Human Capital and Entrepreneurship

Human capital theory was developed by Dr. Gary Becker, an American economist at the University of Chicago, and others. According to Becker (1994), 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). For example, startups in high-tech often involve founders with PhDs. 

In entrepreneurship, human capital in the form of tacit knowledge, or experience, is key to doing spinout ventures, where the goal is the replicate parent organization capabilities and complementary assets. Human capital of employees that leave to do spinouts is considered a key type of knowledge spillover from incumbents to startups.

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 attainknowledge and skills. Signaling theory has been used as an alternative to human capital theory.


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