Unequal social capital prevents many from achieving their entrepreneurial dreams

In 2020, it was estimated that more than a quarter of employees would like to be entrepreneurs, driven in large part by their dissatisfaction with corporate life. However, this desire to be entrepreneurial doesn't always translate into true entrepreneurship, especially when people have mortgages, families, and other expenses that aren't suitable for times of low income.

This was well illustrated by a recent study by the University of Manchester, which found that around half of Londoners would rather be self-employed than employed, with less than one in six actually achieving this goal.

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It is widely accepted that entrepreneurship is vital to economic vitality, both in terms of new innovations coming to market and jobs being created. As a result, this gap between our desires and our actions is important.

Researchers have sought to understand some of the drivers of entrepreneurship and have found that it is often a dynamic, multi-step process:

Entrepreneurship never envisioned, where we are largely unaware of the potential of entrepreneurship or how we might become entrepreneurs. Pre-establishment stage, where we plan to become entrepreneurs but have not taken practical steps to establish anything. Young entrepreneur recently started, where our company is in its infancy. Established entrepreneur, where our company is well established and whose requirements we know.

At each of these stages, entrepreneurs may have different needs, goals, and constraints, and researchers believe that by viewing entrepreneurship as a multi-step process, it is easier to expose possible bottlenecks.

The importance of place

Essentially, the research reminds us that entrepreneurship does not exist in a vacuum, but rather depends on the context in which it takes place. Foremost in this context is the location of the entrepreneur itself.

Location plays a fundamental role because much of our social capital is location-specific. What is called regional social capital emerges from the repeated interactions we have through voluntary associations, such as professional associations.

This social capital helps potential entrepreneurs access vital resources and information. Researchers believe that our social capital must be the most important when we want to officially launch our business.

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Unfortunately, the required social capital is not evenly distributed. The researchers analyzed 110 regions across Europe and more than 22,000 individuals to understand how social capital is distributed. This was measured by membership in various voluntary associations.

The analysis shows that regional social capital plays a crucial role in the entrepreneurial process, but may be more influential at certain stages. For example, it was particularly important to help those who wanted to start a business to do so. It is less important in terms of creating entrepreneurial aspirations or even helping businesses survive.

Research underscores the idea that our social context exerts a significant impact on our willingness and ability to be entrepreneurs. This challenges the idea that the factors influencing our entrepreneurship are uniform and instead suggests that they are inherently variable.

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This has clear policy implications, especially as many governments strive to increase economic opportunity and prosperity, thereby helping communities that had been somewhat left behind by globalization.

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“Entrepreneurship promotion programs are a priority for many governments and international organizations,” the researchers explain. “While many policy initiatives have been directed towards improving formal institutions, our study highlights the role of regional social capital, a regional resource that comes from associ...