FOUNDER’S HUMAN CAPITAL, EXTERNAL INVESTMENT, THE SURVIVAL OF HIGH TECHNOLOGY VENTURES Eli Gimmon 12210 Telephone 00 972 52 3966252 Email egimmon@megiddo.co.il Jonathan Levie* G1 1XH Telephone 00 44 141 548 3502 Email ABSTRACT The effect of founder characteristics in attracting external investment and enhancing survival of new high technology ventures is explored using human capital theory and signalling theory. We test the effect of founder characteristics on external investment in and survival of new high-technology ventures by tracking a random sample of 193 start-ups, all participants in the Israeli Technology Incubator Program. Founder’s business management expertise and academic status attracted external investment, but founder’s general technological expertise did not. Founder’s business management expertise and general technological expertise positively affected venture survival, but founder’s academic status did not. Possible implications for entrepreneurs, investors, policy and further research are discussed. Keywords: Technology entrepreneurship; human capital; investors; signals * Corresponding author technology
Repeated sampling of this cohort over time could test if different founders’ human capital factors and technology commercialisation strategies affect longer term performance, including value at exit, or if the same founders’ human capital factors explain more or less of the variance in performance. A limitation of this study is that it ignored founder's social capital. While this factor is less likely to vary for ventures nurtured in a specialist incubator program, founder’s social capital does affect a venture’s funding chances (Greene et al., 1999; Honig et al., 2006). Further research could tease out signals of social capital factors such as reputation (Harrison et al., 2004), for example, whether academic institutional prestige moderated the academic status effect on external investment. Two human capital factors that featured in empirical studies summarised in Table 1 were omitted from our research design: entrepreneurial mindset and learning ability. These are complex constructs that were not measured in the first survey; they may or may not have affected our results. Recent work by Baumol et al. (2009) casts doubt on the proposition that high levels of technical education affects entrepreneurial mindset and learning ability, so we have no reason to suppose that these unobserved characteristics are driving our results. However, future studies should take these constructs into account. Acknowledgements We are grateful to Prof. Zvi Eckstein, Dr. Shlomi Parizat, Mr. David Prumov, and Ms. Rina Pridor for providing us with the data from the 2001 survey performed for the Chief Scientist Office of the Israeli Ministry of Trade and Industry so that this study could be undertaken.
Dependent & Independent variables employed in test Odds ratio Sig (two tailed) Conclusion H1a Funding & founder has business management experience 2.71 ** Supported H2a Funding & founder is technologist 0.93 n.s. Not supported H3a Funding & founder has PhD or Professorial title 4.22 ** Supported H1b Survival & founder has business management experience 2.22 * Supported H2b Survival & founder is technologist 3.63 ** Supported H3b Survival & founder has PhD or Professorial title 1.44 n.s. Not supported si nfairlece level close to .05 (exact value pf .077) (* Significant at 5% level; ** Significant at 1% level; n.s. Not significant