Social capital and new business start-ups: the moderating effect of human capital

Abstract

This paper adds to the literature on social capital and entrepreneurship. Along with human capital, social capital is perceived as resources that trigger and drive the entrepreneurial process. The network success hypothesis articulates social capital as a driver of entrepreneurial success, while the compensation hypothesis states that social capital compensates entrepreneurs for lack of human capital or financial capital. In this study the compensation hypothesis is tested by hypothesising moderating effects of human capital on the association between social capital and entrepreneurial activity. The results from logistic regression analysis applied on a sample of 712 Norwegian farm households show that farming experience and partly education diminish the positive associations found between social capital variables and entrepreneurial activity. Former start-up experience did not show significant moderating effects.

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