The Impact of Human Capital on Financial Performance of Entrepreneurial Firms in Serbia

  • Mihailo Paunović University of Belgrade, Faculty of Technology and Metallurgy, Serbia


Research Question: This paper investigates the impact of human capital on the financial performance within entrepreneurial firms in Serbia. Motivation: In today’s knowledge-based economy, human capital, as the main component of intellectual capital, represents one of the primary value drivers. The competitiveness of developed countries is based to a large extent on investments in intellectual capital. In most OECD countries, investments in intellectual capital are growing dramatically and in some cases they reach or even exceed investments in tangible assets. This paper primarily builds upon the results of Pena (2002) and Hormiga et al. (2011) and, as far as the author is aware, it represents one of few studies of that kind in Serbia. Idea: The main idea of the paper is to examine whether human capital influences the financial performance of Serbian entrepreneurial firms. Dependent variables are indicators of financial performance, such as ROA and sales revenue. Independent variables represent various elements of human capital. Data: The sample consists of young Serbian companies from various industries with at least three employees, founded in 2015 whose financial statements were published in 2017. Out of 1,559 such companies, 151 completed the survey and participated in the research. Tools: Factor analysis was used and numerical variables that represent the answers to the questions about human capital were loaded into factors. Those factors as independent variables were used in multiple regression analysis (OLS, FGLS and Ordered probit). Findings: It was found that elements of human capital, such as the interaction of the entrepreneurial team, social skills and tenacity, and knowledge of the entrepreneur have a positive impact on ROA. The interaction of the entrepreneurial team has a positive impact on sales revenue. On the other hand, social skills and tenacity and knowledge of an entrepreneur do not have any impact on sales revenue. Contribution: The paper can help entrepreneurs and company founders, as well as economic and development policy makers to better understand the importance of human capital for improving financial and overall business performance of newly created ventures. 

Author Biography

Mihailo Paunović, University of Belgrade, Faculty of Technology and Metallurgy, Serbia

Mihailo Paunović is a Teaching and Research Assistant at the Faculty of Technology and Metallurgy, University of Belgrade. He teaches courses in Engineering Economics and Enterprise Economics and Management at undergraduate studies. He is a PhD candidate at the Faculty of Economics, University of Belgrade. He holds a MSc in Accounting, Auditing and Corporate Finance from the Faculty of Economics, University of Belgrade and an International MSc in Business Administration with the specialization in Financial Management from Tias School for Business and Society, Tilburg University.


How to Cite
Paunović, M. (2020). The Impact of Human Capital on Financial Performance of Entrepreneurial Firms in Serbia. Management:Journal Of Sustainable Business And Management Solutions In Emerging Economies, 26(2), 29-46. doi:10.7595/management.fon.2020.0010