Entrepreneurial Capability Scale and New Venture Performance : The Moderating Role of Entrepreneurship education

This study presents a model involving four distinct elements of entrepreneurial capability: passion and self-achievement, integrity and commitment, leadership and management, and active learning and analysis. By conducting studies across several cities in China, this study develops and validates a 30-item entrepreneurial capability scale to capture the four dimensions, then uses the new scale to examine the antecedent and consequence of entrepreneurial capability. Results show the positive relationship between prior experience and entrepreneurial capability, and between entrepreneurial capability and new venture performance. Entrepreneurship education in university moderates the positive effect of entrepreneurial capability on new venture’s management performance. The resultant instrument provides researchers with a useful measurement tool for evaluating entrepreneurial capability. 1 About the Authors: a Rebecca Wenjing Lv is a Ph.D. student in the Department of Innovation, Entrepreneurship, and Strategy of the School of Economics and Management at Tsinghua University, Beijing, China. Her research focus on technology entrepreneurship, venture capital investment in entrepreneurship, and technology innovation. b Changqing Lai is a Ph.D. student in the Department of Innovation, Entrepreneurship, and Strategy of the School of Economics and Management at Tsinghua University, Beijing, China. He is interested in entrepreneurship education, social network and entrepreneurship, entrepreneurial motivation and national strategy. Changqing Lai holds a Bachelor's degree (2014) in software engineering from Huazhong University of Science and Technology. His paper about entrepreneurship education is accepted by international journal and his paper about water strategy is published on journal of information and computational science which is indexed by EI complex. c Jin Liu is an Assistant Professor in the Graduate School of Education at Beijing Institute of Technology, Beijing, China. Professor Liu is the Deputy Director of Center for Faculty Development of Beijing Institute of Technology. His research, teaching, and social service support college student entrepreneurship, entrepreneurship education, autonomous enrolment, and faculty mobility and innovation. 1 This research was funded by the 2011 Key Project of National Social Science Foundation of China (“Study on Training Mode of Knowledge Entrepreneurial Capability of College Students”, 11AGL003). The views expressed here are those of the authors and not necessarily those of the NSSFC. Introduction Entrepreneurship has been an emerging issue both in research and practice in China, especially in these years. Chinese government has brought out the policy of “Mass Entrepreneurship” as the new economic engine of Chinese economy. However, the failure rate of new venture cannot be ignored [1]. Even if new venture could survive, they can hardly perform well [2]. In examining influencing factors of new venture performance, several researchers have discussed the effect of entrepreneurial capability [3-5]. However, there has not reached a widely acceptable agreement on the concept of entrepreneurial capability (EC). Some researchers focus on firm’s capacity, introducing the concept of entrepreneurial capacity as a firm’s capacity to sense, select, and shape opportunities, and synchronize their strategic moves and resources in pursuit of these opportunities [5]. This firm-level definition of entrepreneurial capacity has some overlap with dynamic capabilities [6]. Furthermore, where does this “firm’s entrepreneurial capability” come from? As most of new venture formed mainly by the entrepreneurs themselves, the influence of entrepreneurs’ characteristics on new venture performance cannot be ignored. The central role of the entrepreneur in determining firm performance has been studied by several researchers [7, 8]. Several researches has noticed the important role of entrepreneurs’ characteristics in new venture, by proposing the concept of entrepreneurial passion [9], or the concept of entrepreneurial alertness [10] and examined the prior knowledge as its antecedents, and firm’s innovations as its consequences. However, these two concepts about entrepreneur’s characteristics cannot capture the whole view of entrepreneurs’ characteristics. As the role of entrepreneurs in new venture is not only having passion towards the firm, or having alertness to acquiring new opportunities, but also, seizing business opportunities, and exploiting and configuring existing resources to maximize firm performance [11]. Previous researches on entrepreneurial capability (EC) attempts to take the whole process view of entrepreneurs’ characteristics in new venture, including from the aspect of entrepreneur characteristics [12], the aspect of entrepreneurial opportunity [3], the aspect of learning [13], the aspect of contextual factors [14], and the aspect of network relationships [15]. This study aims at developing a theoretical reasonable measurement of entrepreneurial capability, by first reviewing existing literatures in this area, and then summarizing and defining the concept of entrepreneurial capability. From this foundation, we propose that entrepreneurial capability consisting of four distinct elements: passion and self-achievement, integrity and commitment, leadership and management, and active learning and analysis. We then develop a scale with solid psychometric properties on individual entrepreneur-level, which is different from previous firm-level scales developed by other researchers. Our research reports two studies to develop and validity a scale for entrepreneurial capability. In Study 1, we first use expert interviews to generate 41 items, and then employs exploratory factor analysis and then confirmatory factor analysis to assess reliability and factor structure. The revised scale is then be used in Study 2 to test nomological validity of entrepreneurial capability, by examining prior knowledge acting as its antecedents, and new venture performance acting as its outcomes. After that, we further test the moderating role of entrepreneurship education in the relation between entrepreneurial capability and new venture performance, and propose that to entrepreneurs who have received entrepreneurship education during in universities, the positive effect of their entrepreneurial capability on their new venture’s performance would be stronger than those have not received entrepreneurship education. Our study makes several contributions to entrepreneurial capability research. First, we offer a specific scale which could help researchers to grasp the dimensions of entrepreneurial capability and its implications. Second, we also discusses the antecedents and consequences of entrepreneurial capability. Third, we propose the moderating role of university entrepreneurship education in the relation between entrepreneurial capability and new venture performance, which indicates the importance and meaning of entrepreneurship education in universities. State-of-the-Art Entrepreneurial Capability. We argue that the concept of “competitiveness” or “competencies” is too broad for studying entrepreneurial capabilities. “Competitiveness” could also be used at various levels of study, such as the firm level, the industry level, and even the national level [7, 16]. As for entrepreneurial capabilities include several subtle human characteristics which could hardly been seen as one type of competency [17]. Meanwhile, as competitiveness is always ultimately concerned with the long-term performance [7], which is not a quite perfect measurement for new venture as few of new venture could survive to have long-term performance. Thus, to measure new venture performance, without solid external data source or annual reports, using entrepreneurs’ own perceptions might be more appropriate. We summarize existing literature related to entrepreneurial capability. The results reports in Table 1. As Table 1 shows, most researches on entrepreneurial capability take the firm-level research, meanwhile, major amounts of researches are theoretical research or case study, without solid empirical test. Thus, this paper aims to focus on individual entrepreneur-level capability, and take conductive studies to test reliability and validity using empirical research. Table 1 Summary of researches related to entrepreneurial capability Construct Definition Dimensions Researchers Research type Entrepreneurial capability firm’s capacity to sense, select, and shape opportunities, and synchronize their strategic moves and resources in pursuit of these opportunities Sensing, Selecting, Shaping, and Synchronizing Abdelgawad et al. (2013); Zahra, Abdelgawad, & Tsang (2011) Theoretical research Entrepreneurial competency a higher-level characteristic encompassing personality traits, skills and knowledge, can be seen as the total ability of the entrepreneur to perform a job role successfully. Entrepreneurial, Opportunity, Relationship Conceptual, Organizing, Strategic, and Commitment competencies Man, Lau, & Chan (2002) Theoretical research International entrepreneurial capability Firm-level ability to leverage resources via a combinations of innovative, proactive, and risk-seeking activities to discover, enact, evaluate, and exploit business opportunities across borders. International experience, international marketing capability, international learning capability, networking capability, and innovative and risk-taking capability Zhang et al. (2009) Empirical research with survey Entrepreneurial capability A micro-foundation for dynamic capability and includes creative search Opportunity identification and enacting, Woldesenbet, Ran, & Jones (2012) Case study Entrepreneurial orientation A managerial attitude that will guide the entire strategy-making process following an nine-item, seven-point scale proposed by Covin and Slevin (1989) Alegre & Chiva