2.1: The Entrepreneurial Personality

Question 1

Do entrepreneurial traits predict behavior in different situations?

Answer 1

• Common misunderstanding: all behavior is determined by personality traits
• A person can chose to behave against her disposition, and it is a common experience of entrepreneurs that they manage their personality.
• It makes little sense to expect a high relationship between any one personality trait and specific decisions by an entrepreneur

Question 2

How are personality traits defined?

Answer 2

– By being consistent across various situations and

– By being stable over time

Question 3

Why was the trait approach was heavily criticized during the 1990s?

Answer 3

– A high diversity of traits were studied
– No theoretical consensus about the basic “entrepreneurial” dispositions in the literature
– Inconsistent and conflicting empirical evidence for the relationship between personality traits and Entrepreneurship
– Many studies were narrative reviews

Question 4

What are the requirements for the revival of the Personality Approach?

Answer 4

• Personality dispositions need to be sampled across different situations and occasions; they cannot predict a single behavioral act
• The predictive power of personality traits becomes higher if one takes the interaction of personality and situational parameters into account.
• Differentiating between broad and specific traits
– Specific traits (such as goal orientation and self-efficacy) are nearer to behavior and more powerful than broad traits (such as emotional stability)

Question 5

Could the relationship between a personality variable and success only be linear?

Answer 5

No, it should be tested for nonlinear relationships as well: i.e. People may be too ambitious, too risk-oriented, too achievement-oriented

Question 6

What are the five Broad Personality Traits that have an effect on business success?

Answer 6

• Extraversion
• Emotional stability (neuroticism)
• Agreeableness
• Conscientiousness
• Openness to experience

Question 7

How do Broad Traits have an effect on business creation and success compared to Specific traits?

Answer 7

Broad traits should be less strongly related to business creation and success than more specific traits.

Question 8

How do broad (Big Five) personality taxonomy traits as defined by Costa and McCrae (1988) relate to business creation and success?

Answer 8

Costa and McCrae (1988) focus on:
• Extraversion
• Emotional stability (neuroticism)
• Openness to experience 
• Agreeableness
• Conscientiousness

With regards to creation and success:
• Emotional stability (= low neuroticism) and independence are positively correlated with success (Brandstätter 1997)
• Openness to experience is negatively related to business startup (Wooton & Timmerman 1999)
• Negative relationship between openness to experience and survival (Ciaverella et al. 2004)
• Positive relationship between conscientiousness and survival (Ciaverella et al. 2004)

Question 9

What are the eight Specific Personality Traits of entrepreneurs?

Answer 9

• Need for achievement
• Need for autonomy
• Innovativeness
• Creativity
• Locus of control
• Risk-taking propensity
• Self-efficacy
• Tolerance for ambiguity

Question 10

What is the Need for Achievement?

Answer 10

Concept first developed by Murray (1938): N-Ach.
People with high N-Ach:
– Prefer own responsibility for solution of problems and setting targets/goals
– Want to achieve these targets by own efforts
– Want to know exactly how well they perform

Question 11

What are the consequences of a high N-Ach?

Answer 11

– Go for goals with medium level of difficulty
– Search for personal efforts
– Search for situations with direct feedback
– Look for personal control of success chances
– Look for partners with high qualification rather than personal closeness
– Money as an indicator of personal success

Question 12

What is the conclusion about N-Ach for entrepreneurs?

Answer 12

– Entrepreneurs have higher N-Ach than average population
– Mixed evidence for differences between entrepreneurs and managers (Intrapreneurs also have a higher N-Ach than average population and managers with lower degree of responsibility )
- People who think of becoming an entrepreneur also exhibit higher N-Ach
- N-Ach is positively correlated with business success

Question 13

What are the two competing theoretical positions regarding the effects of risk- taking propensity on Entrepreneurship and success?

Answer 13

1. Direct linear relationship of risk-taking, creation and success
2. A curvilinear relationship

Question 14

What does the first theory of risk taking - the direct linear relationship - state?

Answer 14

– Entrepreneurship often linked to willingness to accept risks or uncertainty by economists
– Decision to become an entrepreneur: the perceived degree of risk and the perceived possibility of failure associated with the financially unsuccessful venture
– Primarily involves risk measurement and risk taking
– Risk financial well-being, career opportunities, family relations, and psychic well-being

Question 15

What does the second theory of risk taking - the curvilinear relationship - state?

Answer 15

– High N-Ach would rather lead to moderate risk-taking
– Entrepreneurs do take high risks, but perhaps this is only a matter of risk perception
– Certain instruments used to measure risk-taking propensity may be erroneous

Question 16

What is the relationship between risk-taking propensity on Entrepreneurship and business success?

Answer 16

There is a positive relationship between risk-taking and Entrepreneurship.
The effect of risk-taking propensity on Entrepreneurship and business success is positive and significant, but small.
The difference of “real” entrepreneurs to managers becomes quite considerable.

Question 17

What is the relationship between innovativeness and entrepreneurship?

Answer 17

• Entrepreneurs are more innovative than other people and

* Innovativeness (as a personality variable and on a firm-level) is positively correlated with success.