Competence value emersion: a key to sound practices in entrepreneurial finance. From 'Q' to 'T' ratios in the North-Eastern Italian experience

Abstract

The determinants of the value of the entrepreneurial competences and behaviour are examined. The study reveals that time is the link between marginal productivities of the capital assets and that of the human competences. The successful entrepreneur behaves in order to give marketability to skills, riding a cycle that transforms them into a corporate hallmark. We provide a detailed description of a methodology to measure the 'competence value' and to compare it against standard goodwill estimations. Results of empirical analysis over a sample made of more than 3,000 Italian companies show that the proposed Intato-T-ratio is a stronger estimator than the widely diffused Tobin-Q-ratio. Allocating investments according to the competence value can exploit immediately 51% of hidden values and allow higher growth rates during an entrepreneurial cycle lasting 13 years on average. Aborting competence value in credit allowances procedures will impact dramatically on SMEs after the adoption of Basel-3 agreements.

How to Rate the Financial Performance of Private Companies? A Tailored Integrated Rating Methodology Applied to North-Eastern Italian Districts

“…This also means that any investor may use this approach given its specific Z grade (e.g., the one fixed in the Basel agreement for the case of banks). Finally, by utilizing (c), one does not need to employ peer-group benchmarking and may focus mainly on accounting data; in fact, the only condition is to infer about the (whole) market-shortfall (Mantovani 2014).…”

“…Our proposal starts from the same intuitions of Gardenal (2010), who challenged Lintner's approach to SME evaluations through the measure of expected return and volatility. However, diverting from Gardenal's proposal, we prefer to apply Lintner's approach by following the original intuitions that underpin the "competence value" concept and the algorithms for computing the T-ratio (Mantovani 2014). This way, our proposal widens the use of Lintner's model by also considering the risk aversion of the single investor.…”

Competency Model: A Study on the Cultivation of College Students’ Innovation and Entrepreneurship Ability

“…However, the success of entrepreneurial activities depends not only on the current objective market environment but also on the subjective motivation of the entrepreneurs themselves. Entrepreneurial competency is a subjective motivation that influences entrepreneurial activities [10], which includes the entrepreneur's enthusiasm for entrepreneurship and their ability to solve challenges encountered during the entrepreneurial process. It can be said that entrepreneurial competency constitutes an essential prerequisite for the success of entrepreneurial endeavors [11] and serves as a vital skillset for entrepreneurs.…”