Human Capital, Social Capital, and Firm Dissolution

Posted: 17 Nov 2009

See all articles by Arjen van Witteloostuijn

Arjen van Witteloostuijn

University of Groningen - Faculty of Economics and Business

Johannes Pennings

University of Pennsylvania - Management Department

Kyungmook Lee

affiliation not provided to SSRN

Date Written: 1998

Abstract

This study assesses the impact that human and social capital have on the closure of firms. It proposes and tests firm-level hypotheses on the possible impacts of human and social capital on organizational dissolution, particularly their specificity (i.e., the degree to which the human capital inside a firm was idiosyncratic and difficult to transfer) and non-appropriability. In an analysis of 1,851 Dutch accounting firms during the period 1880 to 1990, the following five hypotheses are presented: (1) organizational dissolution will be negatively related with industry-specific capital developed through professional education; (2) the indicators of social capital introduced will have significantly negative effects on firm dissolution; (3) firm-specific human and social capital will have stronger effects on firm dissolution than industry-specific human capital; (4) partners' human and social capital will have a stronger effect on firm dissolution than associates' human and social capital; and (5) firms started as splits are more likely to dissolve than firms founded de novo. Results of the analysis show that all of the human capital variables except for associates' industry-specific human capital developed through professional education had significant and predicted effects on firm dissolution. In addition, only two indicators of social capital were found to significantly decrease firm dissolutions--partners from client environments and partners to client environments. Also, the partners' firm-specific human capital was found to be significantly higher than the partners' industry-specific human capital. However, social capital was not found to be significantly larger than industry-specific human capital for both partners and associates. Finally, it was concluded that firms started as splits dissolve more frequently than firms founded de novo. (SFL)

Keywords: Accounting firms, Firm performance, Work experience, Educational background, Resource model, Firm characteristics, Social networks, Closing firms, Firm survival, Human capital, Social capital

Suggested Citation

van Witteloostuijn, Arjen and Pennings, Johannes and Lee, Kyungmook, Human Capital, Social Capital, and Firm Dissolution (1998). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship, Available at SSRN: https://ssrn.com/abstract=1504506

Arjen Van Witteloostuijn (Contact Author)

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Johannes Pennings

University of Pennsylvania - Management Department ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States

Kyungmook Lee

affiliation not provided to SSRN

No Address Available

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