The role of social capital in the appetite for risk-taking of entrepreneurs in business incubation

Abstract

The constructs of entrepreneurship, social capital and risk have been individually studied rigorously. However, these constructs have not been studied together very often and even less so within the South African business incubation environment. This research project explores the relationship between social capital and appetite for risk-taking by entrepreneurs in the business incubation environment. Social capital was analysed through its latent variables namely being trust, networking and information sharing. In order to observe the nature of the relationship between perceived business incubation support, social capital (trust, networking and information sharing) and appetite for risk-taking, the study’s electronic questionnaires were sent to business incubators across the Gauteng region. Once reliability and validity of the studies constructs and instruments were observed, the study used descriptive analysis to draw insights from the data and made linkages to the literature of the field. The study measured the relationship between the constructs using Structural Equation Modelling (SEM) and found the absence of a linear relationship between perceived business incubator support and the appetite for risk-taking by the entrepreneurs. The SEM path analysis found a triangular relationship between Perceived Business Incubator Support, Information Sharing and Trust. Thus, suggesting that improved Perceived Business Incubator Support had a positive influence on Information Sharing and Trust. The Path Analysis also suggested improved Information Sharing led to improved Trust. The Path Analysis suggested a positive relationship between Trust and Networking. Finally, Appetite for Risk-Taking only had a direct relationship with Networking. Limitations to the study were described in detail such as the study only having access to a small sample size and systematic errors such as the study inability to discern between different types of entrepreneurs (i.e. industry, product types, number of employees etc.). Recommendations for future studies outline suggestions for how literature in the field could be moved forward.