The essay highlights upon the role that human and social capital may have upon a nascent entrepreneur setting up a business for the very first time. The key requirement is discussed and evaluated on the basis of some standard theories like that of the relationship amidst entrepreneurship and human capital and that with social capital. Information is highlighted and discussions have been made with structured and logical arguments. The essay provides us with important information related with nascent entrepreneurship and associated theories.
Theory of human capital maintains that information and knowledge provide an individual with enhanced vigor in his cognitive abilities, thereby leading to increasingly productive as well as efficient activity. Thus, with profitable opportunities for innovative economic activities existing, individuals having increased quality human capital must be better at perception. Getting engaged in such entrepreneurial activities, those individuals must also possess superior capability in successful exploitation of key opportunities (Asprey, 2004). For instance, over investment that leads to higher level of certification can discourage taking risk, whereas under investment can encourage it (Augusto Fel?cio, Couto and Caiado, 2014). This is the reason that migrant often engage more in entrepreneur activities. They dwell in new society which may not reward formal human capital investments.
Possessing previous information is important for intellectual performance. It enables integration as well as accumulation of new information, and also adaptation to new situations. Knowledge may be either tacit or explicit. Tacit knowledge means non-codified elements of activity. It bears information type conveyed in processes, procedures, written documents, or educational institutions (Batjargal, 2007). Resolving critical issues as well as making key entrepreneurial decisions uses a thorough communication of tacit as well as explicit knowledge, social structures as well as belief systems. Human capital is not just the consequence of formal education, but it also involves practical learning as well as experience in job areas or non-formal educational systems. Hence, broad labor market experience and special vocational experience is predicted to enhance human capital. Research tends to support the existence of a positive relationship amidst human capital as well as entrepreneurial activities. This may be confounded by numerous factors. For instance it is depicted that the link amidst persistence as well as education is nonlinear, along with human capital enhancing performance but not persistence. Besides, various sorts of human capital may be significant at various stages of entrepreneurial activities (Dezdar and Ainin, 2011). Though it is predicted that knowledge is crucial to both discovery as well as exploitation of opportunities of entrepreneurs, research gives little understanding of the type of learning experiences that would be helpful.
On the other hand theory of social capital means the ability of actors to enjoy benefits from societal structures, memberships, and networks. Societal networks given by family, organizational relationships and community are theorized for supplementing the impacts of experience, education, and financial capital. Social capital is usually multidimensional which occurs at individual as well as organizational levels (Fedoryshina, 2014). It is widely defined within the literature, like the exact relation between definition as well as operationalization is important for explaining aspects of network processes as well as reciprocities.
Social capital may act as a useful resource for increasing internal organizational trust by binding of actors, and also bridging external networks for providing resources. A key factor that enhances the strength of social capital comprises of trust due to obligations, exchange, and threat of censure. The trust acts as bonding glue which holds well knitted organizations closely. Another aspect of it is that the bond renders resources like important information about bridging the gap.
Social capital gets operated and functioned by identification of networks as well as network relationships, denoted by strengths of bonds, group activities like frequency of meetings as well as formal interactions, informal activities, and social relationships (GOUDARD and LUBRANO, 2012). From the perspective of entrepreneurs, concept of social capital gives networks which support the discovery of opportunities and also identification, allocation, and collection of essential resources. This social capital can even help in the exploitation processes of entrepreneurs, by diffusing key information and resources. Within the discovery process, this concept of social capital supports nascent entrepreneurs by leading them to new situations and ideas that provide them broader reference frame to nurture as well as support potential venture ideas. Potential bonds maintained by business entrepreneurs as well as other team member support the discovery process. It has been referred to by researchers the significance of socialization by motivating autonomy and delivery of networks for providing precious resources. Potential bonds in nascent venture can yield enhanced efficiency in utilization of resources (Gradstein and Justman, 2000). The process discovery is referred to as asymmetrical data amidst entrepreneurs as well as resource owners. As information is limitedly available, bridging and integrating social capital can increase information flow. It has been identified by researchers that entrepreneurs often initiate businesses associated with former occupations (Han, Han and Brass, 2013). Small businesses specifically rely on the advices of relatives and companions for retaining confidentiality and even personal control. Opportunities, ideas, innovations, views and perspectives yield greater advantages to those individuals who reside in environments considered to be enriched with discovery due to social capital. Including social capital supports discovery process. The process of exploitation provides individuals with scopes for leveraging resources of social capital. Integrating social capital gives individuals that network which facilitate evaluation, obtaining, and use of required resources useful in exploitation. Integrating social capital based on weak bonding at individual level, make use of what an individual has grown in own associations reflecting own priorities, value structure, and allocation of resources (Kolstad and Wiig, 2013). So, social capital is said to impart sufficient resources when effectively leveraged for nascent entrepreneur, having specific importance in situations of incomplete information as well as weaker economic markets like nascent industries, technologies, markets, and products.
At the level of organization, as nascent organizations start exploiting opportunities, they seek advantages imparted by social capital. The significance of trust factor within intra-organization increasing efficient performance has been identified. Those undertaking nascent activities, formal classes of business are to impart increased assistance in leading to profitability of nascent firms (Martin and Cheung, 2005).
Since nascent entrepreneurs perform own venture ideas, they may verify or even reject guiding assumptions as well as consider whether to intensify or redirect their efforts or discontinue. In attempt to engage stakeholders, acquiring resources, and attaining milestones, these entrepreneurs get pertinent data which supports them update as well as refine beliefs own knowledge regarding the opportunity. Often these beliefs are reinforced and their weakened where they face signals that scopes at hand are not feasible to be exploited. Nascent entrepreneurs may abandon the scopes which lack promise. So, evolution as well as progress of new venture is solely dependent upon perceptions of nascent entrepreneurs as well as subjective judgment of opportunity merits (Mezghani and Mezghani, 2014). Here, sustained efforts of nascent entrepreneurs need adequate confidence by these entrepreneurs in in-hand opportunity feasibility. This can reflect beliefs of nascent entrepreneurs that the opportunity is feasible and that they possess required skills to establish the firm successfully.
The success of efforts in venturing rests upon some key milestones like attracting customers, adopting competitive strategies to beat rivals, and acquire physical, human, and financial resources (Wu and Olson, 2009). To level to be deemed as not achievable, nascent entrepreneurs would give up efforts. Apart from assessing opportunity feasibility, nascent entrepreneurs assess own capabilities to take up the venture. As defined by Bandura, self-efficacy refers to the belief in won ability for executing actions may affect the cognition, action course, control perception, and self-confidence (Munasib, n.d.). This has emerged as key success predictor with enhanced level of self-efficacy and achievement of goals. With rising interest of entrepreneurial cognition, self-efficacy is deemed as key attribute of entrepreneurs.
It is argued that in light of initial efforts, nascent entrepreneurs adapt particular beliefs regarding ability to establish successfully specific venture as well as execute tasks in the defined process. Task-related beliefs represent the emergent state of nascent entrepreneurs. This shows an emerging belief regarding their capability to put forth their venture efforts to enactment (Ndede?€ђAmadi, 2004). Thus it exhibits not the general attitude of nascent entrepreneurs towards concept of entrepreneurship, but present attitude in venturing business activities in hand. It is significant for persistence of these entrepreneurs with emergent venture as it enhances venture commitment and also perseverance against all adversity.
In context to elaborate discussion on human capital, it has been argued by researchers that the need to adopt the construct of particular human capital to specific context states the need for entrepreneurial experiences as well as industry experience. It is useful in enhancing the productivity of these nascent entrepreneurs in execution of tasks related to launching as well as managing of business and in maintaining effective relationship with stakeholders like suppliers, customers, investors in specific industry. So, this is essential for nascent entrepreneurs in adopting opportunities that leads to emergence of venture efforts (Schindler, n.d.). The theory of human capital is based upon the fact that greater the availability of human capital better is the task performance of any venture. In context to this, perspective of human capital is useful in predicting outcomes of entrepreneurial activities like being nascent entrepreneurs or establishing new venture organization. Recent findings suggest that more elements of human capital happen to be instrumental predictors of innovative venture milestones like recognition of opportunity. Early and effective planning ensures identifying the perfect roadmap to lay venture efforts. The process of planning business right from the very beginning is essential and this provides the entrepreneur with effective time and scope to plan and implement business strategies and lead to the success of the initiated venture (Spathis and Constantinides, 2004).
Thus research tends to support the existence of a positive relationship amidst human capital as well as entrepreneurial activities. This may be confounded by numerous factors. For instance it is depicted that the link amidst persistence as well as education is nonlinear, along with human capital enhancing performance but not persistence. Social capital is usually multidimensional which occurs at individual as well as organizational levels (Stromsnes, 2008). It is widely defined within the literature, like the exact relation between definition as well as operationalization is important for explaining aspects of network processes as well as reciprocities. From the perspective of entrepreneurs, concept of social capital gives networks which support the discovery of opportunities and also identification, allocation, and collection of essential resources (Vluggen and Bollen, 2005). This social capital can even help in the exploitation processes of entrepreneurs, by diffusing key information and resources. It is argued that in light of initial efforts, nascent entrepreneurs adapt particular beliefs regarding ability to establish successfully specific venture as well as execute tasks in the defined process. Task-related beliefs represent the emergent state of nascent entrepreneurs.
Asprey, L. (2004). Information strategies: are we aligning the business case with enterprise planning?.Records Management Journal, 14(1), pp.7-13.
Augusto Fel?cio, J., Couto, E. and Caiado, J. (2014). Human capital, social capital and organizational performance. Management Decision, 52(2), pp.350-364.
Batjargal, B. (2007). Internet entrepreneurship: Social capital, human capital, and performance of Internet ventures in China. Research Policy, 36(5), pp.605-618.
Dezdar, S. and Ainin, S. (2011). Measures of success in projects implementing enterprise resource planning. International Journal of Business Performance Management, 12(4), p.334.
Fedoryshina, I. (2014). Human Capital a Part of Social Capital. The Russian Academic journal, 29(3).
GOUDARD, M. and LUBRANO, M. (2012). HUMAN CAPITAL, SOCIAL CAPITAL AND SCIENTIFIC RESEARCH IN EUROPE: AN APPLICATION OF LINEAR HIERARCHICAL MODELS*. The Manchester School, p.no-no.
Gradstein, M. and Justman, M. (2000). Human capital, social capital, and public schooling. European Economic Review, 44(4-6), pp.879-890.
Han, J., Han, J. and Brass, D. (2013). Human capital diversity in the creation of social capital for team creativity. J. Organiz. Behav., 35(1), pp.54-71.
Kolstad, I. and Wiig, A. (2013). IS IT BOTH WHAT YOU KNOW AND WHO YOU KNOW? HUMAN CAPITAL, SOCIAL CAPITAL AND ENTREPRENEURIAL SUCCESS. Journal of International Development, 25(5), pp.626-639.
Martin, I. and Cheung, Y. (2005). Business process re?€ђengineering pays after enterprise resource planning. Business Process Mgmt Journal, 11(2), pp.185-197.
Mezghani, K. and Mezghani, L. (2014). Effects of Business Managers’ Skills on Enterprise Resources Planning Strategic Alignment. American Journal of Business and Management, 3(1).
Munasib, A. (n.d.). Social Networks Over the Lifecycle, and the Relationship between Human Capital and Social Capital. SSRN Journal.
Ndede?€ђAmadi, A. (2004). What strategic alignment, process redesign, enterprise resource planning, and e?€ђcommerce have in common: enterprise?€ђwide computing. Business Process Mgmt Journal, 10(2), pp.184-199.
Schindler, D. (n.d.). Human Capital, Multiple Income Risk and Social Insurance. SSRN Journal.
Spathis, C. and Constantinides, S. (2004). Enterprise resource planning systems’ impact on accounting processes. Business Process Mgmt Journal, 10(2), pp.234-247.
Stromsnes, K. (2008). The Importance of Church Attendance and Membership of Religious Voluntary Organizations for the Formation of Social Capital. Social Compass, 55(4), pp.478-496.
Vluggen, M. and Bollen, L. (2005). Teaching enterprise resource planning in a business curriculum.International Journal of Information and Operations Management Education, 1(1), p.44.
Wu, D. and Olson, D. (2009). Enterprise risk management: small business scorecard analysis.Production Planning & Control, 20(4), pp.362-369.