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01-06-2013

Balanced skills among nascent entrepreneurs

Authors: Michael Stuetzer, Martin Obschonka, Eva Schmitt-Rodermund

Published in: Small Business Economics | Issue 1/2013

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Abstract

This paper examines the effects and origins of balanced skills among nascent entrepreneurs. In a first step we apply Lazear’s jack-of-all-trades theory to investigate performance effects of a balanced skill set. Second, we investigate potential sources of balanced skills, thereby testing the investment hypothesis against the endowment hypothesis. Analyzing data on high-potential nascent projects, we find support for the notion that balanced skills are important for making progress in the venture creation process. Regarding the origins of balanced skills, the data support both hypotheses. In line with the investment hypothesis, an early interest in an entrepreneurial career, prior managerial and entrepreneurial experience are significantly related with a more balanced skill set. Supporting the endowment hypothesis, an entrepreneurial personality profile indicating entrepreneurial talent is correlated with a balanced skill set. Our results thus hint at the need for theories on the origins of a balanced skill set that integrate both views.

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We will use the same notation as in the original model to make it easy for the reader to follow our application of model.

Lazear (2005) terms λ as a market-determined premium to entrepreneurship that is endogenously defined within the model so as to equate supply and demand. λ is a multifaceted catch-all variable. It can be interpreted as the level of technological complexity or economies of scales in an industry which hinders the transformation of individual entrepreneurial talent into successful start-up attempts.

There is no response bias between the 152 participants and the 80 non-participants with respect to gender and region (testing for an age bias was not possible due to missing data for the non-participants). Furthermore, there is no bias with respect to age, gender and region between the entrepreneurs of the 100 nascent projects, the 34 already complete firms and the 18 abandoned projects. Also, when comparing the final sample of 90 entrepreneurs with those 142 entrepreneurs dropping out at several stages of the data collection process, we find no sample bias with respect to gender and region.

Variance in this variable might be an artefact of the utilisation of the different sources in the construction of the dataset. However, the results of the Kruskal–Wallis equality-of-populations rank do not support this concern (χ² = 5.4, p = .61), allowing us to safely proceed.

In more detail, count models often specify any form of dispersion as \( V[y_{i} |x_{i} ] = \mu_{i} + \alpha g(\mu_{i} ) \). Underdispersion is given if α < 0 resulting in lower than expected levels of variance V. In order to test for underdisperion we first estimated a Poisson model to compute predicted counts \( \hat{\mu }_{j} \) of our model. We then run the auxiliary OLS regression \( [(y_{i} - \hat{\mu }_{j} ) - y_{i} ]/\hat{\mu }_{j} = \alpha g(\hat{\mu }_{j} )/\hat{\mu }_{j} + u_{i} \) where the function is specified as g = μ ². The coefficient for the α parameter was negative and significant at the 1% level providing strong evidence for underdispersion.

With this we also avoid the negative effects of multicollinearity in the model, which is due to the high correlation of the investment hypothesis variable with age of first entrepreneurial career interest and the control variable age.

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Title: Balanced skills among nascent entrepreneurs
Authors: Michael Stuetzer
Martin Obschonka
Eva Schmitt-Rodermund
Publication date: 01-06-2013
Publisher: Springer US
Published in: Small Business Economics / Issue 1/2013
Print ISSN: 0921-898X
Electronic ISSN: 1573-0913
DOI: https://doi.org/10.1007/s11187-012-9423-2

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