When capital does not matter: How entrepreneurship training buffers the negative effect of capital constraints on business creation

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Research summary: Entrepreneurship training is an effective means to promote business creation. We examine the effect of entrepreneurship training in conjunction with capital constraints, which entrepreneurs frequently experience in the context of developing countries and emerging economies. We develop a theoretical model that explains how entrepreneurship training attenuates the negative effect of capital constraints on business creation by developing financial mental models. To test our model, we conducted two longitudinal, randomized field experiments in developing countries. Our studies show a moderation effect of entrepreneurship training on the relationship between capital constraints and business creation. Results reveal that financial mental models mediated this moderation. The study demonstrates the role that entrepreneurship training plays in dealing with capital constraints in entrepreneurship in developing countries and emerging economies.
Managerial summary: A major barrier for entrepreneurship is capital constraints. In the context of developing countries and emerging economies, where people experience severe capital constraints, the common thinking suggests improving access to capital as the major solution for overcoming capital constraints in business creation. Our study provides empirical evidence for a different point of view: It emphasizes the importance of entrepreneurship training as an effective means to cope with capital constraints when starting businesses. Our findings show that entrepreneurship training reduces the negative effect of capital constraints on business creation through financial mental models. This implies that entrepreneurship training improves participants' financial mental models and hence supports them in starting businesses despite capital constraints. Consequently, we recommend promoting entrepreneurship training to overcome capital constraints in business creation.
Original languageEnglish
JournalStrategic Entrepreneurship Journal
Issue number3
Pages (from-to)369-395
Number of pages27
Publication statusPublished - 01.09.2020

Bibliographical note

This research was supported by Deutscher Akademischer Austauschdienst (DAAD, German Academic Exchange Service; ID 50020279 and ID 54391079), the German Commission for UNESCO (Deutsche UNESCO Kommission), BASF Foundation (BASF Stiftung) (STEP-2012-2013), and National University of Singapore (R-317-000-084-133/R-317-000-095-112). We would also like to thank Eike Hedder, Andreas Heese, Rebecca Kernert, Marie-Luise Lackhoff, Kay Turski, Melanie von der Lahr, Kristina Zyla, Diana Br?e, Svenja Haskamp, Susan Haskamp (n?e Ktimbo), Alexander K?sshauer, Lukas Samel, Johannes Steinberg, Nina Weilm?nster, Sebastian Zimmermann, Meike Schwill, Alexander Fr?se, Sarina Pfeiler, and Sophia Glaser for their support in collecting the data. Special thanks go to Makerere University Business School, Makerere University, Uganda Christian University, Kyambogo University, Uganda Martyrs University, and Uganda National Commission for UNESCO for the fruitful cooperation.