Overcoming early entrepreneurial challenges: the protective role of psychological capital

Abstract

This study investigates how early entrepreneurial challenges affect the firm performance of new ventures and explores the moderating role of Psychological Capital (PsyCap) in mitigating these effects. The research is conducted within the context of an emerging economy, Ecuador, where institutional voids and limited resources heighten entrepreneurial vulnerability. Using a path dependence and cumulative disadvantage framework, the study applies ordinary least squares (OLS) regression models with heteroskedasticity-robust standard errors to a dataset of 417 entrepreneurs. Psychological Capital is measured across its four dimensions: self-efficacy, optimism, resilience, and hope. Control variables include gender, age, and family support. Results show that early-stage challenges are negatively associated with business performance. However, elevated levels of Psychological Capital significantly buffer these effects, attenuating the magnitude of the negative association between early challenges and performance. Self-efficacy and resilience emerge as particularly strong moderators. The cross-sectional nature of the data and the self-reported design limit causal inference and generalizability. Future longitudinal studies could explore how psychological resources and entrepreneurial challenges interact over time and across institutional contexts. The findings suggest that developing entrepreneurs' psychological capacities can enhance resilience and performance in volatile environments. This has implications for entrepreneurship training programs, especially in emerging markets. This study contributes to the entrepreneurship literature by integrating Conservation of Resources (COR) theory and Resource-Based View (RBV) theory to conceptualize Psychological Capital as both a buffering mechanism and an intangible resource associated with firm performance. The study expands upon recent research on resilience by providing evidence from a large sample in an emerging market like Ecuador.