International Variations in the Impact of Perceived Entrepreneurial Ability and Actual Ability on Entrepreneurial Activities

• Author: Manoj Chandra Bayon,Yancy Vaillant
• Published date: 01 March 2016
• Date: 01 March 2016
• DOI: http://doi.org/10.1002/jsc.2052

RESEARCH ARTICLE

Strat. Change 25: 131–150 (2016)

Published online in Wiley Online Library

(wileyonlinelibrary.com) DOI: 10.1002/jsc.2052

Copyright © 2016 John Wiley & Sons, Ltd.

Strategic Change: Briengs in Entrepreneurial Finance

Strategic Change

DOI: 10.1002/jsc.2052

International Variations in the Impact of Perceived

Entrepreneurial Ability and Actual Ability on

Entrepreneurial Activities1

Manoj Chandra Bayon

School of Business, Universidad del Norte, Colombia

Yancy Vaillant

ESC-Rennes School of Business, France

Perceived entrepreneurial ability and high actual ability impact entrepreneurial

activities, irrespective of the stage of development of the economy, but the joint

impact of perceived entrepreneurial ability and high actual ability is not systematic

across economies.

Entrepreneurship is increasingly recognized as a critical component of the socio‐

economic development of economies (Henkerson and Stenkula, 2010). Globally,

there exists a strong correlation between business start‐ups and economic growth

(Kelley et al., 2012). As a result business creation is being given top priority, and

dierent policies utilize entrepreneurship as an instrument for revitalizing territo-

ries. In this eort, some scholars have suggested a selective orientation as regards

the type of entrepreneurship to be promoted (for example, high technology entre-

preneurship) and/or promoting entrepreneurship among those with high human

capital (Shane, 2009; Henkerson and Stenkula, 2010). Although empirical evi-

dence shows that the founders’ ability (human capital) is signicantly related to

entrepreneurial performance (Unger et al., 2011), it is not clear if individuals with

high ability (human capital) are more likely to choose entrepreneurship. Interest-

ingly, recent studies have revealed that in general the (favorable) perception that

individuals have about their entrepreneurial ability is more likely to inuence the

decision to enter entrepreneurship (Koellinger et al., 2007; Lafuente et al., 2007;

Townsend et al., 2010; Hogarth and Karelaia, 2012; Bayon et al., 2015). ere-

fore, it can be surmised that if individuals with high ability are encouraged by

their perceived entrepreneurial ability to choose entrepreneurship, then the impact

of entrepreneurship on the economy is likely to be higher.

1 JEL classication codes: L26, O57.

Owing to the differential impact

of perceived entrepreneurial

ability and high actual ability

onentrepreneurship across

economies, we suggest different

policy measures to address the

issue of quality and quantity

ofentrepreneurship across

economies.

Entrepreneurship will benet

frompolicies supporting

entrepreneurial training in

developing (factor‐driven)

economies, while improvements

informal education will enhance

entrepreneurial activity in

efciency‐driven countries.

Economies at a higher stage of

economic development are more

likely to benet from the joint

effect of perceived entrepreneurial

ability and high actual ability, an

outcome that is likely to lead to

an improvement in the quality of

entrepreneurship in those

economies.

132 Manoj Chandra Bayon and Yancy Vaillant

Copyright © 2016 John Wiley & Sons, Ltd. Strategic Change

DOI: 10.1002/jsc

In this paper, we examine the role of these two dimen-

sions of ability, perceived entrepreneurial ability and high

(actual) ability, separately as well as jointly in inuencing

the decision to become entrepreneurs. As far as we know,

no studies have simultaneously examined the distinct role

of perceived entrepreneurial ability and actual ability and

their interaction with the decision to pursue entrepreneur-

ship. Although the independent eect of both perceived

entrepreneurial ability and high actual ability on entrepre-

neurship has been demonstrated in other studies, we argue

that the successful pursuit of entrepreneurship is more

likely to emerge from the matching of perceived entrepre-

neurial ability with high actual ability and hence needs to

be empirically investigated.

Our second research objective is to examine the impact

of perceived entrepreneurial ability and high actual ability

across economies. Recent data from the Global Entrepre-

neurship Monitor (GEM) indicate that entrepreneurial

activity is more intense in emerging and less‐developed

economies compared with more‐developed economies

(Kelley et al., 2012). is could be due to the dierential

impact of perceived entrepreneurial ability and high actual

ability on the choice of entrepreneurship vis‐à‐vis wage

employment across economies. Given the role of perceived

entrepreneurial ability and considering the dierences in

the stock of high actual ability (human capital) (Barro,

1991), we assess whether the independent and the joint

eect of perceived entrepreneurial ability and high actual

ability on entrepreneurship holds across economies.

e contribution of our study is twofold. First, we

highlight the distinctive role of perceived entrepreneurial

ability and actual ability in inuencing entrepreneurship

across a large set of economies. Second, by identifying the

dierential impact of perceived entrepreneurial ability and

high actual ability across economies, we provide new

insights into the relative role of subjective ability judg-

ments and objective ability in inuencing the quality and

quantity of entrepreneurship.

e paper is organized as follows. In the next section

we rst distinguish perceived entrepreneurial ability from

actual ability, followed by specic hypotheses. e meth-

odology used to reach the objectives of the paper is

explained in the second section, and the third section

presents our results. A nal section provides conclusions

and discusses the academic and policy implications of the

study’s results.

Literature review and hypotheses

In the human capital theory, abilities are resources that

improve productivity (Becker, 1993). Human capital

theory considers the acquisition of abilities as an invest-

ment decision in which individuals spend time and mon-

etary resources, with an expectation of future income

(Becker, 1993). Furthermore, those who make greater

investments (for example, by acquiring a greater level of

education and training) expect a higher income from their

chosen occupation. However, human capital as commonly

measured through education and training does not reveal

unobservable abilities. Moreover, innate abilities may

mask the motivation for acquiring higher levels of educa-

tion and training. erefore, while education and training

are indicators of actual ability, perceived abilities reect

the unobservable and tacit knowledge of individuals

(Davidsson and Honig, 2003). Hence, it is necessary to

distinguish actual abilities – those that result from formal

learning (education and training) – from the perceived

abilities of individuals.

High actual ability and entrepreneurial activity

What discourages individuals from choosing entrepre-

neurship? From an individual point of view, the opportu-

nity cost can act as a barrier to entrepreneurship, especially

for individuals with high actual ability (Raphael et al.,

1995). However, several authors have suggested that by

pursuing growth‐oriented and innovative entrepreneurial

ventures, talented individuals who are constrained by time

and physical limitations on ability can scale their ability‐

related advantages and appropriate higher returns through

entrepreneurship instead of waged employment (Murphy