Who Gets Ahead and Why: State of the Field Explores Human Capital

This post is the first in a series by the Growthology team, where we will take a look at some of the topics discussed in State of the Field, a compilation of knowledge on entrepreneurship research written by the leading experts in the field.

 

Brink Lindsey, author of the book Human Capitalism, writes that “the central importance of human capital in today’s economy is a response to the rise of social complexity.” As society has become increasingly complex, jobs have become more highly skilled, the workforce has changed, and the study of human capital has become increasingly mainstream.

While financial means are important for a startup’s success, I argue that human capital is equally important. Human capital within entrepreneurship is one area Growthology will expand on throughout the course of this year. Several of my colleagues’ posts have presented different points of view on human capital matters (workers, students and crowdfunding to name only the most recent).

In this post, I hope to provide a loose understanding of the state of human capital research as it relates to entrepreneurship, as well as present future questions to address. Many of the thoughts presented here are in a developing stage and I invite others to engage in this conversation.

The State of the Field contributors of human capital, Sonali Shah (University of Illinois at Urbana-Champaign); M. Diane Burton (Cornell University, The IRL School); and Pao-Lien Chen (National Tsing Hua University), ask one overarching question: who gets ahead and why?

This question has been the plot of many non-fiction books: Outliers and David & Goliath by Malcolm Gladwell, Drive by Daniel H. Pink, Lean In by Sheryl Sandberg, Mindset by Carol Dweck, even biographies like Steve Jobs by Walter Isaacson, to name only a handful of best sellers. As we’ve seen extraordinary success from a select few entrepreneurs, society has become obsessed with the patterns and habits of the successful, looking for the magic formula for achievement.

The State of the Field contributors take an interesting approach that relies on understanding two types of entrepreneur characteristics: the individual and the situational.

Individual factors include both innate and choice traits. Innate traits comprise things like race, gender, ethnicity, nationality, family background, personality, and genetics—things that are predetermined about an individual. Choice traits include things like education and experience—paths chosen or not chosen.

Situational factors include cultural values, political climate, regulatory environment, industry & organizational competitiveness, and population demography—things that are not necessarily within the control the entrepreneur, but that have great impact on business dynamics.

While I tend to agree that these are important pieces of the human capital puzzle, these traits and circumstances alone do not determine success or failure in entrepreneurship. I’m equally interested in learning about the teams and networks surrounding and supporting entrepreneurs. This bleeds into another State of the Field topic (found here), but for sake of argument, let’s consider this scenario:

A mechanical engineer leaves a firm she’s been with for the two decades since she graduated college. She has never taken a business class. Obtaining financing to start the business was challenging and took a couple of years. Thanks to support from her family and mentors she has begun taken on clients and suddenly finds herself managing a new business, making hiring decisions, and creating policies to affect organizational culture.

Will she succeed? Why or why not? Is it her engineering background or experience with just one company? That she didn’t take a business class? That she’s a woman? What if it’s just her grit and can-do personality? Her childhood? How does the team around her and her own skills impact her entrepreneurship decisions? These are the questions human capital attempts to answer.

I find the questions of industry, demographics, networks, and teams highly enticing. I think it’s important that we go beyond studying the entrepreneurs alone. To know who gets ahead and why, we need to further understand beyond the individual and situational factors, and include the people that surround them and the organizational behavior of the firms they create. 

The Kauffman Foundation hopes to learn more about questions on human capital components such as gender through the grants from our Women’s RFP. Just recently I read a great dissertation from one of our newer Kauffman Dissertation Fellows on human capital in entrepreneurship in the scientific and engineering sectors. On the whole, there is still much to be discovered and many unanswered questions to ponder.

Are we (the scholars, the foundations) asking the right questions? How should we best strategize a focus on human capital? I’m hoping we will have continued dialogue throughout the year. These discussions will play out in longer-form writing, at conferences, with other people, and through associated research. For now, keep up with Growthology and State of the Field to follow human capital research.

To be a contributor to State of the Field, please email me at akrause@kauffman.org.

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