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2010
Personality and
entrepreneurship
In Psychology much attention has been given to the study of the personality
and dispositional traits of an entrepreneur. Such research began already in the early 20th century, but only during
the last decades this research has expanded to the extent that it is possible to draw some conclusions.
An entrepreneur
is often defined as a creative innovator who establishes businesses based on original ideas. Such a definition certainly distinguishes
the entrepreneur from other business persons.
The nature of the work of an
entrepreneur
An entrepreneur has to detect and exploit opportunities, he or she has to make
rapid decisions, be able to act in situations where the resources are scarce, have various skills, possess specific knowledge,
be the leader, manager, and innovator at the same time. An entrepreneur prefers to be in charge, and take personal responsibility
for choices, actions and the outcomes of them.
Some of the readers will certainly recognize these features, whereas
others may immediately notice that they themselves do not possess them.
Personality
traits
Hundreds of measures have been used to identify entrepreneurial activities and
success (mainly in the USA and Europe), and the traits and dispositions that repeatedly appear as good predictors of entrepreneurial
activities and success are as follows:
Need for Achievement, Innovativeness, Proactive Personality, Generalized
Self-Efficacy, Stress Tolerance, Need for Autonomy, and Internal Locus of Control (for a review and meta-analysis, see, Rauch
& Frese, 2007).
Thus, entrepreneurs need to be motivated to achieve, they need to look
for novel ways of doing business or solving problems, to actively initiate businesses, persevere, and feel confident in their
capabilities to perform various kinds of tasks in uncertain situations.
And, further, they need to tolerate stress,
and believe that their own actions determine the rewards of business activities (internal locus of control) rather than outisde
factors or the actions of others. Need for autonomy refer to the entrepreneurs’ avoidance of restricted organizational
rules, and wish to be in control, which certainly explains the choice to become an entrepreneur.
There is also research supporting the thought that the personality traits of an entrepreneur are different from those of
managers who are employees in some organization. How you become a business owner or entrepreneur is also relevant.
An Austrian study found that those who initiated their own business seemed to have different personality traits (more
entrepreneurial) than those who inherited or took over a family business.
Weaknesses
Of course, there are weaknesses in these studies as in all studies. A study using psychological
instruments to measure personality traits and compare the responses of groups of people, necessarily needs relatively large
samples.
The names of businesses and their owners are often gathered through business registers or through some
organisation. Not all contacted persons return the questionnaires, which might even reflect the personality of those who return
the questionnaires and those who don’t.
It may also
be difficult to judge whether a successful business truly is innovative or merely expanding. In other words, some business
owners who are not innovative or whose business does not have novelty value, may yet be categorized into entrepreneurial
businesses, and they may very well possess some of the entrepreneurial personality features.
Imagine a person who owns a corner shop and who notices that there is space and demand for another, similar
corner shop at the end of the street. If a new shop is established and shows profitable, the owner has expanded the business
and done so successfully.
The business is not innovative but the person behind it did see an opportunity and acted
upon it. Thus, he or she possesses at least some of the entrepreneurial personality traits.
Secondly, success is necessarily defined in a very simple way in research situations. Sometimes it refers
to the fact that somebody has successfully established a business. In other studies it may refer to the expansion of business.
Unfortunately, it may take years for a new enterprise to grow, and if the research data are gathered during the
first or second year of the business, it might not show any growth.
Since the financial resources available for
researchers are often limited (more value for less money-attitude may have an impact on the quality of research, I’m
afraid), and it may not be possible to follow the development of the studied businesses over a longer period of time.
And, further,
it is not unusual for an entrepreneur to be a serial entrepreneur. Some businesses and products have a short life cycle and
the entrepreneur behind them is busy establishing new businesses.
Inventors often develop hundreds of ideas and
many of them fail. Thus, if an inventor-entrepreneur who is part of a study has recently been successful he or she may be
categorized amongst successful entrepreneurs whereas an inventor whose (latest) idea was not a success may be categorized
amongst unsuccessful entrepreneurs.
The fact that some businesses and ideas fail, raises an important
question of when it is the right time for an entrepreneur to admit failure and move on, and when it is the right time
for an entrepreneur to persevere and to try to save the failing business. I suspect that this question is the
hardest to answer.
Although there are weaknesses in the studies of entrepreneurial personality, the
evidence of the findings of hundreds of studies is convincing.
The research field of entrepreneurial activities
and small business does not have a uniting paradigm, and each researcher approaches the issue from his or her own point of
view.
The advantage of this situation is that the field and the journals where the results are published
are still open for new approaches. But it would be useful if more attention was paid on conceptual clarity.
Suggested reading:
Rauch, A. & Frese, M. (2007). Let’s put the person back into
entrepreneurship research: A meta-analysis on the relationship between business owners’ personality traits, business
creation, and success. European Journal of Work and Organizational Psychology, 16(4), 353-385).
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2010
What's been ignored
Gender
An important aspect of research is generalizability. From a more pragmatic
point of view we may ask who or what groups do the entrepreneurial traits represent.
Psychological entrepreneurial
studies tend to be genderless. At the same time, the image of an entrepreneur clearly is an image of a man. The gender of
the participants is seldom mentioned, and when it is, men seem to dominate the samples. In older studies this simply reflects
the fact that most entrepreneurs and business owners used to be men.
Since there is a shortage of studies on female entrepreneurs, it isn’t certain that the personality of female entrepreneurs
is similar to male entrepreneurs.
Today
women are encouraged to become business owners and in every EU country there seems to be special entrepreneurial programmes
for women only.
A recent American study on the background and motivational factors of the owners of over 500 (high
tech, bio-tech) companies found that only 8 percent of the owners were women.
All the owners were university educated
and since men and women quite equally take part in higher education today, one would expect there to be more female entrepreneurs.
In the Austrian study where the personality traits of those who started
an own business and those who inherited a business were compared, there were gender differences, men possessing
more entrepreneurial traits than women.
Unfortunately, women were predominantly found amongst those who inherited
their business, and men amongst those who established their own business.
Thus, the reasons for (and thereby
also motivational factors for) becoming business owners were different for men and women in this study. These differences
in reasons and motivation probably had a greater impact on the emerging personality differences than gender itself.
It may be that men and women prefer to establish different kinds of businesses. Amongst the inventors I studied
in Sweden, some were women and they developed ideas related to beauty products, safety equipment in working environment, sports
bras, etc. None of them was developing high tech products or businesses.
All in all, there is a great need to
study female entrepreneurs and of studies comparing the personality traits of female and male entrepreneurs, as
well as of studies where potential differences in the type of business men and women prefer to establish.
And,
it wouldn't harm to take a look at the reasons why high-tech, information and bio technology still are so male dominated.
Migrants
Another group that is missing consists of migrants and ethnic
groups. In most European countries migrants are over-represented amongst small businesses.
In psychological studies
the ethnicity (nationality, race, religion, first or second generation migrant, etc.) of business owners and their personality
traits has not been studied.
One of the reasons for this might be that if the migrants in the sample formed a
very diverse group (belonging to various ethnic groups, nationalitites, religions, and so on), the researcher might ignore
the ethnicity of the participants. If there are too many groups or the emerging groups are too small, all statistically
meaningful comparisons become impossible.
I've also noticed that in British reports on national
or regional entrepreneurial activities, ethnic groups mainly refer to the older and larger ethnic groups (from the Indian
sub-continent, the Caribbean, etc), and not to the new migrants. No distinction is made between first and second generation
migrants.
The modest but existing research into the personality of first generation migrants indicate that
they tend to be work oriented and motivated to achieve. This applies especially to those who are the first movers but not
necessarily to those who migrate only because they wish to reunite with their family members.
It would be interesting
to see whether the same traits apply to the second generation migrants as well.
We may ask whether the personality
traits of the children of migrants are more similar to the personality traits of their parents than to other young people
in the host country.
Many of the traits mentioned in these pages can be learned as well as they can be inherited.
In other words, a positive cultural attitude towards entrepreneurship may encourage people to develop certain
traits. The reverse is also true; a negative cultural attitude towards entrepreneurship may discourage entrepreneurial traits.
Adolescents
Yet another observation is that most of the previously
mentioned and relevant psychological measures are aimed at adult populations. Only a couple of the measures of entrepreneurial
personality traits can be applied to adolescent populations.
Today governments wish to encourage adolescents
to become interested in a career as entrepreneur and to do so quite early.Therefore it is important to study which adolescents
should be encouraged to establish their own businesses.
Personality structure may also be relevant when
judging what kind of a business (innovative, conventional, high risk, low risk, etc.) a person should be encouraged to establish. Once
again, new research within the field is needed.
Social Business
Yet another ignored aspect is the nature of business. A business may be a profit making business or a social business. In
psychological research this distinction is missing but implicitly the emerging picture is that of a profit making business.
Personally, I don't expect the personality traits of entrepreneurs who establish profit making businesses
to be different from the personality traits of entrepreneurs who establish social businesses.
In both cases the
entrepreneur must be enthusiastic and motivated to achieve, stress tolerant, able to face difficulties, be flexible, take
responsibility for both failures (in order to make necessary changes) and successes.
Yet, there may be other
differences than the personality traits mentioned here, that might be worth studying.
Hopefully, these comments
inspire academics to continue with entrepreneurial studies. Hopefully they also encourage research financiers to offer
funding opportunities to entrepreneurial studies.
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2011
Evaluators and experts
What
about the evaluators who decide on funding? What can we expect of them? Unfortunately, there are no studies on the personal
characteristics of business (or other project) evaluators. But there is research on expert decision-making.
Is there a single
correct judgment?
We
tend to expect that all decisions concerning funding, diagnoses, or appointments are fair and that there was only one
possible and correct solution upon which all the decision makers could agree.
We assume that
there is always a single true or correct solution to all problems, and that the decision-makers had complete information available
when making the decision.
Yet, in reality most decision are made by
using imperfect information. This happens
(a) because all information is not available
or it would take too much time to search for all pieces of information.
(b) because the nature of the problem is such that it really doesn’t have a single correct solution.
A numerical or a mathematical problem has a single correct solution
whereas all other kinds of problems must be based on opinions, convictions, indicators, symptoms, expectations, or on the
assumption that previous behaviour is a good indicator of future behaviour.
A
doctor who is making a diagnosis bases the judgment on the symptoms, which unfortunately may be related to several illnesses
(this in turn may lead to new laboratory tests in order to exclude some illnesses, and so on).
A financier may
decide to base the decision on the assumption that previous success is a good indicator of future success, and so on.
Experts do disagree
In Psychology much research has been carried out to study if experts are consistent in their judgments and
if they agree or disagree.
The outcomes of such studies indicate that an individual evaluator may be consistent
in his or her judgment (use similar kinds of criteria) across situations, whereas different evaluators may make dissimilar
judgments when judging the same situation.
In other words, experts may focus on different evalautive criteria
and stress the value of different aspects of the evaluated project.
Experience
Experience influences how well an expert evaluator performs
complex tasks.
It seems that experienced evaluators more easily than novices can discriminate between relevant
and irrelevant information in situation where the judgment demands problem structuring, information seeking, selecting information,
and interpretation of guideline cues.
When the tasks are mathematical by their nature there is no difference between
experienced evaluators and novices.
Maths or people
It
is easier to reach an agreement between the evaluators when the task concerns the use of machines or can be solved by mathematical
calculations than when the task concerns human beings, as is the case in Psychology, in Medicine, and when judging the character
of a person.
People are not very good at judging the character of other persons, although most people live in
the illusion that they are...
This illusion persists very likely because we tend to remember only those occasions
when we made a correct judgment and repress (forget) the occasions when we made incorrect judgments.
Different types of projects
Within the fields of research and innovations there are also different types of
methods of evaluations involved.
From the evaluative point of view it matters whether the aim of research is mainly
to search for new knowledge, or to develop specific knowledge applicable to the development of a prototype, or whether the
aim is to directly contribute to the development and testing of a commercially viable product.
It is difficult to judge what the contribution of ‘pure science’
is to society or to industrial innovation.
Previously, universities and industries used to have quite different
cultures and misunderstandings were not unusual. Today, when universities too are seen as commercial enterprises, the cultural
differences are not that large, and collaboration between industries and universities takes place frequently.
However,
it has become more difficult to defend ‘pure science’.
Major funding
organisations (for research and innovations) seem to lack shared evaluative criteria which makes it more difficult to evaluate
the economic returns of funding activities and to evaluate the proceedings and outcomes of funded projects.
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