Entrepreneurial Clustering and the Development of Positive Psychological Capital

Abstract

In this paper, I explore the core idea that geographical clustering may provide entrepreneurs with psychological benefits - a type of benefit that is not yet recognized in the literature on clusters. Specifically, I develop a theoretical model along with testable propositions where I argue that entrepreneurial clusters have the potential to develop into ‘communities’ which provide clustered entrepreneurs with varying degrees of psychological sense of community. A strong psychological sense of community in turn helps entrepreneurs develop positive psychological capital through processes of social comparison, social influence, perceived social support, increased participation inside the cluster community, and emotional sustenance. Higher levels of positive psychological capital helps entrepreneurs deal with the psychological pressures associated with starting and managing a small business and thereby leads to improved venture performance, albeit up to a threshold level of psychological capital after which higher levels of psychological capital may hurt venture performance. Contributions to the literatures on clusters, entrepreneurship, and psychological capital are discussed.