Mediating Role of Entrepreneurial Self-efficacy in the relationship of Social Capital and Entrepreneurial Intentions

This study aims to identify the direct and indirect effect (via the mediation of self-efficacy) of social capital on to the EIs in the context of developing country of Pakistan. Data collection were done from the 5 largest universities of Lahore and Islamabad. Data were analyzed through structural equation modeling (SEM) technique. The results have affirmed that there is a positive effect of social capital on to the EIs. However, this effect is more significant via the mediation of Entrepreneurial self-efficacy. So there is a need for policymakers to provide students conducive environment that promotes their EIs while strengthens their self-believe on their abilities. The study is novel as there is not sufficient literature to comprehend the phenomenon of social capital in relation to the EIs. KeywordsSocial capital, entrepreneurial self-efficacy, entrepreneurial intention, developing countries Introduction The entrepreneurship is crucial in progress of any country’s economy (do Paço, Ferreira, Raposo, Rodrigues, & Dinis, 2011).According to Krueger and Carsrud (1993) entrepreneurial intention (EI) is the first step that leads toward entrepreneurship.Initially, Ajzen has stressed the vital role of individual intentions in comprehending their certain behavior and activities (Ajzen, 1991, 2002). There is extensive literature that supports the importance of social capital for the success of entrepreneurial ventures (Read, Song, & Smit, 2009; Smallbone & Welter, 2001). Nevertheless, this issue is understudied so far that whether or not the social capital of individuals eases the process of business startup for them? We assume it as an important aspect that plays a dual role in the business startup. The social capital of an individual act as a facilitator increasing perceived behavioral control, which in the Theory of Planned Behavior (TPB) (Ajzen, 2011) is one of the factors (along with attitude and subjective * RabeeyaRaoofThe University of Lahore.Email: rb.raoof@gmail.com † Dr. Ijaz Qureshi, University of Sialkot ‡ Sadia Jabeen, The University of Lahore Mediating Role of Entrepreneurial... Rabeeya, Ijaz and Sadia The Dialogue 309 Volume XIV Number 2 norm) that influence behavioral intention. TPB has appeared as a proficient tool and instrument to explore an individual’s intention toward entrepreneurship e.g. (Kautonen, Van Gelderen, & Tornikoski, 2013; Van Gelderen, Kautonen, & Fink, 2015). Thus, this study will examine the effect of social capital on Entrepreneurial self-efficacy and then its impact on EI with the help of TPB.Douglas asserted that there is a linkage between the individuals' attitude towards work, income, independence, risk, and intention to become an entrepreneur (Douglas & Shepherd, 2002). Thus the positive attitude towards entrepreneurship also helps to develop EIs which leads to entrepreneurial behavior. Also, Self-efficacy impacts whether one seeks after entrepreneurship (Bandura, Barbaranelli, Caprara, & Pastorelli, 2001; Bandura & Wessels, 1997; Zhao, Seibert, & Hills, 2005). Likewise, such intentions are mediated through the effect of entrepreneurial self-efficacy and social capital. Selfefficacy is "characterized as a man's confidence in his or her capacity to perform work" (Gist, 1987) and a man's conviction that he or she can viably utilize these abilities to accomplish a specific task (Bandura & Wessels, 1997). For the past many years the unemployment arouses as the crucial issue of Pakistan and it is increasing substantially. Government can’t meet the requirements of jobs and nor the private sector is enriched with opportunities because the formal education and training is the basic missing part, the entrepreneurs are less educated and prefer to work in an informal environment without the legal boundaries and code of conduct norms (Williams & Shahid, 2016). To address these problems the higher education system of the country needs to be reexamined for the enlargement of entrepreneurial activities and economic growth. Because this is the only way to eradicate the unemployment issues and economic deterioration (Zaman, 2013).Pakistan is one of the developing countries which is in a race to shift low income to high-income countries. So this is exactly the right time for Pakistan to introduce the policies in the promotion of entrepreneurship (Saleem, 2008). To maintain policies for best utilization of valuable resources, Small and Medium Enterprises Development Authority (SMEDA) has been established (Qureshi & Herani, 2011). The social capital of an individual act as a facilitator increasing perceived behavioral control, which in the Theory of Planned Behavior (TPB) (Ajzen, 2011) is one of the factors (along with attitude and subjective norm) that influence behavioral intention. TPB has appeared as a proficient tool and instrument to explore an individual’s intention toward entrepreneurship e.g. (Engle et al., 2010; Kautonen et al., 2013; Mediating Role of Entrepreneurial... Rabeeya, Ijaz and Sadia The Dialogue 310 Volume XIV Number 2 Van Gelderen et al., 2015). Thus, this study will observe the effect of social capital on social norms and then its impact on EI of individuals with the help of TPB.Self-efficacy is associated with country-level social capital and entrepreneurial activity (Kwon & Arenius, 2010) and the successful development of entrepreneurship increases the welfare of the nation as a whole (Kwon & Arenius, 2010). This study is unique because it explores the effect of social capital onto the EIs through the mediation of entrepreneurial self-efficacy. Moreover, it elaborates the direct relationship between social capital and EI. Furthermore, this study proposes the implications for policy makers of government and educational institutes. Theoretical Framework and Hypothesis Development Social Capital and Entrepreneurial Self-efficacy Self-efficacy convictions additionally can direct one's level of inspirations. Individuals with elevated amounts of entrepreneurial selfefficacy set propelling objectives; they perceive they will accomplish these objectives, and they foresee defeating any snags that may ruin them from achieving their objectives. In outline, self-efficacy is directed through motivational, emotional, and cognitive aptitudes and is fortified by "dominance of experiences, social displaying, social influence, and physical and emotional states"(Bandura et al., 2001). Moreover, the desirability and feasibility also affect the entrepreneurial career decisions, especially feasibility effects the problematic decisions which leads to the final career choices.The individuals’ entrepreneurial selfefficacy is a significant predictor for their goal orientations as it affects the expected outcome and aspired stage of target behaviors. Which strengthen the intention of individuals. Although the self-efficacy theory has a tendency to predict the general and specific behaviors of individuals, however, it has been ignored by the literature of management as well as entrepreneurship (Gist, 1987). Not only the career choices impact entrepreneurial self-efficacy but also the role models effects their intentions and opportunity recognition. H1: The social capital is positively linked with entrepreneurial selfefficacy of an individual. Entrepreneurial Self-efficacy and EIs The self-efficacy relates to the individual's beliefs about his abilities and Bandura defined it as the view of the individual's capabilities over the events which affect their life (Ajzen, 2002; Bandura et al., 2001). Bandura affirmed that self-efficacy influences the thought patterns of the individuals which inspires their actions.With the higher entrepreneurial self-efficacy, the individuals will be more inclined to putting increased Mediating Role of Entrepreneurial... Rabeeya, Ijaz and Sadia The Dialogue 311 Volume XIV Number 2 efforts and perform better which supports the EIs (Ajzen, 2002; Boyd & Vozikis, 1994). Thus with the reference of the TPB, entrepreneurial selfefficacy builds the success or failure perceptive of the individual for an entrepreneurial attitude which leads toward the EI(Ajzen, 1985). The more individuals will be self-effaced, more they will be agreed to take initiatives and risk of the entrepreneurial venture. Entrepreneurial selfefficacy is of huge importance in the entrepreneurial literature as it psychologically explains the venture creation (Fayolle, 2005; Krueger & Carsrud, 1993).So the entrepreneurial situation is also influencing the perceived entrepreneurial self-efficacy and EIs (Bandura, 1986; Fayolle, 2005).Thus with the reference of the TPB, entrepreneurial self-efficacy builds the success or failure perceptive of the individual for an entrepreneurial attitude which leads toward the EI(Ajzen, 1985). The more individuals will be self-effaced, more they will be agreed to take initiatives and risk of the entrepreneurial venture with the belief of their abilities and perception of success.On the basis of these arguments which demonstrates the positive relationship between entrepreneurial selfefficacy andEIs we may posit; H2: The entrepreneurial self-efficacy of an individual positively influence the EIs. H3: The social capital positively influences the EIs via the mediation of entrepreneurial self-efficacy. Social Capital and EIs Social capital caters the capabilities of the individuals to beneficed by means of their various ranks in the structure of the organization as individuals' friends, colleagues, classmates, and other relations. As this social capital assist the individuals to gather information, take decisions, organizing various activities as well as to coordinate to exploiting the human or physical capital (Liñán & Santos, 2007). Thus the social capital helps to utilize the resources gained from the societal network and social circle structure. It aids to provide a positive effect on the prospect entrepreneurs in taking initiatives (Davidsson & Honig, 2003).Souitarisstated th