A critical look at the methodology of quantitative studies on entrepreneurial competencies and business success

The entrepreneurial competencies of owner-managers of small or medium-sized enterprises (SMEs) are seen as causes for the survival and success of their SMEs. There is a research literature of quantitative studies providing evidence for such a causal link. Entrepreneurial competencies could therefore be a means to financial success for individuals and macroeconomic success for policymakers. However, several methodological shortcomings have been pointed out to exist in the entrepreneurship literature. If these methodological shortcomings also exist in quantitative studies on entrepreneurial competencies and business success, caution is required when it comes to assuming a causal link between the entrepreneurial competencies of SME owner-managers and the success of their SMEs. This in turn means that caution is also required in using this research to inform policy and practical decisions. To find out if caution is warranted or not, this thesis critically analyzes quantitative studies on entrepreneurial competencies and business success to assess whether there is evidence for a causal link between the two. The research questions of the thesis are how, if at all, methodological issues in these studies threaten their 1) reliability or 2) validity. The thesis relies on reliability and validity as the main concepts of critical analysis. In addition, the thesis makes use of a theoretical concept called the research triad ; a holistic approach to logically analyzing the relationship between theory and methodology, and directed acyclic graphs (DAGs), a formal, graphical language for modeling causal assumptions. The research design of the thesis consists of two major parts. The first part is a structured literature search to gather as many quantitative studies on entrepreneurial competencies and business success as possible. The structured search provides the sample of the thesis. The second part is the critical analysis of this sample, which is done by applying the theoretical concepts to the studies of the sample. The thesis analysis shows that the quantitative studies on entrepreneurial competencies and business success are reliable but that there are three major threats to validity: Nonresponse bias from not including failed or otherwise unsuccessful entrepreneurs in study samples. A type of selection bias called ascertainment bias arising for the same reason. Confounding common method bias caused by using the entrepreneur as the only source of information on entrepreneurial competencies in cross-sectional research designs. The conclusion of the thesis is that, because of the discovered threats to validity, there is only inconclusive evidence for a causal link between the entrepreneurial competencies of SME owner-managers and the success of their SMEs. Consequently, caution is required in using these studies to inform policy and practical decisions. Furthermore, the analysis of the thesis implies that future research on SME owner-manager s entrepreneurial competencies and business success must include information on failed or otherwise unsuccessful entrepreneurs to be valid and unbiased. In cross-sectional research designs, researchers must use third parties to evaluate entrepreneurs entrepreneurial competencies. Additionally, due to the high failure rates among entrepreneurs, researchers who study samples of only surviving entrepreneurs should consider the methodological challenges known from sociological research on elite populations. Moreover, methodological reviews of entrepreneurship literature who conceptualize validity as having to do with causality, cannot rely solely on the presence or absence of statistical methods to assess validity