Individual Differences Among Entrepreneurs

Overview
Personality Traits
Cognitions
Skills
Training and Experience
Motivation
Demographics

Entrepreneurs are a unique class of people. They have certain traits in common which reliably distinguish them from other groups of people, such as managers, craft workers or the general public. This section details the differences between entrepreneurs and others. The comparison group for many of the classic studies is that of a manager, usually defined as someone working in a large, stable organization. (Of course, this assumes that large, stable organizations exist that don't apply some entrepreneurial pressures on its managers.) Other times, the comparison group is the general population or some other population. It is important to keep in mind which populations are being compared as we look at each trait.

These differences play a role in both emergence, which is the process by which a person attains entrepreneurial status, or chooses to become an entrepreneur, and success. It is not a given that a trait that predicts emergence will also predict success. Entrepreneurship occurs over a period of time, and as tasks change, some of the traits that may have caused emergence or allowed for early success may haunt the experienced entrepreneur, while traits that were not needed in the early phase become helpful later on.

Personality Traits

This section deals with traits. Traits are defined as relatively enduring characteristics of a person. These include psychological traits

Personality Originally, bad studies [which ones] found no personality differences. The field was reinvigorated in the 1990s with the publication of some meaning research [such as]. Personality Differences

Achievement
LoC
values, attitudes, beliefs
High Nach (McClelland and another proof as a subcategory of FFM as compared to managers by Zhao Seibert 2006)
High Openness to Experience as compared to managers (Zhao)
Low agreeableness as compared to managers (Zhao)
Low neuroticism as compared to managers (Zhao)

I'm having a problem with the methodology of comparing entrepreneurs with managers (Miner, Zhao, etc.) instead of the general population. Three reasons: 50% of all people emerge at some point [find this citation!] and do something entrepreneurial, so managers becomes an overrestrictive subset. Further, managers may be a subset of entrepreneurs who can't start their own enterprise, thus invalidating them as a superset of entrepreneurs (i.e., they may be farther to one side because those who can be entrepreneurial push the other side). Finally, anyone can become an entrepreneur, including tech people, etc. They don't just emerge from the ranks of managers. Not sure where this misconception comes from, but it's worth a blog entry for sure.

Psychodynamic Theories Typified by Manfred Kets de Vries (1977). Described entrepreneurs as deviant drifters unable to fit in, with strong feelings of inferiority and helplessness. See Chell1985.

Risk-Taking Propensity (following from Vecchio 2003)

Brockhaus, 1976, 1980a - couldn't distinguish entrepreneur from manager
Brockhouse & Nord, 1979 - disprove propensity.
Litzinger (1965)
Masters & Meier (1988)
Brockhaus 1980b, Peacock 1986 - couldn't distinguish success from non-success
Carland, Carland, Carland & Pierce 1995; Hull, Bosley & Udell, 1980; Stewart et al. 1998 - found difference between entrepreneurs and managers
Broehl, 1978, Liles 1974, Stewart et al. 1998 - found difference between entrepreneurs and general population

Need for Autonomy Desire to be independent and self-directing

Harrel & Alpert, 1979; McClelland 1975 - why some people want to work for smaller firms.

Self-Efficacy Based on Bandura, 1982, Wood & Bandura, 1989

Boyd & Vozikis, 1994, Scherer, Adams, Carley and Wiche 1989. - More likely to do difficult things
Krueger & Dickson, 1994 - See greater opportunity, more willing to take risks when they feel more competent
Chen Greene Crick 1998 - Founders score higher than non-founders on entrepreneurial self-efficacy

Locus of Control Based on Rotter 1966

Engle, Mah and Sadri 1997 - weren't able to distinguish owners from employees (Rotters 1966 scale)
Chen et al. 1998 - couldn't distinguish founders and non-founders (Levinson's 1973 scale)
Gatewood, Shaver and Gartner 1995 - Found something, but not clear

Cognitive Differences

Then came Shaver and Scott 1991's call for cognitive research, which includes Locke and Baum and others.

Goals
Counterfactual thinking
Optimism

Risk-Assessment Differences

Palich and Bagby 1995 - entrepreneurs generally see greater potential in scenarios
Cooper, Woo and Dunkelberg, 1988 - this sounds like confidence/optimism
Krueger & Dickson, 1994 - Those who feel competent take greater risks.
Simon2000 - People making situational misapprehensions about a business are more likely to support it. Overconfidence, Illusion of Control, Law of Small Numbers.

Overconfidence

Cooper et al. 1988 - entrepreneurs overestimate their change of success
Palich & Bagby - Entrepreneurs frame things more positively
Busenitz & Barney (1997) - Overconfidence is slightly correlated with entrepreneurship.
Kets de Vries - Of course....

Counterfactual Thinking

Baron 1999 - Entrepreneurs do less regretful thinking about the past. They think less about what might have been. This leads to:
- an increased likelihood to admit mistakes
- have less regret (negative affect)
- less hindsight bias (the tendency to assume that the past was inevitable, which could lead to pessimism)

Skills Differences

Social skill
New Resource Acquisition

To exhibit a behavior, the person taps a skill. What skills are ascribed to entrepreneurs?

Skills (New Resource, Technical, Opportunity-Identification, etc.)
Ability to enlist others, persuasion
Financial/operational skills?

Training and Experience

This can include social capital as well as industry experience. Should skills be incorporated into training?

Motivational Differences

Motivation follows two theories: cognitive and needs-based. We already talked about them above – cognitive in Cognitive and needs-based in Personality. However, we talk about them again here.

Goals, achievement, other things?

Collins Hanges Locke 2004 says that type of motivation (Need for Achievement) impacts emergence and success.
Baum Locke 2004 show a relationship between certain traits, including goal size and communication, to venture growth/performance.

Task Orientation Miner 1990 defined hierarchic (managerial) and task (entrepreneurial) motivation. Applies to high-growth firms, not Mom & Pop stores.

Smith & Miner 1983 - entrepreneurs have lower hierarchic motivation than low and mid-level managers
Berman & Miner (1985) - entrepreneurs have lower hierarchic motivation than high-level managers
Miner, Smith & Bracker 1989 - founders have higher task motivation than non-founders
Bellu, 1988; Bellu, Davidson & Goldfarb (1989); Bracker, Keats, Miner & Pearson (1988) - Entrepreneurs are more task-motivated than managers
Miner 1990 - Entrepreneurs heading high-growth firms are distinguishable from managers.

Demographics

This includes gender, age, ethnicity, family background, education and other experiential factors.

Gender

Family Background

Fairlie and Meyer 1996 - Education is positively correlated. Ethnicity is associated. "Advantaged" status is positively correlated.
Blanchflower & Oswald 1998 - Inheritance and gifts predict entrepreneurship (capital is important).
Jo Lee 1996 - Prior experience in domain and education predict success
Reynolds 1997 - Younger people do it (25-34 years old).
Role models have an impact - uncited from Bygrave, Portable MBA