Factors of Human Capital towards Business Performance of Women-Owned Small Enterprises: A Study in Matara District, Sri Lanka

Abstract

In today?s context, managing business successfully is not an easy task. Many people who begin the process of starting a new business fail to achieve their goals, although others are quite successful . It has been recognized that women owned firms were more likely to fail, and had lower levels of sales, profits, and employment than those owned by men . Human Capital is arguably the most valuable asset held by any organization today. Prior research showed that human capital attributes in particular those of the business owner, have been argued to be a critical resource that affects small business performance. However the amount of investigations linking performance of women entrepreneurs and human capital are very limited in Sri Lanka. Therefore this research is is an empirical investigation of the impact of factors of human capital on the business performance of small enterprises managed by women entrepreneurs. The main objective of the study was to determine the impact of human capital and to what extent factors of human capital contribute to performance changes of small enterprises managed by women. A secondary objective was to find the most influencing human capital factor in formulating a composite index of human capital. This study considered seven factors of human capital as independent variables and business performance as dependent variable. The strength of the relationship between variables and the level of statistical significance were assessed using Correlation coefficient and the Multiple regression procedure . The findings of the correlation analysis showed that human capital is highly correlated with performance. With regard to regression analysis, only two human capital variables i.e training, and previous entrepreneurial experience, were significantly positively influencing for performance. Other five factors; education level, education area and previous occupation, entrepreneurial skills and parents or husband owns a business were not significantly affecting for performance. Thus, this study reveals that level of education, area of education as not influential factors to enhance performance of women entrepreneurs in small scale enterprises, but training and experience as more important factors. It suggests that, even without formal education women can be directed to do businesses and their performance can be improved by giving proper training. Therefore the results of this study have practical implications for managerial practice and small business development. The regression model which explains the influence of factors of human capital towards the human capital index showed that education area as the most influential factor and education level as the least influential factor in formulating a composite index of human capital.