Abstract
Human capital has been amply discussed in the literature as a crucial factor for the growth of small and medium-sized enterprises (SMEs). However, the factors mediating the relationship between human capital and small business growth are rarely addressed. Based on the logics of the interlock between abilities, intent and effort, and goals; mediation models; and data from 46,412 French small businesses, we find evidence that reasons to start a business mediate the relation between firm growth and SME owner-managers’ human capital (discriminating between specific and general human capital). The mediation effect is particularly important in the case of general human capital. The obvious and important implication is that without a proper assessment of the reasons to start a business, the dimensions of human capital cannot be used to their full potential to understand firm growth.
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Notes
The denominations of the hypotheses into “a” and “b” refer to general and specific human capital, respectively. In addition, note that the paragraphs preceding the hypotheses are structured similarly: we announce the signal suggested by the reason to start a business (i.e., the direction of intent and effort). Next, we provide references to the link between human capital and firm growth, then the link between the reason and firm growth (direct link of the independent variable and then the mediator with the dependent variable, respectively), then the link between the reason and general human capital and finally the link between the reason and specific human capital.
Enterprise refers to the desire to be an entrepreneur.
Please refer to the full tables in the supplement.
Note that these preliminary models explain only a small part of the variability in the data. This is unsurprising; we are looking for weak signals in noisy data as we attempt to predict growth based on the information available at the time of creation of the business, and we do not include elements of the entrepreneurial behavior that take place afterwards.
Please refer to the full tables of turnover growth in the supplement.
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El Shoubaki, A., Laguir, I. & den Besten, M. Human capital and SME growth: the mediating role of reasons to start a business. Small Bus Econ 54, 1107–1121 (2020). https://doi.org/10.1007/s11187-018-0129-y
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DOI: https://doi.org/10.1007/s11187-018-0129-y