Academic journal article Entrepreneurship: Theory and Practice

Invention Quality and Entrepreneurial Earnings: The Role of Prior Employment Variety

Academic journal article Entrepreneurship: Theory and Practice

Invention Quality and Entrepreneurial Earnings: The Role of Prior Employment Variety

Article excerpt

We use creativity theory to analyze the effects of occupational job variety and industry variety on invention quality, and entrepreneurial earnings. We test our ideas with survey data from 770 inventor-entrepreneurs who commercialized their own inventions. Results suggest that occupational and industry variety substitute for each other in positively affecting invention quality whereas a lack of industry variety is associated with greater entrepreneurial earnings. Results are consistent with the idea that high levels of both occupational and industry variety enables the generation and discovery of inventions, but these ideas are usually not technically feasible or financially viable.

Introduction

A central goal of entrepreneurship research is to identify the factors that predict entrepreneurial success (Shane & Venkataraman, 2000), particularly with respect to identifying new opportunities and successfully exploiting them for commercial profit (e.g., Arentz, Sautet, & Storr, 2013; Corbett, 2005). Much research has been dedicated to identifying a range of dispositional factors including risk-taking propensity and cognitive abilities (for a review, see Astebro, 2012). Alternatively, scholars have also sought to identify nondispositional factors, with a particular interest in human capital (for a review see Unger, Rauch, Frese, & Rosenvusch, 2011). The core idea of human capital theory is that investments in human capital (e.g., education or job skills) increase net lifetime earnings because of their value in most types of employment (Becker, 1964). In addition, Lazear (2005) posits that entrepreneurial success is contingent on acquiring all the relevant and diverse business skills required to start and run a new venture. However, while many conclude that human capital is essential to entrepreneurial success (e.g., Briiderl, Preisendorfer, & Ziegler, 1992; Cooper, Gimeno-Gascon, & Woo, 1994), some remain skeptical of its value for entrepreneurship (e.g., Baum & Silverman, 2004; Haber & Reichel, 2007).

To resolve this debate, Unger et al. (2011) conducted a meta-analytic review of 30 years of human capital research and found only a small positive effect of human capital on entrepreneurial success. They offer the explanation that human capital effects on entrepreneurial success depend on how relevant human capital is to the specific entrepreneurial tasks required for success. For example, Davidsson and Honig (2003) find human capital to be more strongly related to the task of starting a new business than the task of completing the first sale or turning a profit. Consequently, Unger et al. suggest the importance of addressing how human capital reflects learning from prior experiences to effectively execute the variety of entrepreneurial tasks required for success.

Considered together, human capital research on entrepreneurship provides two suggestions: entrepreneurship may require a variety of business skills (Lazear, 2005), and some business skills are more important for certain entrepreneurial activities whereas other business skills are more important for other entrepreneurial activities (Davidsson & Honig, 2003). In this article, we suggest that unpacking human capital into its component parts--be it knowledge and skills acquired through prior occupational experiences or prior industry experiences--and separating out the effects of these component parts on specific entrepreneurial tasks should provide new insights into the link between human capital and entrepreneurial success.

In reviewing the aforementioned research, we posit that distinguishing between occupational variety and industry variety (cf. Astebro & Thompson, 2011) and between two dependent variables that capture entrepreneurial success--i.e., invention quality and entrepreneurial earnings--makes a useful contribution to furthering our understanding of the role of human capital on entrepreneurial success. …

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