THE ROLE OF SOCIAL SKILLS IN ENTREPRENEURS
’ SUCCESS: EVIDENCE FROM VIDEOTAPES OF ENTREPRENEURS’ PRESENTATIONSRobert A.
Baron, Rensselaer Polytechnic Institute
Candida G. Brush, Boston
University
ABSTRACT
INTRODUCTION
METHOD
RESULTS
DISCUSSION
CONCLUSIONS AND IMPLICATIONS
TABLE 1
TABLE 2
CONTACT
REFERENCES
An extensive body of research suggests that social skills—competencies that enable individuals to interact effectively with others—can positively affect their outcomes in many business contexts (e.g., interviews, performance appraisals, negotiations.). This research examined the hypothesis that these skills also play a role in entrepreneurs’ financial success (e.g., their success in obtaining equity funding). To obtain evidence on this issue, two distinct forms of data were collected: entrepreneurs’ responses to a survey instrument that measures several social skills, and ratings of entrepreneurs’ social skills by expert judges (e.g., clinical psychologists) who viewed videotapes of the entrepreneurs making practice presentations of their new venture concepts. Both sources of data were related to measures of entrepreneurs’ success (e.g., initial decisions to assist or not assist them in obtaining financing by the staff of a company that specializes in helping entrepreneurs obtain financial backing). Results indicated that raters perceived significant differences between the entrepreneurs with respect to their social skills and also with respect to persuasiveness, emotional intelligence, and personal appearance. In addition, one aspect of entrepreneurs’ social skills—their social adaptability—was a significant predictor of measures of their success.
Why are some entrepreneurs but not others successful in converting opportunities, business concepts, or perceived opportunities into profitable companies? This has long been a central issue in the study of entrepreneurship and one that has proven exceptionally difficult to resolve. Initial efforts to answer this question focused on the personal traits of entrepreneurs and attained only modest success (e.g., Scott & Shaver, 1991). A much more promising approach has focused on cognitive factors and processes—the ways in which entrepreneurs think, reason, and make decisions (e.g., Busenitz & Barney, 1997; Jenkins & Johnson, 1997; McCarthy, Schoorman, & Cooper, 1993). Research within this perspective has identified a number of cognitive factors such as self-efficacy and attributions, that may influence entrepreneurs’ success (e.g., Baron, 1998; Brush, 1992; Palich & Bagby, 1995, Gatewood, Shaver, & Gartner, 1995). Similarly, emerging studies of nascent entrepreneurs (Carter, Gartner & Reynolds, 1996) show that entrepreneurial behavior, what the entrepreneur does in undertaking activities to create a venture (Bird, 1989), distinguish successful venture start-ups from those that are still trying.
The present research investigates another perspective on this issue—one that emphasizes the role of entrepreneurs’ behavior on their success at start-up. Such an approach is consistent with suggestions by Bird (1989) and Gartner (1988, p. 21) who recommend that the field of entrepreneurship should focus on “what the entrepreneur does, not who the entrepreneur is”—that is, on entrepreneurs’ behavior rather than on their supposedly stable traits. We suggest here that one aspect of entrepreneurs’ behavior that may well influence their success is their social competence—the extent to which they possess and employ discrete social skills that enhance their ability to interact effectively with others (e.g., venture capitalists, potential partners, employees, customers). This suggestion is based on several forms of evidence.
First, and most directly, an extensive body of research on the impact of social skills indicates that proficiency with respect to such behaviors strongly affects the outcomes experienced by individuals in many contexts, including important business settings (e.g., Duck, 1994; Segrin & Kenney, 1995; Weber & Harvey, 1994; Tsui, 1998). For instance, such research shows that proficiency with respect to several social skills (e.g., impression management, social perception, persuasiveness) results in strong beneficial effects on the outcomes experienced by individuals in job interviews (Riggio & Throckmorton, 1988), yearly performance reviews (Wayne & Kacmar, 1991), and negotiations (Lewicki, Saunders, & Minton, 1997).
Second, a substantial proportion (perhaps an actual majority) of new ventures are founded by teams of entrepreneurs rather than single individuals (e.g., Cooper, 1986; Cooper & Daily, 1997). For example, Teach, Tarpley and Schwartz (1986) found that over two-thirds of start-up software companies were founded by two or more principals. Similarly, in a recent survey, Inc. Magazine (1998) reported that 57% of its sample of 500 high-growth private U.S. companies were started by at least two founders. Relatedly, Kamm and Nurick (1993) suggest that the team interpersonal process impacts performance over the life cycle of the business , while research shows the benefits of teams include more internal checks and an improved array of ideas and abilities (Watson, Ponthieu & Critelli, 1995) . Given the fact that a large proportion of start-ups involve the efforts of two or more entrepreneurs, it seems reasonable to suggest that high levels of social competence on the part of these entrepreneurs will facilitate face-to-face interaction between them, and may, in this manner, contribute to the success of their new ventures.
Third, possession of a high degree of social competence may also prove beneficial to entrepreneurs in the context of face-to-face interactions with many persons outside their companies—venture capitalists, potential customers and employees, to name just a few. For instance, Larson (1991) studied partner networks in a comparative case analysis and found that communication in these involved continually “selling” the partner on the advantages of the exchange. Similarly, Niederkofler (1991) showed that carefully-planned interactions were important in the evolution of strategic alliances. Effective interactions with others may assist entrepreneurs in performing such important tasks as raising needed capital, attracting and selecting competent employees, and persuading customers and suppliers to do business with their company under favorable terms (see, e.g., Cable & Shane, 1997; Carter, Gartner, & Reynolds, 1996; Stevenson & Jarillo, 1991). Completing such tasks successfully, in turn, may contribute to entrepreneurs’ overall success.
Fourth, social competence is a crucial to building the organization internally. Bird (1989) notes that entrepreneurs create organizations intentionally, choosing values to guide the culture of the new venture. These values must be effectively articulated to gain participation, and commitment from employees. For example, in a study of the factors influencing the success of new ventures, Duchesneau and Gartner (1990) found that entrepreneurs whose companies are successful engage in more communication with others, and are more effective in this activity, than entrepreneurs whose companies fail. Vesper (1990) includes personal contacts and relationships as one of the five key ingredients in new venture formation. Finally, the suggestion that social competence plays some role in entrepreneurs’ success appears to be consistent with suggestions by Gartner, Bird, and Starr (1992) that one of the key activities performed by entrepreneurs in starting new ventures is convincing others to share their beliefs about what the emerging organization can, and will, become. It seems possible that entrepreneurs may be aided, in their efforts to accomplish these tasks, by proficiency with respect to basic social skills.
Fifth, additional support for the view that entrepreneurs’ social competence (which we view as one important aspect of their behavior) can influence their financial success is provided by several findings and proposals in extant literature on entrepreneurship. In a discussion of cooperation between entrepreneurs and venture capitalists, Cable and Shane (1997) note that such cooperation may increase when the entrepreneur and venture capitalist share a positive social or business relationship (1997, p. 159). MacMillan, Siegel and Narasimha (1985) note that the ideal entrepreneur-venture capitalists relationship rests on a “winning plan” and an entrepreneur who personally impresses the venture capitalist. It involves a courtship, a sizing up, where the plan must pass the criteria for product/service, finance, marketing, and technology, and the team must be suited to the task. In particular, the “personal chemistry,” the interpersonal style and skills of the entrepreneur(s) make a difference (Hisrich & Jancowicz, 1990).
At this point we should note that in one sense, the present research represents a logical extension of recent work on the nature and effects of social capital (e.g. Schoonhaven, Eisenhardt & Lymman, 1990; Labianca, Brass, & Gray, 1996; Shane & Cable, 1998). Greene and Brown (1997) define social capital as non-economic knowledge that has a direct impact on economic behavior; social capital emerges from individual social structures and can result in social norms, and networks that reinforce economic behavior. It can include relationships, family, race or ethnicity and political connections (Greene, Brush & Brown, 1997). Similarly, Nahapiet and Ghoshal (1998) suggest that social capital refers to the sum of the actual and potential resources individuals obtain from their relationships with others—the benefits they obtain from knowing others, being part of a social network with them, or merely from being known to them (e.g., from having a good reputation). In a sense, social capital provides individuals with an important type of credential—a favorable social identity which can be converted into significant, tangible benefits such as enhanced access to information (e.g., Boissevain, 1974); the more people one knows, the more information, and often, the more accurate information, one receives), and increased cooperation and trust from others (Fukuyama, 1995). After all, a person who is a friend—or even merely an acquaintance of an acquaintance—is easier to trust than a total stranger. In addition, social capital has been found to translate directly into financial outcomes: it is positively related to the compensation received by both managers and CEOs (Bellieveau, O’Reilly, & Wade, 1996). Social capital often leads to improved access to financial capital (Freear & Wetzel, 1992) and facilitation of purchase of assets and equipment at less expensive prices (Starr & MacMillan, 1990). In many cases, the strength of the founder’s ties, size of network and time devoted to maintaining a network can affect initial profits (Aldrich, 1987). That social capital is also beneficial to entrepreneurs is suggested by recent findings indicating that entrepreneurs possessing high social capital (as based on networks, status, personal ties, and referrals) are more likely to receive funds from venture capitalists than entrepreneurs who are lower on this dimension (Shane & Cable, 1999).
While social capital is clearly important and confers significant benefits on those who possess it, we believe that it is only part of the total story where entrepreneurs’ success is concerned. Specifically, we believe that a high level of social capital helps entrepreneurs gain access to venture capitalists, potential customers and other persons who play a role in their ultimate success, but that once such access is gained, entrepreneurs’ social competence begins to play a role. Perhaps the best means of illustrating this point is through the following simple exercise. Readers should pause and consider the following question: How do their own organizations select new employees—especially ones who will play a key role? Is this function carried out solely on the basis of the candidates’ social capital (i.e., their reputation, referrals, and so on)? Probably not. In most cases, this is a beginning rather than an end to the selection process. Only candidates possessing high levels of social capital are initially considered—persons with favorable reputations, an established record in the field, who graduated from the “right” schools, worked (or are working) for “good” employers, are known to the persons seeking to hire them, and so on. Once a short list of persons possessing high social capital is assembled, however, it is the impressions the candidates make on the individuals involved in the final selection that largely determine whether they are actually hired. All readers have probably encountered candidates for employment who appeared to “walk on water” prior to a visit but who, once present in the flesh, managed only weak gurgling sounds at best. Such persons possess high levels of social capital but are lacking in social competence, and this becomes readily apparent during initial face-to-face encounters with them.
It also seems reasonable to suggest that in many cases, social capital is the result of social competence. Where, in essence, does a good reputation originate? What determines the breadth and depth of an individuals’ social network? It seems reasonable to suggest that social competence—the ability to interact effectively with others—often provides an important foundation for the development of social capital. Thus, understanding the role of social competence in entrepreneurs’ success may contribute to our understanding of the origins and impact of social capital.
Finally, we suggest that the effects of social competence may be broader or longer-lasting than those of social capital. Social capital may well exert its primary impact fairly early in the process, determining which entrepreneurs gain initial access to venture capitalists, customers, suppliers, and so on. In contrast, the effects of social competence may persist and continue to shape the nature of entrepreneurs’ relations with these persons, and others who are important to their success, on a long-term basis. In other words, once entrepreneurs have gained access to venture capitalists, customers, and so on, these persons respond to the entrepreneurs’ actual behavior—what they say or do—not solely to the entrepreneurs’ reputation or status. As Samuel Butler put it: “We are not won by arguments that we can analyze, but by tone and temper, by the manner which is the person himself.” Social competence comes into play over and over again, in many situations—especially ones that are tense or stressful. Thus, its effects may be long-term and long-lasting, and continue to shape relations between entrepreneurs and other persons for as long as they do business. For this reason too, social competence seems worthy of careful attention, and is the primary focus of the present research.
But what social skills, specifically, will be most useful to entrepreneurs? Recent studies designed to examine the impact of social competence on entrepreneurs’ suggest that several may play such a role. For example, one investigation conducted with two different groups of entrepreneurs (founders of high-tech companies and founders of cosmetics distribution companies), reported that two aspects of these entrepreneurs’ social competence—their social adaptability and social perception—were significant predictors of their financial success (Baron & Markman, 1999a). Similarly, another recent study examined the relationship between entrepreneurs’ personal appearance (one aspect of impression management) and their financial success (Baron & Markman, 1999b). Results indicated that the more favorable entrepreneurs’ personal appearance (as rated by judges unacquainted with them), the greater their financial success. Indeed, entrepreneurs rated as having the most favorable appearance (the highest 20%) earned fully 19.8% more ($53,815) from their businesses than those rated as having the least favorable appearance (the lowest 20%). Additional findings indicated that as expected, aspects of the entrepreneurs’ social competence (e.g., social adaptability), mediated these beneficial effects of personal appearance. In other words, the more favorable entrepreneurs’ appearance, the higher their social competence, and this competence, in turn, significantly predicted their financial outcomes. In sum, a growing body of empirical evidence offers support for the suggestion that entrepreneurs’ social competence may indeed play an important role in their success.
Given these findings and the relative paucity of directly pertinent evidence, we reasoned that it would be best to cast a wide empirical net in the present research. Thus, we included measures of a number of different social skills found, in previous research, to have important effects on business contexts (see, e.g., Segrin & Kenney, 1995; Thomas, Fletcher, & Lange, 1997; Robbins & DeNisi, 1994; Weber & Harvey, 1994; Tsui, 1998): (1) social perception—accuracy in perceiving others (e.g., their traits, intentions, motives); (2) impression management—a wide range of techniques for inducing positive reactions in others; (3) expressiveness—the ability to express one’s emotions and feelings clearly, and so to generate enthusiasm in others; (4) persuasiveness—the ability to change others’ views or behavior in face-to-face encounters; (5) social adaptability—the ability to adapt to, or feel comfortable in, a wide range of social situations. These skills were assessed by a survey instrument completed by entrepreneurs, and were also included among the dimensions rated by expert judges who viewed videotapes of the entrepreneurs making presentations of their new venture concepts. In addition, we asked raters who viewed the videotapes to rate other dimensions of entrepreneurs’ behavior (e.g., their apparent emotional intelligence, energy) and also several aspects of their personal appearance (e.g., attractiveness, likableness, apparent success). In the absence of directly relevant previous research, we made no firm predictions concerning which of these skills or other factors might be most strongly or clearly linked to entrepreneurs’ success. However, we anticipated that some would indeed be related to various measures of entrepreneurs’ success.
At this point, we should call attention to recent developments that serve to underscore the potential importance of entrepreneurs’ social competence in their success. In recent years the business landscape for would-be entrepreneurs has become increasingly competitive; the number of new ventures seeking funding has increased substantially, and the amount of funding sought has shown a corresponding increase. As a result, equity providers find themselves facing the following set of circumstances: they have less and less time in which to evaluate business proposals while, simultaneously, making ever-larger commitments to the companies they do decide to fund (e.g., Timmons & Bygrave, 1997). It is precisely in this kind of environment, we suggest, that a high level of social competence may be especially crucial to entrepreneurs, helping to “tip the balance” in their favor.
Sample
Participants in the initial phase of the study were nineteen entrepreneurs who were seeking initial or additional funding for their new companies. (Collection of additional data is currently ongoing.) These individuals visited the offices of a company that specialized in helping entrepreneurs “connect” with venture capitalists and other potential sources of financial backing. The owner of this company frequently provides consulting and has personally invested in some of the ventures. The company receives more than 600 business plans a year. This company is hereinafter referred to as “the consulting company.”
Procedures
During their initial visit, the entrepreneurs were asked to read and complete an informed consent form that described all major features of the research. Specifically, this form explained that (1) their practice presentation would be video-taped and would then be viewed and rated by university faculty and perhaps other persons, (2) their business plan would be reviewed and rated by a second (different) group of faculty, and (3) they would be asked to complete a questionnaire designed to provide information on their personal characteristics. Virtually all entrepreneurs agreed to participate in these procedures, and signed the informed consent form. We promised to provide each entrepreneur personalized feedback on the video presentation and the written plan.
Videotapes of the entrepreneurs’ initial presentations ranged in length from approximately twenty-five minutes to approximately forty-minutes. These tapes were edited to obtain five-minute segments during which the entrepreneurs presented overviews of their new venture concept. These segments were pilot tested on a large group of advanced business students. Feedback from these raters indicated that segments two-minutes in length were sufficient for raters to make judgments about the entrepreneurs in which they had a high degree of confidence. In view of these results, the segments were edited once more to a length of between two minutes and two minutes fifteen seconds. These tapes were then shown to several groups of raters: advanced business students (44), advanced graduate students in psychology (6), Both groups rated the entrepreneurs on a number of different dimensions. These are described in Table 1.
The questionnaire completed by the entrepreneurs included twenty-six items designed to assess five distinct social skills: social perception,impression management, persuasiveness, social adaptability, expressiveness. Each item consisted of a statement (e.g., “I generally make a good first impression on others,” “I can usually read others well—tell how they are feeling in a given situation”), and respondents’ rated the extent to which this statement was true of them by means of a five-point scale (1 = definitely not like me; 5 = exactly like me). Eighteen of the survey items were adapted from widely used and well-validated measures of social competencies (e.g., Riggio, 1986). The remaining items were developed and selected for use in this investigation on the basis of a careful review of recent research on social competencies plus the results of two pilot studies conducted with 182 undergraduate and graduate students at two different universities. A growing body of evidence suggests that individuals’ ratings of their own social skills are closely related to ratings of these skills provided by others who know them well (e.g., close personal friends, spouses, business partners; Moskowitz, 1990). Thus, such ratings appear to reflect differences in overt behavior that can readily be observed by others. In this sense, they and can be viewed as possessing considerable validity.
Additional items on the questionnaire requested information on the entrepreneurs’ previous experience in starting a new venture, their previous occupation, and basic demographic information.(age, gender, highest level of education, major field in college). In addition, each entrepreneur rated their own business on three dimensions used by equity providers to assess the content of the business plan. These dimensions were (a) level of development of the product/service; (b) management status; and (c) assessment of the major strengths and weaknesses of the plan. These measures followed previous research (MacMillan, et al, 1985; Hisrich & Jancowicz, 1990) as well as current practices indicated by three venture capital firms contacted for this study. The product development dimension was rated on a 5 point scale (where 1= have product/service only and 5 indicated a fully developed product/service, with sales and many satisfied users) (adapted from Rich & Gumpert, 1985). The management status dimensions was rated on a 5 point scale (where 1= single entrepreneur, and 5= fully staffed, experienced management, employees hired) (adapted from Rich & Gumpert, 1985). The assessment of major strengths and weaknesses of the plan asked entrepreneur(s) to allocate points adding to 100 total for 10 dimensions:
Members of the staff of the consulting company rated each entrepreneur after hearing their presentation. These ratings were on a seven point scale ranging from very low (not fundable and we will definitely not work with them) to very high (fundable and we will definitely work with them to obtain financing.) These ratings served as our initial dependent measure of entrepreneurs’ success, because only if entrepreneurs received a ratings of four or higher did they receive assistance in obtaining funding.
Videotapes of the entrepreneurs were rated by a total of 50 raters (44 business students, 6 advanced graduate students in psychology). These data were analyzed in two ways. First, repeated-measure analyses of variance were performed to determine if the raters did indeed differentiate between the entrepreneurs on the various dimensions employed. The results of these analyses indicated that raters perceived significant differences between the entrepreneurs on all dimensions employed in the study, p < .001 in all cases. Second, an exploratory principal component factor analysis was performed on these data. This analysis revealed two distinct factors which, together, accounted for 40.5% of the variance. As shown in Table 2, eight variables loaded highly (.50 or higher) on Factor 1, which accounted for 31.9% of the variance, while only variable (cognitive intelligence) loaded highly on Factor 2, which accounted for an additional 8.53% of the variance.
Second, a regression analysis was performed, in which these factors were employed as predictors of ratings by the staff of the consulting company. Results of these analyses indicated that neither factor was a significant predictor of the dependent measure (i.e., initial ratings by the staff of the consulting company).
A corresponding regression analysis was performed on the data from the survey instrument of social skills (i.e., each of the social skills assessed was regressed on ratings of the entrepreneurs by staff of the consulting company). Results of this analysis indicated that one of the dimensions of social skills measured—social adaptability—was a significant predictor of these ratings and produced a significant increment in R2, F(1,9) = 14.90, p < .005, adjusted R2 = .56. The higher entrepreneurs scored on this variables, the higher the ratings they received from staff of the consulting company.
Results offer some support for the view that entrepreneurs’ social skills—competencies that enable them to interact effectively with others—play a role in their financial success. First, raters who watched short segments of videotapes in which entrepreneurs presented their new venture concepts perceived significant differences between the entrepreneurs on all dimensions they rated—everything from personal appearance and social skills, to basic aspects of the “big five” dimensions of personality (e.g., conscientiousness, agreeableness, extraversion, etc., Barrick, Stewart, Neubert, , & Mount, 1998). It is important to note, in this context, that such differences were obtained despite the fact that the videotape segments were only two minutes in length. These findings are consistent with the results of a large body of previous research on social skills and social perception indicating that much useful and reasonably accurate information can be acquired about others’ characteristics even from very brief encounters with them (e.g., Zebrowitz & Collins, 1997).
Second, one aspect of social skills assessed by the survey instrument—social adaptability—was significantly related to ratings of the entrepreneurs by staff at the consulting company. Since these ratings determined which entrepreneurs would received further assistance in obtaining financial backing for their new ventures, this finding has important implications. As noted earlier in this paper, a high level of social capital may often be very important for entrepreneurs in gaining access to venture capitalists and other sources of funding; indeed, staff at the consulting company indicated that in general, it was only entrepreneurs who were high on this dimension who were invited to make a presentation. Once such access is gained, however, the way in which the entrepreneurs’ “comes across” to persons with whom they interact may play an important role in determining whether they (i.e., the entrepreneurs) actually obtain the financial support they seek.
An important question arising from these results is as follows: Why was social adaptability so important in this respect—more important than other aspects of entrepreneurs’ social skills? One possibility is suggested by the fact that the entrepreneurs who participated in this research were all at a very early stage in the development of their new ventures. Most had formed a company, had a sample product/service, but fully 80% did not have sales and only 30% had a fully formed team and employees. In other words, they were in the process of “organizing” rather than having an actual, functioning organization. In fact, all recognized that they would not be able to accomplish this goal without obtaining the equity funding they sought. At this stage of new venture formation, we reason, the entrepreneurs in our sample found it necessary to approach many strangers—persons who varied greatly in terms of their age, background and training but who shared one salient characteristic: they might provide the financial backing the entrepreneurs desired to obtain. It seems reasonable to suggest that it is precisely in such contexts that a high level of social adaptability would prove beneficial. Close examination of the items employed to assess this factor lends support to such reasoning. Several of these items tap what might appropriately be termed social “boldness”—the ability to approach and interact with total strangers (“I’m comfortable with all people—young or old, people from the same of different backgrounds as myself;” “I can talk to anybody about anything;” “I have no problem introducing myself to strangers.”) In short, social adaptability may have emerged as the most important single aspect of social skills in the present research because all the entrepreneurs were at a stage in the development of their new ventures when this skill would be especially useful to them.
If this reasoning is correct, then the importance of social adaptability might be expected to decrease over time, relative to other social skills and with growing maturity of new ventures, while other social skills might increase in importance. For instance, skill at social perception—the ability to “read” others accurately—might become more useful after initial equity funding is obtained, and entrepreneurs shift their attention to the task of staffing their organizations. During this period, being able to perceive others accurately (skill with respect to social perception) might be prove highly beneficial in helping entrepreneurs to select excellent employees and associates. A study by Watson, et al (1995) of 191 venture teams offers support for this notion in that inter-personal flexibility (i.e. sharing of information) was less important in perceived venture success than other interpersonal dimensions such as team commitment, coordination and leadership. In sum, we suggest that the specific social skills most useful to entrepreneurs may vary with the developmental stage of new ventures. This possibility can be readily investigated in further research conducted with ventures which are, in fact, at contrasting stages in their development.
Before concluding, we wish to highlight the practical implications of our findings for entrepreneurs—and for anyone wishing to assist them in their efforts to start new ventures. Overall, these implications appear to be quite positive in nature. In contrast to basic aspects of personality, which are often exceedingly difficult to change, various aspects of social competence can be readily enhanced. Indeed, effective procedures for increasing social adaptability (e.g., reducing shyness; e.g., Zimbardo, 1977)), enhancing various aspects of interpersonal communication (e.g., Lieberman, DeRisi, & Mueser, 1989), and improving impression-management skills (e.g., Lieberman, 1982), have been developed and put to widespread use by psychologists and other professionals. Such techniques are currently used in many programs are designed to assist students, as well as employees who have been “downsized” to do well in interviews. Such procedures are also used in training programs for many salespersons. Providing entrepreneurs with access to similar training, and especially training focused on the tasks and situations they face, might well assist them greatly in their efforts to start new ventures.
Such training would be especially valuable in cases where it appears that entrepreneurs should succeed but do not—instances in which their ideas are sound, their experience, technical competence, and motivation are all high, yet they fail in their efforts to start new ventures. It seems possible that often, such outcomes stem from a lack of social competence on the part of the entrepreneurs. They are lacking, to some degree, in the skills necessary to negotiate effectively with others, to persuade them to take various actions (e.g., providing needed capital, placing initial orders), or to induce them to share the entrepreneurs’ beliefs about what their new venture can, and will, become (Gartner, Bird, & Starr, 1992). As a result, they make poor first impressions, fail to generate enthusiasm for their ideas or business, and may even annoy or irritate persons who hold the fate of their new ventures in their hands. The results, of course, are both predictable—and negative. With the venture capital industry becoming more competitive, and venture capitalists more experienced and educated (Timmons & Bygrave, 1997) entrepreneurs seeking capital must be more polished and impressive in delivering their pitch the first time. The tight interconnectedness of the industry, which results in significant information sharing suggests that if the entrepreneur performs poorly the first time, he or she will not have a second opportunity (Bygrave, 1992). In view of these considerations, it seems reasonable to suggest that efforts to arm such entrepreneurs with enhanced social competence might well help prove beneficial. Augmented social skills might assist them in avoiding the pitfalls described above, and could well contribute to their ultimate success. Given the important contribution made by entrepreneurs not only to their personal wealth but to that of their societies as well, efforts along these lines would appear to be well-justified (Venkatarman, 1997).
In closing, we should note that suggestions similar to the ones offered here have been made in the past. For instance, when asked to describe the conditions necessary for a happy life, world-famous scientist Albert Einstein (1950) replied with the following equation: “If A is success in life, then A = x + y + z, where x = work, y = play, and z = keeping your mouth shut.” Additional remarks indicated that by the phrase “keeping your mouth shut,” he was referring to certain aspects of social competence. We share Einstein’s view that what he termed “the z factor” may well be one of the many factors that influence entrepreneurs’ success.
CONTACT: Robert A. Baron, Rensselaer Polytechnic Institute, Troy, NY, 12180-3590; (T) 518 276-2864; (F) 518 276-8661; baron@rpi.edu
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