CONNECTING HUMAN CAPITAL WITH A CAUSAL AND EFFECTUAL APPROACH TO ENTREPRENEURSHIP

Human capital, on the one hand, and the causal and effectual approach to entrepreneurship, on the other, have become important concepts in explaining the performance of a firm. Although there are hints in the literature about their theoretical connection, research has yet to examine them in one coherent model. This paper fills the aforementioned research gap by including one category of human capital, entrepreneurial experience, in an empirical model where causal and effectual approaches to entrepreneurship are the main determinants of business performance. Relevant data were collected electronically using a survey questionnaire on a sample of small and medium-sized enterprises in the Republic of Croatia. Structural equation modelling based on the variance approach was used to test hypotheses arising from the proposed structural model. The results show that entrepreneurial experience is a significant moderator of the relationship between the causal approach to entrepreneurship and business performance. At the same time, the same was not confirmed for the relationship between the effectual approach to entrepreneurship and business performance. Using the above results, the importance of the interaction of human capital with one of the two basic entrepreneurial approaches and the necessity of further theoretical development of both entrepreneurial approaches as two related (and not opposite) ways of managing a firm can be highlighted. Despite the limitations, for example, the use of cross-sectional data, the results of this research are important for the conceptual improvement of the causal and effectual entrepreneurial approach and for increasing their practical applicability and effectiveness.