Social capital and re-entrepreneurship: the mediating role of entrepreneurial self-efficacy and entrepreneurial skills

Abstract

Entrepreneurship is a risky activity with a high probability of failure. However, research on re-entry to entrepreneurship is limited. The research aims to analyse how entrepreneurs' social capital and cognitive mechanisms shape their decisions to re-enter entrepreneurship after failure. The research employs both quantitative and qualitative methods. First, Hayes Process Models are utilized to test the role of social capital and cognitive process on re-entry. Global Entrepreneurship Monitor (GEM) 2021 Adult Population Survey (APS) data were used. Then, a content analysis was conducted based on narratives from failed entrepreneurs to determine the mechanisms through which social capital affects cognitive structures for re-entry. Data were collected from Reddit, a social media platform where users share their experiences and create forum content. The analysis showed that entrepreneurs with greater social capital are more likely to initiate new ventures following a failure. Furthermore, entrepreneurial self-efficacy and entrepreneurial skills mediate the relationship between social capital and re-entrepreneurship after failure. Content analysis identifies five categories that explain the role of social capital in re-entrepreneurship after failure: (1) emotional support, (2) financial support, (3) finding customers for a new venture, (4) obtaining advice and (5) finding co-founders for a new venture. The study has theoretical implications. First, the research extends the current understanding of a network-based theory of social capital (Lin, 1999). It increases understanding of the relations between social ties, the cognitive structures of entrepreneurs and entrepreneurial behaviour in turbulent times. The research reveals the mechanisms through which social capital supports entrepreneurs and encourages new venture creation in times of failure. The research suffers from some limitations. First, a cross-sectional data design is used. Secondly, the research was conducted without focusing on specific sectors and entrepreneurial backgrounds. The research also has policy implications. The study confirms the advantages of embeddedness in entrepreneurial networks in post-failure entrepreneurial activities. Therefore, events, associations and other opportunities where entrepreneurs can establish ties should be supported. It can be particularly beneficial for entrepreneurs who have recently experienced failure to form ties with those who have faced similar challenges before. Additionally, entrepreneurship education should include content on the role of social capital in entrepreneurial activities. Educational activities are also supported by failure experience. The research increases understanding of the issue of whether there are differences in social capital resources between entrepreneurs who return to entrepreneurship after failure and entrepreneurs who adopt different career choices.