2013 6th International Conference on Information Management, Innovation Management and Industrial Engineering
The Entrepreneurial Psychological Capital and the Study of Entrepreneurship Zhang Ming
Hu Zuguang
School of Economics & Management China Three Gorges University Yichang, China
[email protected]
School of Business Administration Zhejiang Gongshang University Hangzhou, China
[email protected]
Abstract—The disconnection between the theory of psychological capital and the study of entrepreneurship leads to the absence of the concept of entrepreneurial psychological capital in the study of entrepreneurship. In order to make the combination of the theory of psychological capital and the study of entrepreneurship possible, it is very necessary to introduce the concept of the entrepreneurial psychological capital into the study of entrepreneurship, which can not only consolidate the methodology foundation of the study of entrepreneurship, but also explain the entrepreneurial process and venture performance powerfully. This paper focuses on: (1) exploring dimensions of the entrepreneurial psychological capital and developing corresponding scale; (2) the mechanism analysis of the entrepreneurial psychological capital on the entrepreneurial process and venture performance; (3) the empirical study of the entrepreneurial psychological capital influencing venture performance; (4) the entrepreneurial psychological capital development. Limitations and future research are concluded in the paper. Keywords-Psychological Capital; the Study Entrepreneurship; the Entrepreneur; Venture Performance
I.
of
INTRODUCTION
Studying entrepreneurship and related issues is a typical methodological individualism research paradigm from the perspective of individual entrepreneurs,. In the rational choice approach of methodological individualism, the psychological capital (PsyCap), “beyond human and social capital” [1], is rarely considered as an explanatory variable in the study of entrepreneurship, which results in disconnection between PsyCap theory and the study of entrepreneurship: on one hand, the PsyCap scholars focus their attention upon organizational behavior and human resource management and primarily took employees or managers as the study sample. Although some scholars have extended explained variable to the company level, the explanatory variables are still limited to the PsyCap of employees or managers. On the other hand, the existing process-based entrepreneurship study has been focused on discovering the factors of entrepreneurial individual level which affects opportunity identification, opportunity development and opportunity utilization, but more studies are about the relationship between the entrepreneur ability ( as well as those being closely related to entrepreneur ability, such as economic capital, human capital, social capital, etc.), business strategies and the entrepreneurial process and venture performance, which leads to relative neglection of the role of the entrepreneurial PsyCap in the interpretation. The purpose
of this paper is to describe the necessity of the entrepreneurial PsyCap as explanatory variables applying into the study of entrepreneurship, and then put forward some specific ideas about how to introduce the entrepreneurial PsyCap into the study of entrepreneurship. II.
THE REASONS
The reasons why the entrepreneurial PsyCap should be taken into the study of entrepreneurship are two-fold: first, the introduction of the entrepreneurial PsyCap can help to reinforce the methodology foundation of the study of entrepreneurship; second, the entrepreneurial PsyCap is of more strong explanatory power for the related issues of entrepreneurial process and a better predictive index of venture performance. A. The Methodology Foundation The study of entrepreneurship, as a shared research topic of economics, management, sociology, psychology and other disciplines, whether it can become an independent discipline, largely depends on whether the methodology foundation can be built in a sense of scientific philosophy. Although the methodology foundation includes a lot of aspects, a question must be answered whether we should start from the individual or the whole to explain the existing social phenomenona, in other words, whether we should adopt methodological individualism or methodological holism paradigm. According to Lin Qiang and his colleagues [2], there are mainly eight entrepreneurship study schools. In these eight schools, except for “social” school, the other seven schools can be generally classified into the methodological individualism paradigm, which starts from individual entrepreneurs to study the functions of entrepreneurs, entrepreneurial nature, entrepreneurial behavior, entrepreneurial processes and the venture performance. In terms of the individual entrepreneur, the resources endowments of entrepreneurs need to be clarified, so that the entrepreneurial strategies and the venture performance can be explained. In many entrepreneurs’ resources endowments, scholars have given full attention to the individual characteristics of entrepreneur (such as age, gender, education, etc.), personality traits (such as big-five personalities, the control point, self-esteem, etc.), economic capital, human capital and social capital, but rarely involve entrepreneurs’ another capital--PsyCap. If we consider new venture performance as the entrepreneurs’ natural extension [3], the neglect of the
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role of the entrepreneurial PsyCap in the interpretation will lead to a number of “remainder terms” not being explained, or mistakenly attribute these “remainder terms” to entrepreneurs’ individual characteristics, personality traits, human capital or social capital.
and external environmental factors, and the business strategies and organizational structures can be regarded as the result of entrepreneurs’ response to the environment, while the entrepreneurial team can be considered as an aggregation of individual entrepreneurs based on the interests share principles. That is why in the near future scholars focus on testing which type of entrepreneurial capitals has more influence on new venture performance. We take Hmieleski and Carr's study [9] for example. The study randomly selected Dun and Bradstreet market brand database of 1,500 companies as a sample, added the sum of standardized scores of optimism scale, self-efficacy scale, resilience scale and hope scale to get the entrepreneurial PsyCap index, and took the average annual earnings and average employee growth as an indicator of new venture performance. Their study found: as compared to financial capital, human capital and social capital, the entrepreneurial PsyCap explained the greater portion of variation of new venture performance; the dynamic nature of environment strengthened the relationship of the entrepreneurial PsyCap and new venture performance, namely, the stronger dynamic environment, the higher the correlation between them.
B. The Entrepreneurial Process Entrepreneurship is the pursuit of opportunity regardless of the constraints of the current resource conditions [4], which contains the formation of entrepreneurial motivation, the advance of entrepreneurial process and the achivement of entrepreneurial goals. The existing research show that new firms are of a higher failure rate [5]. This high failure rate is largely attributed to “liability of newness” [6]. If we accept the high failure rate of establishing a business as public information, then, what makes the potential entrepreneurs to choose to be realistic entrepreneurs when they are fully aware of the imformation of high failure rate? What makes entrepreneurs to undertake uncertainties? Knight had long answered these questions in his famous and classic work: it was self-confidence (or self-efficacy) that allows entrepreneurs to work under pressure and makes them brave to provide insurance for the skeptical and timid ones in exchange for the right of final results [7] (P269). In the meantime, the entrepreneurial process, which consits of the identification of entrepreneurial opportunity, the development of business model, the building of entrepreneurial team, the acquisition of business resources and legitimacies, the survival of new venture, the growth of new venture, and many other activities, are full of uncertainties. Each step of establishing a business for entrepreneurs is a difficult process and will experience a variety of repetition and frustration. Only human capital and social capital are not enough to overcome those obstacles and to recover from the setbacks. Therefore we should take hope, resilience, optimism, and other PsyCaps into consideration.
III.
THE MEASURES
A. Exploring Dimensions and Scales The primary part of application of the entrepreneurial PsyCap variables into the study of entrepreneurship is to develop the measurement tools of the entrepreneurial PsyCap. Most of the existing PsyCap scales are based on mature companies and target employees or managers, such as Luthans and his colleagues [10], and there is no specific PsyCap scale for measuring the entrepreneurial PsyCap. In the light of the behavior of entrepreneurs being quite different from general managers and general staff, it should be self-evident that the suitability of using latter two PsyCap scales to measure the former PsyCap is undesirable. At the same time, we must also pay attention to cultural background differences in the process of developing the entrepreneurial PsyCap scale. Because of different cultural backgrounds, the dimensions of the entrepreneurial PsyCap are not identical. To take the employee PsyCap for example.Taking positive organizational behavior (POB) as the standard, according to a strict scale development process, Ke Jianglin and his colleagues [11] developed a local PsyCap scale based on Chinese cultural background. The results indicated the local PsyCap scale had two high-order factors, task-oriented PsyCap and guanxi-oriented PsyCap. The Guanxi-oriented PsyCap includes toleration and forgiveness, respecting and courtesy, modesty and prudence, thanksgiving and dedication, while the task-oriented PsyCap consists of selfconfidence and courage, optimism and hope, spirit of enterprise and diligence, resiliency and perseverance.
C. The Venture Performance The venture performance in the study of entrepreneurship is the most important dependent variable, and is an important criterion to test explanatory power and predictability of various theories. Comparing to the PsyCap research, the study on factors affecting the venture performance has a much longer history, experiencing an evolutionary process: from emphasizing the role of entrepreneurs to emphasizing on business strategy, industry structure, organizational system and other factors, then to re-emphasizing the role of entrepreneurs. Most of the early scholars believed that the venture performance was determined by the entrepreneur’s personality and characteristics. But in the year of 1987, Sandberg and Hofer’s model NVP = f (E, IS, S) (NVP represents new venture performance, E represents entrepreneurs) [8] took a big step forward for new venture performance model, and subsequent studies were all about amendment and development of the model, or testing of the model. We argue that NVP’s determining factors can be classified into two categories: entrepreneur individual factors
B. Analysizing the Influencing Mechanism There are few existing studies taking the entrepreneurial PsyCap as the explanatory variable and the venture performance as explained variables. The main concern of
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the few existing studies is all about “if” and “extent” of the relationship, not “how” and “why” of the relationship. The entrepreneurial PsyCap is essentially a “potential” capability, which does not automatically change into the venture performance. Only by amplifying the other capabilities (such as entrepreneurial capability, etc.) and response to the external environment, can the entrepreneurial PsyCap change into actual entrepreneurial action, and then the venture performance can be achieved.
necessity of Introducing the entrepreneurial PsyCap into the study of entrepreneurship from three aspects, and puts forward specific ideas about how to introduce the entrepreneurial PsyCap into the study of entrepreneurship. It is undeniable that PsyCap theory itself is not mature, and there are still many other “schools” among the study of entrepreneurship. Therefore, it is not easy to apply the entrepreneurial PsyCap into the study of entrepreneurship. The theoretical framework ability and solid empirical research design are quite essential, and only in this way can the role of entrepreneurs in the study of entrepreneurship be more complete.
Therefore, in the impact chain of the entrepreneurial PsyCap upon the venture performance, what is the mediating variables remains as a critical question for researchers. In addition, how to conduct mechanism analysis which includes the individual, group and organizational levels is of great importance too for the study considering the entrepreneurial PsyCap is an individual-level variable and the venture performance is the organizational level variable.
ACKNOWLEDGMENT This research is financially supported by Humanities and Social Sciences General project of the Ministry of Education of China (Grant NO. 11YJA630195).
C. The Empirical Study Although there are lots of researchers taking entrepreneurial self-efficacy as an explanatory variable and the venture performance as an explained variable, the entrepreneurial self-efficacy in these studies is the application of Bandura's self-efficacy theory in the study of entrepreneurship rather than construct upon the positive psychology and positive organizational behavior. To our knowledge, Jensen’ work [12] and Hmieleski and Carr’ work [9] are the only two studies taking the entrepreneurial PsyCap as a whole explanatory variable, and the venture performance as explained variables under the current positive organizational behavior framework. However, their studies were conducted in the context of western culture. Therefore, another important task in future empirical study is how to reflect cultural differences.
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[2]
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D. Developing the Entrepreneurial PsyCap Luthans and his colleagues [13] developed a specialized psychological capital intervention (PCI) model, which is designed to develop workplace psychological capital. Their experiments showed that, through the psychological capital development, individual and organizational performances had been improved significantly. However, the PCI model is specifically designed for employees and managers, and the whole process requires experts’ external intervention and personnel concentration. In reality, it may not be suitable for the development of entrepreneurs’ psychological capital. Thus, it is a major practical problem for entrepreneurship management researchers to effectively motivate those entrepreneurs who are not easy to concentrate and have a higher level of self-esteem to initiatively develop their own psychological capital. IV.
[7] [8]
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[10]
[11]
[12]
[13]
CONCLUSIONS
In view of the absence of the entrepreneurial PsyCap in the study of entrepreneurship, this article demonstrates the
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