Human capital investments and skills outcomes specific to the different entrepreneurship phases

Abstract

Entrepreneurs require some elements of human capital investment (work experience, education, industry-specific and entrepreneurship-specific experience) and skills to perform entrepreneurial activities in different entrepreneurship phases. However, entrepreneurship literature is silent on which specific human capital investments and skills are needed in each of the entrepreneurship phases (nascent, new business and established phases). In addition, studies that applied human capital to understanding entrepreneurial behaviour focused on either opportunity recognition or exploitation without dealing with more than one phase of the entrepreneurship process. Accordingly, this study investigated the human capital investments and skills specific to the different entrepreneurship phases. This study employed a sequential mixed-method research design using interviews and surveys. The interviews were conducted to: identify the sources of entrepreneurship skills; discover skills relevant in each entrepreneurship phase; and use the results of the qualitative phase to develop a survey instrument for measuring applied skills in a larger population of entrepreneurs. The data was collected in face-to-face interviews with a purposive sample of 15 entrepreneurs (five per entrepreneurship phase) and six national experts in entrepreneurship. The quantitative study was aimed at confirming the skills sets derived from the qualitative phase, determining their significance across the different entrepreneurship phases, and testing the relationship between skills, sources of skills that are the human capital investments, and entrepreneurship phases. After validating the quantitative measuring instrument, a questionnaire survey covered 235 entrepreneurs who participated in the study. Through confirmatory factor analysis, the categories of skills developed were: start-up skills; core business skills (business management, financial management, human resource management and marketing skills); personal and leadership skills (social and interpersonal, leadership and personal skills); and technical skills. The hypotheses were tested using inferential statistics that included the Kruskal-Wallis test, Mann-Whitney U test, and hierarchical multiple regression. The results showed that applying start-up, social and interpersonal, technical, and human resource management skills across the entrepreneurship phases produces an inverted U-shaped curvilinear relationship, thus they increase from the nascent to new-business phase and decline in the established phase. Marketing, personal and leadership skills have a negative curvilinear relationship with the entrepreneurship phases as they are applied maximally in the nascent phase but decrease in the new-business and established phases. Financial management and business management skills have a positive curvilinear relationship with the entrepreneurship phases as they increase from the nascent phase, through new business to the established phase. Overall, the relationship between skills and entrepreneurship phases was found to be an inverted U-shaped curvilinear, thus the application of skills positively increases from the nascent to new-business phase but declines from the new-business to established phases. The study also revealed that, as entrepreneurs start businesses, in the nascent phase the use of human capital investments (especially formal education) as a source of skills declines, thus creating a need to acquire more entrepreneurship-specific investments. When the application of skills declines from the new-business to the established phase, entrepreneurs seek additional sources of skills to counter the depreciating skill sets. In addition to acquiring skills from human capital investments, entrepreneurs learn skills from actors in their social networks. So skills acquired from the human capital and social actors are applied unequally in the different entrepreneurship phases. Finally, the entrepreneurship phase and some identified contextual factors were found to have a moderating effect on the relationship between skills and human capital investments. The results of the study assisted in developing a skills framework that will give a deeper understanding of human capital investments and skills needed in the entrepreneurship phases. This study makes a contribution to policy-makers, scholars and training institutions to categorize and sample entrepreneurs according to their skills requirements and entrepreneurship phases.