Abstract
This study investigates the effects of human capital, social capital and their interaction on the performance of 1,398 Vietnamese new-born firms. Operating profit is used as the measure of success. Human capital is captured by individual-level professional education, start-up experience, and learning. Whereas the first two dimensions of human capital are measured with traditional indicators, we define learning as the ability to accumulate knowledge to conduct innovation activities (new product introduction, product innovation and process innovation). Social capital is measured as benefits obtained from personal strong-tie and weak-tie networks. Key findings are threefold: (i) human capital strongly predicts firm success, with learning exhibiting a statistically significant positive association with operating profit, (ii) benefits from weak ties outweigh those from strong ties, (iii) interaction of human capital and social capital displays a statistically significant positive effect on new-firm performance.
Similar content being viewed by others
Notes
Prior studies on 'start-up' firms generally use size and age thresholds to construct an appropriate sample, with maximum ages set from 10 to 12 years since founding. Empirical research using this upper bound of firm age to delineate start-up firms includes Ostgaard and Birley (1996) and Stuart et al. (1999). Another reason for focusing on firms established from 1995 is that this allows investigation of the whole development process of the private sector since the introduction of Company Law and Law on Private Enterprise in 1990—which created the landmark for the emergence and development of private firms in Vietnam—until the promulgation of Enterprise Law in 2000, which infused a strong entrepreneurial spirit into the local business environment. Actually, up to 70 % of firms in the sample were established after 2000. The other 30 % were mostly established in the late 1990s, with only 0.03 % set up in 1995.
For a review of the measures of the performance of entrepreneurial ventures, see Deeds et al. (1998).
“New product introduction” refers to the ability to bring/launch out a new product or service to market. The variable is operationalized by the answer to the question “Has the firm introduced new products since 2002?” By “product innovation”, we mean the introduction of any improvements to the firm’s existing goods or services. This includes, but is not limited to, improvements in functional characteristics, technical abilities, or ease of use. It is the answer to the question “Has the enterprise made any major improvements of existing products or changed specification since 2002?” Finally, “process/technological innovation” indicates the implementation of a new or significantly improved production or delivery method by developing or bringing new technology into widespread use. The variable is constructed by the answer to the question “Has the enterprise introduced new production processes/new technology since 2002?”.
The White (χ2 = 133.82, p value = 0.002) and Breusch Pagan (χ2 = 26.8, p value = 0.000) tests indicate the presence of heteroskedasticiy; robust OLS estimation is adopted for the human capital equation.
The dummy combines the answers to two questions: “Do you participate in one business network?” and “Do you participate in more than one network?”.
References
Abramovitz, M. (1989). Thinking about growth. Cambridge: Cambridge University Press.
Aldrich, H., & Reese, P. R. (1993). Does networking pay off? A panel study of entrepreneurs in the research triangle. In N. S. Churchill, et al. (Eds.), Frontiers of entrepreneurship research 1993. Boston: Babson College.
Aldrich, H., & Zimmer, C. (1986) Entrepreneurship through social networks. In D. Sexton & R. Smilor (Eds.), The art and science of entrepreneurship. New York: Ballinger.
Almus, M., & Nerlinger, A. (1999). Growth of new technology-based firms: Which factors matter? Small Business Economics, 13, 141–154.
Banerjee, A., & Munshi, K. (2004). How efficiently is capital allocated? Evidence from the knitted garment industry in Tirupur. Review of Economic Studies, 71, 19–42.
Barney, J. B. (1995). Advanced strategic management. Reading, MA: Addison-Wesley.
Barney, J. B., Wright, M., & Ketchen, D. J., Jr. (2001). The resource-based view of the firm: Ten years after 1991. Journal of Management, 27, 625–641.
Barro, R. J., & Sala-i-Martin, X. (1995). Economic growth. New York: McGraw-Hill.
Bates, T. M. (1994). Social resources generated by group support networks may not be beneficial to Asian immigrant-owned small businesses. Social Forces, 72, 671–689.
Bates, T. (1997). Race, self-employment, and upward mobility: An illusive American dream. Washington, DC: Woodrow Wilson Center Press.
Bates, T., & Servon, L. (2000). Viewing self-employment as a response to lack of suitable opportunities for wage work. National Journal of Sociology, 12, 23–55.
Bartjargal, B. (2000). Social capital and entrepreneurial performance in Russia: A panel study. William Davidson Institute Working Papers Series No. 352. University of Michigan.
Baum, J. A. C., & Silverman, B. S. (2004). Picking winners or building them? Alliance, intellectual, and human capital as selection criteria in venture financing and performance of biotechnology startups. Journal of Business Venturing, 19, 411–436.
Becker, G. S. (1964). Human capital: A theoretical and empirical analysis. New York: Columbia University Press.
Birley, S. (1985). The role of networks in the entrepreneurial process. Journal of Business Venturing, 1, 107–117.
Bosma, N. S., Van Praag, C. M., Thurik, A. R., & De Wit, G. (2004). The value of human and social capital investments for the business performance of startups. Small Business Economics, 23, 227–236.
Brown, B., & Butler, J. E. (1995). Competitors as allies: a study of entrepreneurial networks in the U.S. wine industry. Journal of Small Business Management, 3, 57–66.
Bruderl, J., & Preisendorfer, P. (1998). Network support and the success of newly founded businesses. Small Business Economics, 10, 213–225.
Bruderl, J., Preisendorfer, P., & Zielger, R. (1992). Survival chances of newly founded business organizations. American Sociological Review, 57, 227–242.
Brush, C. G., Greene, P. G., & Hart, M. M. (2001). From initial idea to unique advantage: the entrepreneurial challenge of constructing a resource base. Academy of Management Executive, 15, 64–78.
Burt, R. S. (2001). Structural holes versus network closure as social capital. In N. Lin, K. Cook, & R. S. Burt (Eds.), Networks and organizations (pp. 31–56). New York: Walter de Gruyter.
Calabrese, T., Baum, J. A. C., & Silverman, B. (2000). Canadian biotechnology start ups, 1991–1997: The role of incumbents’ patents and strategic alliances in controlling competition. Social Science Research, 29, 503–534.
Cohen, W., & Levinthal, D. (1990). Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35, 128–153.
Coleman, J. (1988). Social capital in the creation of human capital. American Journal of Sociology, 94, 95–120.
Cooper, R. G. (1984). How new product strategies impact on performance. Journal of Product Innovation Management, 1, 5–18.
Cooper, A. C., Gimeno-Gascon, F. J., & Woo, C. Y. (1994). Initial human and financial capital as predictors of new venture performance. Journal of Business Venturing, 9, 371–395.
Davidsson, P., & Honig, B. (2003). The role of social and human capital among nascent entrepreneurs. Journal of Business Venturing, 18, 301–331.
Deeds, D., DeCarolis, D., & Coombs, J. E. (1998). Firm-specific resources and wealth creation in high technology ventures: Evidence from newly public biotechnology firms. Journal of Business Venturing, 12, 31–46.
Dencker, J. C., Gruber, M., & Shah, S. K. (2009). Individual and opportunity factors influencing job creation in new firms. Academy of Management Journal, 52, 1125–1147.
Ellerman, D. (1996). Entrepreneurship development in transitional economies. Washington, DC: World Bank.
Evans, D., & Leighton, L. (1989). Some empirical aspects of entrepreneurship. American Economic Review, 79, 519–535.
Florin, J., Lubatkin, M., & Schulze, W. (2003). A social capital model of high growth ventures. Academy of Management Journal, 46, 374–384.
Fukuyama, F. (1995). Trust: The social virtues and the creation of prosperity. New York: Free Press.
Gimeno, J., Folta, T. B., Cooper, A. C., & Woo, C. Y. (1997). Survival of the fittest? Entrepreneurial human capital and the persistence of underperforming firms. Administrative Science Quarterly, 42, 750–783.
Glaeser, E. L., Laibson, D., & Sacerdote, B. (2002). An economic approach to social capital. Economic Journal, 112, F437–F458.
Granovetter, M. (1973). The strength of weak ties. American Journal of Sociology, 78, 1360–1380.
Greve, A., & Salaff, J. W. (2003). Social networks and entrepreneurship. Entrepreneurship: Theory and Practice, 28, 1–22.
Gustafsson, R., & Autio, E. (2011). A failure trichotomy in knowledge exploration and exploitation. Research Policy, 40, 819–831.
Hamilton, B. (2000). Does entrepreneurship pay? An empirical analysis of the returns to self-employment. Journal of Political Economy, 108, 604–631.
Harrison, R. T., & Leitch, C. M. (2005). Entrepreneurial learning: Researching the interface between learning and the entrepreneurial context. Entrepreneurship Theory and Practice, 29, 351–371.
Hebert, R., & Link, A. (1988). The Entrepreneur: Mainstream views and radical critiques. 2nd ed. Westport, CT: Greenwood Publishing Group.
Hoang, H., & Antoncic, B. (2003). Network-based research in entrepreneurship: A critical review. Journal of Business Venturing, 18, 165–187.
Holmes, T. J., & Schmitz, J. A. (1996). Managerial tenure, business age and small business turnover. Journal of Labor Economics, 14, 79–99.
Honig, B. (2001). Human capital and structural upheaval: A study of manufacturing firms in the West Bank. Journal of Business Venturing, 16, 575–594.
Hultink, E. J., & Robben, H. S. J. (1995). Measuring new product success: The difference that time perspective makes. Journal of Product Innovation Management, 12, 392–405.
Jarillo, J. C. (1989). Entrepreneurship and growth: The strategic use of external resources. Journal of Business Venturing, 4, 133–147.
Johannisson, B. (1988). Business formation: A network approach. Scandinavian Journal of Management, 4, 83–99.
Jovanovic, B. (1982). Selection and the evolution of industry. Econometrica, 50, 649–670.
Kirzner, I. (1997). Entrepreneurial discovery and the competitive market process: An Austrian approach. Journal of Economic Literature, 35, 60–85.
Knack, S., & Keefer, P. (1997). Does social capital have an economic payoff? A cross-country investigation. Quarterly Journal of Economics, 112, 1251–1288.
Koch, B. J. (2005). Social capital in China: An experimental approach. Paper presented at the 100th Annual Meeting of the American Sociological Association (ASA). http://www.allacademic.com/meta/p20678_index.html. Accessed 21 August 2008.
Lerner, M., & Almor, T. (2002). Relationships among strategic capabilities and the performance of women-owned small ventures. Journal of Small Business Management, 40, 109–125.
Lerner, M., Brush, C. G., & Hisrich, R. D. (1995). Factors affecting performance of Israeli women entrepreneurs: An examination of alternative perspectives. In W. B. Bygrave et al. (Eds.), Frontiers of Entrepreneurship Research 1995. Boston: Babson College.
Levinthal, D. A., & March, J. G. (1993). The myopia of learning. Strategic Management Journal, 14, 95–112.
Light, I. (1984). Immigrant and ethnic enterprise in North America. Ethnic and Racial Studies, 7, 195–216.
Littunen, H. (2000). Networks and local environmental characteristics in the survival of new firms. Small Business Economics, 15, 59–71.
MacCrimmon, K. R., & Wehrung, D. A. (1990). Characteristics of risk taking executives. Management Science, 36, 422–435.
Malerba, F. (2007). Innovation and the dynamics and evolution of industries: Progress and challenges. International Journal of Industrial Organization, 25, 675–699.
Miguel, E., Gertler, P., & Levine, D. I. (2005). Does social capital promote industrialization? Evidence from a rapid industrializer. The Review of Economics and Statistics, 87, 754–762.
Minniti, M., & Bygrave, W. B. (2001). A dynamic model of entrepreneurial learning. Entrepreneurship: Theory and Practice, 25, 5–16.
Norton, W. I., & Moore, W. T. (2006). The influence of entrepreneurial risk assessment on venture launch or growth decisions. Small Business Economics, 26, 215–226.
Ostgaard, T. A., & Birley, S. (1996). New venture growth and personal networks. Journal of Business Research, 36, 37–50.
Paldam, M., & Svendsen, G. T. (2000). Missing social capital and the transition in Eastern Europe. Working Paper #00-5. Aarhus: Aarhus School of Business, Department of Economics.
Parker, S. C., & Van Praag, C. M. (2006). Schooling, capital constraints, and entrepreneurial performance: The endogenous triangle. Journal of Business and Economic Statistics, 24, 416–431.
Pennings, J. M., Lee, K., & Van Witteloostuijin, A. (1998). Human capital, social capital, and firm dissolution. Academy of Management Journal, 41, 425–440.
Peters, M., & Brush, C. (1996). Market information scanning activities and growth in new ventures: A comparison of service and manufacturing businesses. Journal of Business Research, 36, 81–89.
Piazza-Georgi, B. (2002). The role of human and social capital in growth: Extending our understanding. Cambridge Journal of Economics, 26, 461–479.
Pickles, A. R., & O’Farrell, P. N. (1987). An analysis of entrepreneurial behaviour from male work histories. Regional Studies, 21, 425–444.
Putnam, R. (1993). Making democracy work: Civic traditions in modern Italy. Princeton: Princeton University Press.
Rand, J., & Tarp, F. (2007). Characteristics of the Vietnamese business environment: Evidence from a SME survey in 2005. A study prepared under component 5: Business Sector Research of the Danida Funded Business Sector Program Support (BSPS).
Rand, J., & Tarp, F. (2009). Credit constraints and determinants of the cost of capital in Vietnamese manufacturing. Small Business Economics, 29, 1–13.
Ravasi, D., & Turati, C. (2005). Exploring entrepreneurial learning: A comparative study of technology development projects. Journal of Business Venturing, 20, 137–64.
Reuber, A. R., & Fischer, E. (1994). Entrepreneur’s experience, expertise, and the performance of technology based firms. IEEE Transactions on Engineering Management, 41, 365–374.
Reuber, A. R., & Fisher, E. (1999). Understanding the consequences of founders’ experience. Journal of Small Business Management, 37, 30–45.
Reynolds, P. D. (1993). High performance entrepreneurship: What makes it different? In N. C. Churchill, et al. (Eds.), Frontiers in entrepreneurship research 1993. Boston: Babson College.
Reynolds, P. D., & White, S. B. (1997). The entrepreneurial process: Economic growth, men, women, and minorities. Westport, CN: Quorum Books.
Rogers, W. (1993). Regression standard errors in clustered samples. Stata Technical Bulletin, 13, 19–23.
Rooks, G., Szirmai, A., & Sserwanga, A. (2009). The interplay of human and social capital in entrepreneurship in developing countries: The case of Uganda. WIDER Research paper No. 2009/09. Helsinki: UNU-WIDER.
Sanders, J., & Nee, V. (1996). Immigrant self-employment: The family as social capital and the value of human capital. American Sociological Review, 61, 231–249.
Santarelli, E., Carree, M., & Verheul, I. (2009). Unemployment and firm entry and exit: An update on a controversial relationship. Regional Studies, 43, 1061–1073.
Santarelli, E., & Tran, H. T. (2011). Growth of incumbent firms and entrepreneurship in Vietnam. Working Paper # 785. Bologna: University of Bologna, Department of Economics. Growth and Change (forthcoming).
Santarelli, E., & Vivarelli, M. (2007). Entrepreneurship and the process of firm’s entry, survival, and growth. Industrial and Corporate Change, 16, 455–488.
Say, J. B. (1803/1971). A treatise on political economy of the production, distribution and consumption of wealth. New York: A.M. Kelley.
Schiller, B. R., & Crewson, P. E. (1997). Entrepreneurial origins: A longitudinal inquiry. Economic Inquiry, 35, 523–531.
Schumpeter, J. A. (1934). The theory of economic development: An inquiry into profits, capital credit, interest and the business cycle. Cambridge, MA: Harvard University Press.
Shane, S. (2000). Prior knowledge and the discovery of entrepreneurial opportunities. Organization Science, 11, 448–469.
Shane, S., & Venkataraman, S. (2000). The promise of entrepreneurship as a field of research. Academy of Management Review, 25, 217–226.
Smeltzer, L. R., Van Hook, B. L., & Hutt, R. W. (1991). Analysis and use of advisors as information sources in venture startups. Journal of Small Business Management, 29, 10–20.
Sonnentag, S., & Frese, M. (2002). Performance concepts and performance theory. In S. Sonnentag (Ed.), Psychological management of individual performance: A handbook in the psychology of management in organizations (pp. 3–25). Chichester: Wiley.
Storey, D. J. (1994). Understanding the small business sector. London: International Thomson Business Press.
Stuart, T. E., Hoang, H., & Hybels, R. (1999). Interorganizational endorsements and the performance of entrepreneurial ventures. Administrative Science Quarterly, 44, 315–349.
Szirmai, A. (2008). Explaining success and failure in development. UNU-MERIT Working Paper #2008-013. Maastricht: UNU-MERIT.
Taylor, M. (1999). Survival of the fittest? An analysis of self-employment duration in Britain. Economic Journal, 109, 140–155.
Timmons, J. A. (1994). New venture creation (4th ed.). Irwin, IL: Burr Ridge.
Tran, A. N. (2010). Corruption, political systems and human development. In A. K. Rajivan & R. Gampat (Eds.), Perspectives on corruption and human development (pp. 268– 320). Bangalore: Macmillan Publishers.
Tran-Nam, B., & Pham, Ch. D. (Eds.). (2003). The Vietnamese economy: Awakening the dormant dragon. London: Routledge Curzon.
Van der Sluis, J., Van Praag, C. M., & Vijverberg, W. (2003). Entrepreneurship selection and performance: A meta-analysis of the impact of education in industrialized countries. The World Bank Economic Review, 19, 225–261.
Van Praag, C. M. (2003). Business survival and success of young small business owners. Small Business Economic, 21, 1–17.
Van Praag, C. M. (2005). Successful entrepreneurship: Confronting economic theory with empirical evidence. Cheltenham: Edward Elgar.
Van Praag, C. M., & Cramer, J. S. (2001). The roots of entrepreneurship and labor demand: Individual ability and low risk aversion. Economica, 269, 45–62.
Venkataraman, S. (1997). The distinctive domain of entrepreneurship research. In Advances in Entrepreneurship, Firm Emergence and Growth, Vol. 3 (119–138). Greenwich, CT: JAI Press.
Westhead P., Ucbasaran, D., & Wright, M. (2005). Decisions, actions and performance: Do novice, serial, and portfolio entrepreneurs differ? Journal of Small Business Management, 43, 393–417.
Yoon, I. (1991). The changing significance of ethnic and class resources in immigrant business: The case of Korean immigrant businesses in Chicago. International Migration Review, 25, 303–331.
Zahra, S.A., & George, G. (2002). International entrepreneurship: The current status of the field and future research agenda. In M. Hitt, R. Ireland, M. Camp, & D. Sexton (Eds.), Strategic leadership: creating a new mindset (pp. 255–288). London: Basil Blackwell.
Zimmer, C., & Aldrich, H. (1987). Resource mobilization through ethnic networks: Kinship and friendship ties of shopkeepers in England. Sociological Perspectives, 30, 422–445.
Acknowledgments
We are grateful to two reviewers for their helpful suggestions. Enrico Santarelli acknowledges financial support from University of Bologna (RFO 2009).
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Santarelli, E., Tran, H.T. The interplay of human and social capital in shaping entrepreneurial performance: the case of Vietnam. Small Bus Econ 40, 435–458 (2013). https://doi.org/10.1007/s11187-012-9427-y
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11187-012-9427-y