Human capital theory of entrepreneurship

What is the human capital theory of entrepreneurship?

Human capital theory was developed by Dr. Gary Becker, an American economist at the University of Chicago, and others.

According to Becker, human capital is different kind of capital from physical and financial resources. Education, technology and etiquette training, and health expenditures are capital too because they improve wellbeing, health, earnings, and appreciation. Expenditures on education, training, and health care are investments in human capital.

Human capital also refers to an individual or group’s stock of knowledge, routines, personality characteristics and social habits. Human capital even includes creativity that can be usefully applied to an economic purpose, and thus is considered to be a type of wealth. Countries, organizations, and groups with greater human capital are expected to be better able to accomplish goals to bring about economic improvement.

Several studies have found a positive association between human capital and economic development, including innovation and productivity growth. These associations have been used as evidence to justify government subsidies for education and training.

Human capital attributes, such as education and experience, may also be critical for entrepreneurial success. The human capital of founders attracts investors (Stuart and Abetti, 1990), especially venture capitalists (Zacharakis and Meyer, 2000).

Some have argued that human capital theory is problematic because individuals often seek education and training in order to signal their quality to employers and investors rather than actually aiming to attain knowledge and skills (Spence, 1973).

All entrepreneurship theory categories

Other Sociological Theories of Entrepreneurship:

Sources:

Becker, G. S. (1994). Human capital revisited. In Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition) (pp. 15-28). The University of Chicago Press.

Stuart, R. W., and Abetti, P. A. (1990). Impact of entrepreneurial and management experience on early performance. Journal of business venturing, 5(3), 151-162.

Zacharakis, A. L., and Meyer, G. D. (2000). The potential of actuarial decision models: can they improve the venture capital investment decision?. Journal of Business Venturing, 15(4), 323-346.


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