The Impact Of Social Capital Of Entrepreneurs On Government Venture Capital Decisions And Firm Performance
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Date
2016
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Business and Management
Program
Doctor of Philosophy
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This item is made available by Morgan State University for personal, educational, and research purposes in accordance with Title 17 of the U.S. Copyright Law. Other uses may require permission from the copyright owner.
Abstract
Entrepreneurs play an important role in the development of economies. In order to be successful, entrepreneurs need to acquire resources to exploit business opportunities. The question of how entrepreneurs acquire resources has been explored in the literature; however, more research is needed to better understand entrepreneurs' resource acquisition processes, particularly with respect to financial resources. Venture capital is an important source of financial resources, and for Saudi Arabian entrepreneurs, government venture capital (GVC) is a significant source of investment capital. GVC decisions can be impacted through entrepreneurs' social capital. Social capital refers to the benefits that an actor extracts from his/her social structures and networks, and can be operationalized through a focus on social exchange and network characteristics (e.g. strong ties, weak ties, structural holes). In this dissertation, I developed 10 hypotheses and investigated how entrepreneurs' social capital impact GVC funding decisions and early firm performance. Using Burt's (1984) ego-network survey methodology, I collected data from 190 entrepreneurs (12.5% response rate) who applied to three GVC sources in Saudi Arabia – Saudi Credit and Saving Bank, Badir, and Waed. Data were collected through online questionnaire that was administered in early 2016. Using logistic regression and correlation analyses, the study found support for seven hypotheses; three were not supported. The results support the idea that social capital/social network characteristics such as network size, weak and strong ties, structural holes, and network heterogeneity of Saudi Arabian entrepreneurs impact GVC funding decisions and firm performance. The study also examined and found differences in the relative importance of social network subunits (e.g. academic, industry, others) such that industry contacts had more of an impact on funding decisions than any other subunits. Following a discussion of the results, implications for practice, and limitations, future research directions are offered.