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Spiritual Capital Indicates Business Success in Developing Countries

May 17, 2018

Developing countries are difficult climates for entrepreneurship. Without strong formal institutions like regulations, contracts or laws to facilitate business transactions, less privileged citizens must rely on the informal economy and informal norms to buy and sell products. Who do you trust to do business with in that situation?

Steve Bradley, associate professor of Entrepreneurship and faculty director of the John F. Baugh Center for Entrepreneurship & Free Enterprise, posed the question. Reaching across departmental divisions, Bradley worked with Chavanne Chair of Christian Ethics in Business and Management Professor Mitch Neubert to find out how entrepreneurs differ in such a setting.

Co-authors Retno Ardianti and Edward Simiyu in Indonesia and Kenya, respectively, leveraged existing relationships with functioning microfinance organizations to collect survey data from local microcredit entrepreneurs. The researchers measured five forms of capital: financial capital, human capital, social capital, psychological capital and spiritual capital. In this study, spiritual capital is measured as faith maturity—how central your faith is to you and how it guides you in your life.

“We theorized that spiritual capital shapes the entrepreneurs’ motivation and willingness to pursue new ideas, and that it also may be a ‘signal’ of trustworthiness for suppliers or customers leading to greater sales and growth,” Bradley said.

The article, "The Role of Spiritual Capital in Innovation and Performance: Evidence from Developing Economies," was published in Entrepreneurship Theory and Practice. Controlling for a considerable number of industry, firm and individual predictors of business outcomes, the researchers found spiritual capital was associated with business success.

“Spiritual capital predicted the innovativeness of entrepreneurs, how many people worked in the company and their sales numbers,” Neubert said. “That was pretty impressive because even when you accounted for things like how much money they had, how skilled they were or who they knew, faith maturity still predicted those factors. This encourages consideration of how the spiritual development of entrepreneurs can help their business performance.”

Bradley’s body of research on the resources and resource constraints of entrepreneurs met Neubert’s work on the spiritual life of business owners in this study of microfinance entrepreneurs in developing countries.

“Unfortunately, the benefits of microcredit for poverty reduction have been lackluster, so our goal was to understand why it has seen limited success and how microcredit funding can be offered in ways that grow microbusinesses and reduce poverty,” Bradley said.

Together, Bradley and Neubert set out with the shared goal to further understand microfinance, and ultimately, help reduce global poverty through entrepreneurship.

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