal of Business Venturing, Elsevier, vol. 16(5), pages 429-451, September.
  11. Chowdhury, Sanjib, 2005. "Demographic diversity for building an effective entrepreneurial team: is it important?," Journal of Business Venturing, Elsevier, vol. 20(6), pages 727-746, November.
  12. Elfring, Tom & Hulsink, Willem, 2003. " Networks in Entrepreneurship: The Case of High-Technology Firms," Small Business Economics, Springer, vol. 21(4), pages 409-22, December.
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  14. Benson Honig & Miri Lerner & Yoel Raban, 2006. "Social Capital and the Linkages of High-Tech Companies to the Military Defense System: Is there a Signaling Mechanism?," Small Business Economics, Springer, vol. 27(4), pages 419-437, December.
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  16. Shepherd, Dean A. & Douglas, Evan J. & Shanley, Mark, 2000. "New venture survival: Ignorance, external shocks, and risk reduction strategies," Journal of Business Venturing, Elsevier, vol. 15(5-6), pages 393-410.
  17. Cooper, Arnold C. & Gimeno-Gascon, F. Javier & Woo, Carolyn Y., 1994. "Initial human and financial capital as predictors of new venture performance," Journal of Business Venturing, Elsevier, vol. 9(5), pages 371-395, September.
  18. Shaker A. Zahra & Harry J. Sapienza & Per Davidsson, 2006. "Entrepreneurship and Dynamic Capabilities: A Review, Model and Research Agenda," Journal of Management Studies, Wiley Blackwell, vol. 43(4), pages 917-955, 06.
  19. Davidsson, Per & Honig, Benson, 2003. "The role of social and human capital among nascent entrepreneurs," Journal of Business Venturing, Elsevier, vol. 18(3), pages 301-331, May.
  20. Colombo, Massimo G. & Grilli, Luca, 2005. "Founders' human capital and the growth of new technology-based firms: A competence-based view," Research Policy, Elsevier, vol. 34(6), pages 795-816, August.
  21. Batjargal, Bat, 2007. "Internet entrepreneurship: Social capital, human capital, and performance of Internet ventures in China," Research Policy, Elsevier, vol. 36(5), pages 605-618, June.
  22. Ronstadt, Robert, 1988. "The Corridor Principle," Journal of Business Venturing, Elsevier, vol. 3(1), pages 31-40.
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Cited by:
  1. Stam, Wouter & Arzlanian, Souren & Elfring, Tom, 2014. "Social capital of entrepreneurs and small firm performance: A meta-analysis of contextual and methodological moderators," Journal of Business Venturing, Elsevier, vol. 29(1), pages 152-173.
  2. Obschonka, Martin & Silbereisen, Rainer K. & Schmitt-Rodermund, Eva & Stuetzer, Michael, 2010. "Nascent entrepreneurship and the developing individual: Early entrepreneurial competence in adolescence and venture creation success during the career," MPRA Paper 32021, University Library of Munich, Germany, revised 21 Dec 2010.

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