New venture management valuation: Assessing complementary capacities by human capital theory

Abstract

A theory of new venture management valuation should answer the two questions: (1) What should be assessed? (2) How can it be assessed? In response to the work of Smart (1999), we address the first question and suggest a conceptual framework for the valuation of founder managers' entrepreneurial potential. Entrepreneurial capital, as we term this potential, is conceptualized as founder managers' complementary capacity to identify new opportunities, to combine or co-ordinate scarce resources; and to see new initiatives through to fruition. This approach is an extension of human capital theory to include the more heterogeneous entrepreneurial capacities of founder managers and entrepreneurs. Implications for new venture management valuation are discussed.