The Interplay of Human and Social Capital in Shaping Entrepreneurial Performance: The Case of Vietnam

Enrico Santarelli, Hien Thu Tran
2012 Social Science Research Network  
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 ability to accumulate knowledge to conduct innovation activities (new product
more » ... duction, product innovation and process innovation). Social capital is measured as benefits obtained from personal strong-tie and weak-tie networks. Key findings are three-fold: (i) human capital strongly predicts firm success, with learning exerting a statistically significant positive impact on 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. JEL Classification: L26; L25; L14; J24; O53 the Ministry of Labor, Invalids and Social Affairs in Vietnam (MOLISA) and the Department of Economics of the University of Copenhagen. The two-year panel dataset, drawn from the surveys conducted in 2005 and 2007, contains information on 1,398 start-ups created in Vietnam from 1995 to 2005. The econometric strategy adopted is ordinary least squares (OLS) regression with robust standard errors. Consistent with comparable empirical research for developed countries (Van Praag, 2005; Parker and Van Praag, 2006), our findings show that human capital categorized into education, experience and learning plays a significant role as key determinant of successful entrepreneurship. Measuring the effect of social capital as the benefits obtained from personal strong-tie and weak-tie networks, our findings support Granovetter (1973) and Davidsson and Honig (2003) , but contradict Bruderl and Preisendorfer (1998) , showing that benefits from weak-tie networks outweigh those from strong-tie networks. Weak ties give entrepreneurs access to various types of
doi:10.2139/ssrn.1982497 fatcat:fyf5sljaljh3jbklkeldfoq6xa