Beyond social capital: the role of entrepreneurs' social competence in their financial success

doi:10.1016/S0883-9026(00)00069-0

Journal of Business Venturing

Volume 18, Issue 1, 1 January 2003, Pages 41-60

https://doi.org/10.1016/S0883-9026(00)00069-0 Get rights and content

Abstract

Two studies investigated the hypothesis that the higher entrepreneurs' social competence (their ability to interact effectively with others as based on discrete social skills), the greater their financial success. Entrepreneurs working in two different industries (cosmetics and high-tech) completed a questionnaire designed to measure several aspects of their social competence (e.g., accuracy in perceiving others, skill at impression management, persuasiveness). Results indicated that one aspect of social competence (e.g., accuracy in perceiving others) was positively related to financial success for both groups of entrepreneurs. In addition, social adaptability was related to financial success for entrepreneurs in the cosmetics industry, and expressiveness was related to such success for the entrepreneurs in the high-tech industry. The questionnaire employed to assess social competence was cross-validated with a third group of entrepreneurs who completed this measure themselves, and whose social competence was also rated by persons who knew them well. The two sets of ratings agreed closely, thus providing evidence for the validity of this measure. Overall, findings are consistent with the view that a high level of social capital (e.g., a favorable reputation, extensive social network, etc.) assists entrepreneurs in gaining access to persons important for their success. Once such access is attained, however, entrepreneurs' social competence influences the outcomes they experience.

Section snippets

Executive summary

Venkataraman (1997) and Shane and Venkataraman (2000) have recently suggested that a key focus for the field of entrepreneurship should be “Why, when, and how some people and not others discover and exploit opportunities.” (Italics added.) In this research, we focus on a question closely related to this suggestion: Why are some entrepreneurs more successful than others in exploiting opportunities they have discovered?

Previous efforts to address this important issue have often considered the

Participants

Two samples of entrepreneurs participated in the study — a total of 230 individuals. Those in the first sample were 159 independent sales contractors who created their own cosmetics distribution organizations, and also created or helped to “spin off” additional independent distribution organizations. All were female and all ran their businesses from their homes in one mid-western state.

The entrepreneurs in our second sample were 71 top executives in high-tech entrepreneurial firms recruited

Preliminary analyses

In order to determine whether the items on the questionnaire assessed distinct aspects of social competence, a principal component factor analysis with varimax rotation was performed on the total sample (the initial and replication studies; n=230). Parallel analysis (Horn, 1965) was then applied to determine the appropriate number of factors to retain. Parallel analysis generates an artificial data set with the same number of observations, variables, means, and standard deviations as the

Discussion

The results of the present research offer support for the hypothesis that the higher entrepreneurs' social competence, the greater their financial success. For both samples, accuracy in perceiving others (social perception) was significantly related to a measure of financial success. In addition, for entrepreneurs in the cosmetics industry, social adaptability was related to such success (although not quite significantly so; P<.06). Finally, for entrepreneurs in the high-tech industry,

Acknowledgements

The authors wish to express their sincere appreciation to Rob McDonald for his outstanding assistance with respect to data analysis and to Gerald R. Ferris for supplying articles and references directly relevant to the present research.

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