Entrepreneurship : the impact of human capital, a social network and business resources on start-up
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How does a prospective entrepreneur's personal network help him/her in the process of venture creation? In this study the social network is hypothesized to be affected by the entrepreneur's own individual capabilities. Further, social network is hypothesized to generate business resources, which again is hypothesized to be the mediator to start-up. In this path model which includes an interplay between indvidual and structural factors as conducive for start-up, the main hypothesis is that factors appearing later in temporal order transmit all of the impact of prior factors. The model is tested on a sample of "real" potential entrepreneurs who had received a license for starting a business in one industry, farming of cod in Norway. The individuals sent a questionnaire asking for their background characteristics, networking behavior and resource acquisition prior to start-up. The survey had a 59% response rate. of the 289 returned questionnaires, 103 were defined as non-starters and 186 as starters. The empirical analysis revealed the following findings: Human capital is only able to explain 2-7% of the variance in the social network dimensions, Social network, on the other hand, predicts business resources very well (17-40% variance explained). Also, business resources predict start-up well (36%). In controlling for prior variables in temporal order, an interesting picture is revealed. Business resources are not able to transmit all of the effects from prior variables. Human capital has a strong direct impact on the probability of start-up, even when social network and business resources are controlled. Structural factors late in temporal order are therefore not able to mediate all of the effects from individual factors early in temporal order. However, the hypothesis that social network's effect on start-up is fully mediated by business resources received support. Social network in the entrepreneurial process is important only indirectly by generating business resources needed for start-up.