Academic journal article Journal of Business and Entrepreneurship

Human Assets and Entrepreneurial Performance: A Study of Companies Started by Business School Graduates

Academic journal article Journal of Business and Entrepreneurship

Human Assets and Entrepreneurial Performance: A Study of Companies Started by Business School Graduates

Article excerpt

ABSTRACT

We examined the effect of taking core elective entrepreneurs hip courses on the performance of independent businesses started by Babson alumni who graduated between 1985 and 2009. Taking entrepreneurs hip courses enhanced the amount of startup capital raised, but real-world experience enhanced it more. However, neither taking entrepreneurs hip courses nor learning how to write a business plan had any effect on the subsequent operating performance of the business. In contrast, professional experience gained after graduation before starting a business improved operating performance.

EXECUTIVE SUMMARY

Our study examines if businesses started by alumni who took core elective entrepreneurship courses performed any better than ones started by alumni who never took those courses. We surveyed 3,775 Babson alumni who graduated during a 25-year period, 1985-2009; 63% had taken one or more of three core elective entrepreneurship courses and 37% had taken none.

During the past 25 years, entrepreneurship education has become a major field of business school pedagogy, so it is surprising that there have been few studies of whether it is effective. What's more, almost all those studies concentrate only on short-term effects of entrepreneurship education on students' intentions to become entrepreneurs; very few have looked at long-term effects; and fewer yet have studied the performance of businesses started by alumni. Not surprisingly, the National Council for Graduate Entrepreneurship (NCGE 2004) report pleaded for research into the performance of entrepreneurship education graduates in action as actual entrepreneurs. Our paper is a pioneering attempt to answer the question raised by the NCGE report and by many others concerned with the effectiveness of entrepreneurship education. We look at whether entrepreneurship education has a positive influence on performance when starting up a new venture or subsequently operating it and also examine the effect of experience on entrepreneurial performance.

We found that taking entrepreneurship courses enhanced the amount of startup capital raised, but real-world experience enhanced it more. However, neither taking entrepreneurship courses nor learning how to write a business plan had any effect on the subsequent operating performance of the business. In contrast, professional experience gained after graduation before starting a business improved operating performance.

The results provide new insights about the value of entrepreneurship courses in higher education and their importance relative to practical experience. Our findings are important for students, educators, policy makers, foundations, and benefactors.

LITERATURE SUMMARY

The literature that is most relevant to our study deals with the relationship between entrepreneurial performance and founder's human capital - education and experience in particular - because according to human capital theory, education and experience are the most important determinants of intellectual performance and facilitate assimilating new knowledge and adapting to new situations (Weick, 1996; van der Sluis, van Praag, Vijverberg, 2008). Literature on the effect of general education on entrepreneurial performance is fairly extensive, but published articles on the effect of entrepreneurship-specific education on entrepreneurial performance are extremely rare. Due to space limitations, we present the following brief summary of what the literature tells us about the relationship between human assets and entrepreneurial performance. (An extensive literature review is available from the lead author.)

Summary

General education is related positively to entrepreneurial performance, especially in the USA. But empirical evidence relating entrepreneurship-specific education with performance is extremely scarce and not convincing. The literature on creativity and expertise leads to the conclusion that it takes 10 years to become an expert in any domain; which we infer also applies to entrepreneurship. …

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