The Interplay of Human and Social Capital in Shaping Entrepreneurial Performance: The Case of Vietnam

Abstract

This study investigates the effects of human capital, social capital and their interaction on the performance of 1,398 Vietnamese new-born firms. Operating profit is used as the measure of success. Human capital is captured by individual-level professional education, start-up experience, and learning. Whereas the first two dimensions of human capital are measured with traditional indicators, we define learning as ability to accumulate knowledge to conduct innovation activities (new product introduction, product innovation and process innovation). Social capital is measured as benefits obtained from personal strong-tie and weak-tie networks. Key findings are three-fold: (i) human capital strongly predicts firm success, with learning exerting a statistically significant positive impact on operating profit; (ii) benefits from weak ties outweigh those from strong ties; (iii) interaction of human capital and social capital displays a statistically significant positive effect on new-firm performance.

Diversification Strategies and Firm Performance: A Sample Selection Approach

“…Those firms exporting their products / services are likely to outperform their non-exporting counterparts. Finally, with respect to individual characteristics of owners, consistent with our previous finding (Santarelli and Tran, 2013) and a number of studies on the return to education (for instance, Cooper et al, 1994;Parker and Van Praag, 2006), professional education has a significant and positive effect on firm performance. We do not find evidences for a significant impact of industry profitability on firm performance.…”

“…Since our aim is to isolate the effects of "product diversification" on performance, we introduce three categories of control variables: (i) individual level: educational attainment, age and gender of the owner; (ii) firm level: firm size, age, capital intensity, debt ratio, technological resources, and whether the firm exports its products / services; (iii) industry level: profitability proxied by average industry ROA (return on assets). The inclusion of these variables in the model is based on three streams of literature: industrial organization, management, and finance (Markides, 1995;Hitt et al, 1997;Qian, 2002;Santarelli and Tran, 2013). …”

Young innovative companies: Are they high performers in transition economies? Evidence for Vietnam

“…This is consistent with Cohen and Levinthal (1990) in showing that technological capacity enables firms to absorb incoming spillovers and protect their own knowledge; (ii) both capital intensive and highly leveraged YICs are less profitable; (iii) firms operating in multi-business sectors and/or exporting their products/services abroad outperform their peers. This confirms the recent findings from Garcia-Quevedo et al (2014), Tran (2013), andTran et al (2015); and finally, (iv) a contradictory effect exists between labor size and economic size. Firms endowed with a large asset pool are normally capital intensive and thus incur high sunk costs and transaction costs because of their "asset specificity".…”

“…-Diversification: Diversified firms realize higher profit margins than firms with a highly concentrated product/process spectrum (Santarelli and Tran, 2013). The impact of diversification on firm performance is mixed.…”

The Effect of Social Capital and Knowledge Sharing on Innovation Capability

“…Unlike human capital, which is a combination of a person's attributes, skills or experiences, social capital consists of value and benefit, both actual and potential, which are produced by a person's social interactions (Santarelli & Tran, 2012). Social capital could interact with human capital and financial capital.…”