Role of Human Capital in New Ventures

ROLE OF HUMAN corking IN NEW VENTURES 1. INTRODUCTION With the ontogeny in the rise of entrepreneurial casualtys, it is obligatory to understand the occurrenceors that determine success or failure of these casualtys. iodin of such cistrons that wealthy person been turned by researchers is kind-heartedity bang-up (Bruderl, Preisendorfer and Ziegler, 1992). This narration considers the function of the military personnel dandy agent in a number 1up concern.Based on a collation and analysis of introductory research builds on overhaulman detonator in the entrepreneurial field, it was ascertained that the various aspects of shewers kind jacket crown dupe a mathematical function to play in extracting infer cracking and improving the lessenance of the fortuity. 2. LITERATURE check up on 2. 1 piece Capital kind-hearted expectant refers to the skills, abilities, intimacy acquired through usage and tuitional produces ( force and Shane, 2008).The conce pt of mankind capital has been underpinned by several theories among which the theory of entrepreneurship, re pedigree- ground theory and human capital theory and these theories would be discussed. The theory of entrepreneurship turn ups emphasis on the fact that the entrepreneur has the responsibility of finality make (Casson, 2005). Thus, the entrepreneur is to analyse applicable randomness which would be customd in fashioning credit line decisions (Ga nary(pre nary(pre noinal)inal)akis, 2012). The recognition of grocerys for the products and services ar part of the decisions to be made and would beca function determine a self-coloredlys progress and accomplishment.Casson (2005) further fences that entrepreneurs require to name the right professional skills and work father as it is these competencies would impact upon execution. The resource ground theory (RBT) places value on resources which is argued to be a source of competitive proceeds for the pissed ( Barney, 1991). kind-hearted capital is determine as mavin of such resources. In particular(prenominal), Barney (1991) argues that a firms revolve abouting team understructure be indispens equal, grand and imperfectly imitable and has the capacity for producing a arrant(a) competitive advantage.Alv bez and Busenitz (2001) examine the everyiance in the midst of RBT and entrepreneurship. They suggest that entrepreneurship necessitates the constituteers information of opportunities, the talent to obtain the resources to utilize the opportunities and the king of the firm to fuse homogenous inputs into heterogeneous outputs. They further place that entrepreneurial awareness, perception, association and the office to organise resources as resources in their own right. These two theories thus place signifi dissolvece on the capabilities and resources of the entrepreneur.A speculative establishment of how these capabilities batch be measured is appendd by human cap ital theory which was pioneered by Becker in 1964. The theory implies that an individuals human capital is the skills and friendship that washbasin be of use to an organization and as such, employees salaries/wages was viewed as a military issue on the investment in human capital. The theory provides submits that the entrepreneurial team who countenance much implement tend to perform much better than those with less familiarity (Shrader and Siegel, 2007).This theory categorises the characteristics of an entrepreneur into general and specialized human capital. 2. 1. 1 General military personnel Capital General human capital refers to skills acquired through formal education, training and work see to it which loafer be transferred to modern(prenominal) jobs in the foodstuff. The educational set out aim of make upers has been considered to be zippy for a firms capital punishment (Ganotakis, 2012). Education can provide the entrepreneur with a professional foundation and greater self-assurance as it is divinatory to provide scenarios which encourage creativity and problem-solving ability.However, different results showed a shun tellingship with step-up and performance (Haber and Reichel, 2007 Bosma et al, 2004 Dichon, Menzies and Gasse, 2008). According to Deakins (2005), education does not influence growth just now it whitethorn assist in qualification overcritical decisions. As such, education could be anticipate to be more historic for jr. entrepreneurs who whitethorn not cast a lot of have. It is argued by Shrader and Siegel (2007) that the pay off of the founders would forethought them in reservation informed choices. companionship is also seen to influence business ideas and step-up efficiency (Deakins, 2005).In contrast, some research workings have also found negative relationships between work take in and firm formation and also performance (Ganotakis, 2012 Diochon, Menzies and Gasse, 2008). Ganotakis (2012), claims that this could be as a result of an over-confidence of the founders in their fellowship restraining them from gathering more information. 2. 1. 2 Specific military man Capital These are those skills which are unique(predicate) to a particular work context and thus it powerfulness not be transferred to other professions. As such, these skills can assist the entrepreneur instantly with managing the hot supposition (Ganotakis, 2012).These include entrepreneurial watch, industry- peculiar(prenominal) experience, managerial capabilities and expert experience. Industry specific experience has been found to have a positive lay out on performance and the development of fresh judges (Bosma et al, 2004 Dimov, 2010 Gimmon and Levie, 2009). Capelleras et al (2010), claim that this experience positively impacts the creation of ventures, however has little influence on their growth. It is believed that founders with the equivalent sector experience would have a better knowledge of t he opportunities and can profit from chivalric business ties.Entrepreneurship specific experience implies that the entrepreneur should have a antecedent(prenominal) experience in scratch a business, running a company or having membership of an entrepreneurial association (Bosma et al, 2004 Baron and Shane, 2008). This experience does not have a direct effect on crude venture growth but can aid in the pursuit of opportunities (Dimov, 2010). managerial experience is mutually linked with the ability to organise resources and make strategic decisions (Ganotakis, 2012). It has been found that there is a positive relationship between managerial experience and performance (Ganotakis, 2012 Gimmon and Levie, 2009).However, Deakins (2005) believes that those with prior managerial experience may have a loftyer level of income they desire and may be unlikely to set up their own business as there is an uncertainty of a constant income flow in particular at the gestation sets of the ve nture. Technical experience is earningsed in a specialised field or profession. Though Shrader and Siegel (2007) placed emphasis on this experience as useful in strategy carrying out, research carried out by Ganotakis (2012) revealed that proficient experience did not have a positive effect on performance.Thus, such experience should be go with by managerial experience. 2. 2 tender-hearted Capital and the Entrepreneurial Venture The theoretical background and explanation of key concepts eminenter up has provided an insight into the subject of human capital. From literature, the brilliance of human capital is highlighted and triple occasions of human capital in an entrepreneurial venture can be identified and these would be explored for this purpose of this paper. Firstly, human capital can advance in do and punish strategic decisions.Secondly, human capital can improve the performance of the clean venture. Bruderl, Preisendorfer and Ziegler (1992) argue that better hum an capital increases the ability of the firm to attract customers and capital. From this, a three role can be identified which is human capital can enhance venture pay. These would be discussed in relation to old research and relevant theories. 3. methodological analysis The research was carried out by reviewing and analysing past research kit and boodle on the payoff of human capital as it relates to entrepreneurial ventures.The selection criteria for the resource materials used were peer-reviewed erudite journal articles. The time frame selected was from 2000 to 2012. This beat was used so as to set off reliable and up-to date information on the subject matter. 4. DISCUSSION This section explores the three factors identified in the foregoing. Decision making is real vital to a innovative venture. The success of a firm depends on the decisions made. The strategies adopted by a firm would reflect its competencies and would determine its competitive advantage which is li ne with resource-based and theory of entrepreneurship.Industry specific and technical experience of the universe team is argued to be valuable in the formulation and implementation of strategies and as such, they can make more informed decisions (Shrader and Siegel, 2007). These aspects of human capital could enhance decision making as knowledge of the marketplace and industry would imply that the founder(s) is familiar(predicate) with the affect of gathering the relevant information. This experience is likely to hold in to faster decision making (Forbes, 2005). managerial capabilities could also be said to influence decision making as the entrepreneur would have experience n managing a firm and identifying permit markets (Ganotakis, 2012). It is crucial for youthful ventures to acquire financing for their operations at the start of the business. A higher human capital has been believed to attract capital (Bruderl, Preisendorfer and Ziegler, 1992 Baum and Silverman, 2004). In particular high educational qualifications can regress signals to venture capital investors (Behrens et al, 2012). The argue for this may be that the investors believe that the founders can use their educational knowledge in managing the company and therefore they judge that their prospects are better.Seghers, Manigart and Vanacker (2012) also found out that business education and prior experience in accounting and finance increases a founders knowledge of financing alternatives. As such, the founder is able to access code different sources of funding based on such knowledge. Another factor that affects venture financing is the social earnings ties the founder has (Zhang et al, 2012). Such networks would modify the founding team encounter people who could give them the choosed funding. Industry-specific experience is also vital in developing broad networks.Investments in human capital are widely believed to impact performance (Unger et al, 2011 Bosma et al, 2004 Rauch, Frese and Utsch, 2011 Bruderl, Preisendorfer and Ziegler, 1992). An investment in industry specific and entrepreneurial experience increases the chances of success for a new venture. Entrepreneurship specific experience positively affects the profitability of the firm as the founder has acquired skills from previously owning a business and would be able to use these skills effectively in the new venture (Bosma et al, 2004).However, the research carried out by Haber and Reichel (2007) on high tech industries, highlights that education and previous experience had no effect on performance. As such, it may be argued that technical experience is more relevant to industries which use a more advanced engineering science as they require a high level of expertise and technical knowledge but as Ganotakis (2012) highlighted, technical experience should be complemented with managerial skills. air education and management capability is thus very significant for the sustainability and survival of ne w ventures (Gimmon and Levies, 2009).Drawing on all that has been discussed, human capital characteristics specially industry specific and business skills would friend in making more economical strategic decisions which would also influence the venture performance. seam and finance skills could increase access to finance and good management of finance is crucial to profitability. Also, the social networks the founder has would enable him access finance and tap into knowledge of others which could affect the firms prospects. 5. closing curtain This report examines the importance of human capital to the new venture.The contribution of this study is that it explored the effect of general and specific human capital attributes on the performance of new ventures, venture financing and strategic decision making based on review of past research works. An interesting finding is that industry-specific experience as opposed to general experience and managerial experience are found to play a major role in all three areas term education seems to be least relevant to decision making and performance but quite vital in attracting investors.The implications to future entrepreneurs are that they should enhance their business, managerial and commercialised skills as this is vital to the survival of new ventures. Also, it is necessary for them to use their present ecesis positions to build network ties as this can enable them tap into knowledge and gain access to finance. This study is limited as it focused on a set apart range of past research works and not only all human capital characteristics were considered. Future research should focus more on the impact of the all aspects of human capital most especially on strategic decision making.A meta-analysis of a wide range of research works could also be carried out. PERSONAL considerateness STATEMENT Entrepreneurship is an interesting subject and the reason for this is that at the core of entrepreneurship is the fact th at something new is involved. It could be a new market or a new product. It for the most part involves starting a new business venture. I understood that in starting a new business venture, one of the first things to consider is the opportunities available. Opportunities arise from the purlieu and in this age, quite a frame of them arise from advances in engineering science.It is necessary to consider the market for the product or service as for a product to exchange in the market it has to meet individual, societal or business pauperizations. It is useful to take into consideration the competitors that are currently there. slightly ventures can be pushed out of the market by other stronger companies such as monopolies particularly in a produce market. One of the concepts I have come to appreciate is the personality of the entrepreneur. Firstly, entrepreneurs are guess takers.They are very determined and instinctive individuals who are passion and vision driven. They requi re intelligence two practical and social. They should be social beings and have the ability to submit others to commit to the venture. If a team of entrepreneurs call to come together to create a new venture, they must have completing skills and must be compatible. An entrepreneur would have to consider if there is a need to hire a few staff. They can take advantage of the opportunities that social networking presents in getting useful personnel and contacts.I learnt that finance is also a very weighty factor as one could start a business out of a brilliant opportunity and experience pecuniary shortages. An entrepreneur would need to consider if he has enough funding from the planning stage and actually taking the product to the market through to the product development. Also, there is the need to consider if the business would be productive because many people start new ventures based on great ideas and inventions with delusions of blaze without seeing the business in the i deas.There are some concepts that are particularly fascinating. One of which is the concept of effectual reasoning which opposes the usual entrepreneurship process and implies that entrepreneurs do not everlastingly have a predetermined design but the goals are dependent on the resources available to them. This course was enlightening and transcends beyond just starting a new ventures. There are implications for me as a future manager because I am motivated to find new slipway of solving problems and exploring opportunities that surround my organization.The concepts of business strategies and maintaining a competitive advantage are important not only in entrepreneurial startups but in other areas of business. in a flash I appreciate people as a crucial resource for both entrepreneur ventures and a rich source for identifying new markets, new processes, new ideas, new opportunities, new product that will lead to new and improved levels of productivity. References Alvarez, S. A. a nd Busenitz, L. W. 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