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The impact of education, experience and inner circle advisors on SME performance: insights from a study of public development centers

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Abstract

In this study, we investigate the effects of entrepreneurial human capital on SME performance using data on 2,713 SMEs within the European Union. Performance was measured in two ways: profitability as ROA and productivity as revenue per employee. Results indicate that both profitability and productivity are positively related to industry-specific knowledge possessed by the CEO-owner prior to starting up the firm and the general business knowledge acquired once the firm is up and running. Experience as a result of having previously worked in a firm in the same industry before starting a business was related to productivity, but there is no relation with profitability. There is a link between performance and inclusion of other CEO-owners in the founder’s inner circle of advisors. This relationship is positive when the advisor’s venture has experienced failure and negative when the advisor’s venture has been successful. We discuss the significance of these findings for research and practice.

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  1. Facultad De Economía-Edificio Departamental Oriental, University of Valencia, Campus De los Naranjos, 46022, Valencia, Spain

    Domingo Ribeiro Soriano

  2. Barry Kaye College of Business, Florida Atlantic University, 777 Glades Road, Boca Raton, FL, 33431, USA

    Gary J. Castrogiovanni

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  1. Domingo Ribeiro Soriano
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Correspondence to Domingo Ribeiro Soriano.

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A first version of this paper was presented at the 2009 Academy of Management Annual Meeting with the title “Human capital factors influencing performance in high-technology SMEs.”

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Soriano, D.R., Castrogiovanni, G.J. The impact of education, experience and inner circle advisors on SME performance: insights from a study of public development centers. Small Bus Econ 38, 333–349 (2012). https://doi.org/10.1007/s11187-010-9278-3

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