An empirical investigation of factors affecting small business success

Abstract

Purpose – The purpose of this paper is to develop a mediational model of small businesses success. In this paper, the authors investigate how the human, social, and financial capital of entrepreneurs influences the capacity of small business to succeed. The objective through this model is to demonstrate that it is through the process of innovation these capitals are converted into success. Design/methodology/approach – The paper suggests an original, conceptual framework for how small businesses can succeed. Findings – To validate this mediational model, the authors used the conditions/steps proposed by Baron and Kenny (1986). Research limitations/implications – The results of this study have implications for both research and practice. This study provides a new contribution to the existing literature by introducing the innovation in the explanation of the links between these capitals and small business success, i.e. business with greater access to human and financial resources are more likely to undertake an innovation, which, in turn, ensures small business success and access to more financial capital facilitates the pursuit of resource-intensive success strategies because, it is argued, that slack resources can be used for experimentation with new strategies and practices, allowing the business to pursue new opportunities of success. Practical implications – The proposition is consistent that managers with considerable human capital, social, and finacial capital know where to look for opportunities, can more accurately assess the value of potential opportunities, and have the ability to exploit these opportunities, which encourages innovation. It is this innovation that then facilitates small business success. These resources are important to achieve small business success, but primarily because they encourage innovation, and it is the innovation that drives the small business success. Originality/value – In this paper, the authors extend the entrepreneurial literature by developing a mediation model of small business success. To the authors’ knowledge, it is the first study that examined the indirect effect of human, social, and financial capital of entrepreneurs on small business success through the mediation of innovation. This model has the indirect effect of human, social, and financial capital on success through their impact on innovation, i.e., through the innovation process such capital is converted into success.