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The Effects of General and Specific Human Capital on Long-Term Growth and Failure of Newly Founded Businesses

Authors


Andreas Rauch, tel.: 44 (0) 1392 726270; e-mail: a.rauch@exeter.ac.uk and to Serge A. Rijsdijk at srijsdijk@rsm.nl.

Abstract

The model developed in this paper draws on human capital theory to explain how newly founded business ventures achieve long-term growth and reduce their chances of failure. Using a sample of 201 business start-ups and assessing growth and venture failure over a period of 12 years, we found that general and specific human capital lead to growth and failure in different ways. More specifically, we found that the effect of general human capital on failure was mediated by growth. Unexpectedly, specific human capital was not related to growth and had direct negative effects on business failure.

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