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

• Author: Kim Marie Bischoff,Michael M. Gielnik,Michael Frese
• DOI: http://doi.org/10.1002/sej.1364
• Published date: 01 September 2020
• Date: 01 September 2020

SPECIAL ISSUE ARTICLE

When capital does not matter: How

entrepreneurship training buffers the negative

effect of capital constraints on business creation

Kim Marie Bischoff

1,2

| Michael M. Gielnik

3

| Michael Frese

3,4

1

Faculty of Economics & Media, Hochschule Fresenius University of Applied Sciences, Berlin, Germany

2

move gGmbH Entrepreneurship Training Institute, Berlin, Germany

3

Institute of Management and Organization, Leuphana University of Lüneburg, Lüneburg, Germany

4

Asia School of Business (in collaboration with MIT Sloan Management) (ASB), Kuala Lumpur, Malaysia

Correspondence

Kim Marie Bischoff, Faculty of Economics &

Media, Hochschule Fresenius University of

Applied Sciences, Jägerstraße 32, Berlin

10117, Germany.

Email: kim.bischoff@hs-fresenius.de

Funding information

BASF Foundation (BASF Stiftung), Grant/

Award Number: STEP 2012-2013; German

Commission for UNESCO (Deutsche UNESCO

Kommission); National University of

Singapore, Grant/Award Numbers: R-

317-000-084-133, R-317-000-095-112;

German Academic Exchange Service;

Deutscher Akademischer Austauschdienst,

Grant/Award Numbers: ID 50020279, ID

54391079

Abstract

Research summary: Entrepreneurship training is an effec-

tive means to promote business creation. We examine the

effect of entrepreneurship training in conjunction with capi-

tal constraints, which entrepreneurs frequently experience

in the context of developing countries and emerging econo-

mies. We develop a theoretical model that explains how

entrepreneurship training attenuates the negative effect of

capital constraints on business creation by developing finan-

cial mental models. To test our model, we conducted two

longitudinal, randomized field experiments in developing

countries. Our studies show a moderation effect of entre-

preneurship training on the relationship between capital

constraints and business creation. Results reveal that finan-

cial 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

Received: 15 February 2019 Revised: 30 May 2020 Accepted: 4 June 2020

DOI: 10.1002/sej.1364

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and

reproduction in any medium, provided the original work is properly cited.

© 2020 The Authors. Strategic Entrepreneurship Journal published by John Wiley & Sons Ltd on behalf of Strategic Management

Society.

Strategic Entrepreneurship Journal. 2020;14:369–395. wileyonlinelibrary.com/journal/sej 369

capital constraints, the common thinking suggests improving

access to capital as the major solution for overcoming capital

constraints in business creation. Ourstudy 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 busi-

nesses. 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 busi-

nesses despite capital constraints. Consequently, we recom-

mend promoting e ntrepreneurship t raining to overcom e

capital constraints in business creation.

KEYWORDS

emerging economies, entrepreneurship training, financial capital,

mental model, new venture creation

1|INTRODUCTION

Entrepreneurship has a positive impact on innovation and job creation, thus driving economic development and pov-

erty alleviation (Carree & Thurik, 2008; Sutter, Bruton, & Chen, 2019; Thurik, Carree, van Stel, & Audretsch, 2008).

Economic development, employment creation, and poverty alleviation are particularly relevant for developing coun-

tries, which face an extremely high rate of unemployment or irregular employment (International Labour

Office, 2017; Van Waeyenberge & Bargawi, 2018). Given the importance of entrepreneurship, a major task for prac-

titioners, policy maker, and scientists is to promote entrepreneurship.

Research has shown that entrepreneurship training is an effective means to promote entrepreneurship. For

example, entrepreneurship training has positive effects on a variety of short- and long-term outcomes, such as

trainees' entrepreneurial intention, motivation, skills, and entrepreneurial behavior (Martin, McNally, & Kay, 2013;

Nabi, Liñán, Fayolle, Krueger, & Walmsley, 2017). These outcomes in turn positively influence business creation and

further factors indicating long-term success (Martin et al., 2013; Walter & Block, 2016). Thus, it is not an open ques-

tion that, in principle, entrepreneurship training is effective. However, the mechanisms how and why entrepreneur-

ship training unfolds its effects are not yet clear. So far, the typical approach has been investigating main effects of

entrepreneurship training on business creation and related outcomes (Bae, Qian, Miao, & Fiet, 2014; Frese, Gielnik, &

Mensmann, 2016; Martin et al., 2013; Nabi et al., 2017; Walter & Block, 2016). This research has led to important

findings, for example about the importance of using an action-oriented approach, meaning exploratory learning

through actively engaging in realistic tasks in entrepreneurship training (Campos et al., 2017; Frese et al., 2016;

Gielnik et al., 2015; Nabi et al., 2017; Varamäki, Joensuu, Tornikoski, & Viljamaa, 2015).

In this study, we extend current research on the mechanisms through which entrepreneurship training exerts its

effect by adopting a perspective that considers the specific context of entrepreneurship in emerging economies.

Entrepreneurship in emerging economies is characterized by institutional voids and resource constraints (Seelos &

Mair, 2016; Sutter et al., 2019). In particular, resource constraints in terms of lack of financial capital is a major factor

impeding entrepreneurship in these contexts (Chliova, Brinckmann, & Rosenbusch, 2015; Khavul, 2010; Naudé,

370 BISCHOFF ET AL.