Do Entrepreneurs have Personalities?

At the recent HBS strategy conference, a number of papers and one panel were focused upon entrepreneurship. Over the past several years, innovation and entrepreneurship have been (and continue to be) very active areas of research. For example, in 2007 the SMS launched the Strategic Entrepreneurship Journal and, for those engaged in it, there appears to be almost unlimited funding for entrepreneurship research (the Kauffman Foundation being a leading source).

During one of the paper sessions, Axel Bichara of Atlas Venture, an early-stage investor in life sciences startups, made an offhand comment to the effect that they place a fair amount of weight on the managerial and personality characteristics of their candidate recipients for funding. My guess is that most people in the business would agree that some people have what it takes to be an entrepreneur and that screening for those qualities is an important part of creating the potential for a successful venture.

In the late 80s, I found myself serving as CFO of an entrepreneurial venture. We had made it past the prototype stage and were gearing up for regional rollouts of our retail product. Our VP Marketing had been hired from a well-known F500 consumer products company (and didn’t come cheap). Unfortunately, it quickly became clear that this individual simply didn’t “get it” when it came to being an entrepreneur. Rather than hustling out in the field and being quick to respond to unexpected events, this person spent most of the time behind a desk issues edicts to advertising firms and setting complex coupon strategies up on a spreadsheet.

Being quick to respond to unexpected events ourselves, we let that person go and immediately began a search for a suitable replacement. Eventually, one young woman with marketing experience from another well known F500 consumer products firm made a very positive impression on myself and the rest of the senior management team. Yet, we had just been down this road with her predecessor: someone with the right pedigree, who came across as very mature, successful and highly polished, failed epically. How could we be sure we wouldn’t be making the same mistake again? And, note well, we weren’t going to get a second chance.

We decided to devise a test. As it happened, next up on the rollout was the Atlanta market. Being lean on resources, we didn’t have much in the way of specific information about the distribution channels there. So, we figured we would send our candidate there for a week to reconnoiter the situation. Based upon her performance, we would have a lot more information about how she would fare in an entrepreneurial setting. We told her we liked her for the job, but had a disastrous experience with her predecessor. Therefore, we said, we wanted to hire her as a consultant to handle a one week, special assignment. We told her that, if she was game, she was to show up at our offices the following Monday, at which time we would explain the assignment, hand her a round-trip plane ticket somewhere, and have her back the following weekend.

Her reaction to this proposal was, “Sure. Do I need to bring food?” That reaction was perfect on so many levels.

She returned late the following Saturday with a jaw-dropping treasure-trove of information and competitive intelligence (purchasing managers spilled their guts to her on competitor pricing, consumer research, specific store information by location … we were stunned). Following our Saturday debriefing, we told her we needed her report in time for a critical funding meeting with our NYC VC that Monday. We put her up in a dump of a NJ hotel (where the receptionist dealt with people from behind bullet-proof glass). She was unfazed and worked, essentially without sleep, to deliver her report to us on-time Monday morning. At that point – surprise again – we explained that, since none of us had time to read the report, we wanted her to present her findings to the VC. She did an outstanding job there as well. The VC granted our next take-down and agreed we should hire her on the spot. Which we did.

Not surprisingly, she turned out to be one of the greatest entrepreneurs I have ever known.

I’m not sure how all the qualities on display in that anecdote would be described in an appropriately general and precise academic fashion. One would think that doing so would be an important scholarly endeavor.  Yet, according to a quick google scholar search, the bulk of serious research on the personal characteristics of successful entrepreneurs was done in the 80s and 90s. There seems to be little interest in this question today. Is this because it has been answered, because we don’t think it can be answered, or because we don’t think it’s important any more?

8 Comments on “Do Entrepreneurs have Personalities?”

  1. glenn macdonald says:

    I think the reason there is little interest in features of successful entrepreneurs is the same reason there is little interest in the features of successful other things, e.g., firms, musicians,… Success normally means earning great rewards, which is a combination of being part of value creation and getting to appropriate a lot of it. Thus the big issue is how value is created and appropriated. In your example, the person you liked had the qualities of someone who would be successful in many settings. The real question is why was your venture her optimal assignment? I.e., why was she adding and appropriating value there rather than somewhere else. The answer is unlikely to be some sort of grand characteristic applicable to all entrepreneurial settings. Moreover, the search for important characteristics will be no more successful than “good to great”, i.e., to the extent it uncovers anything it will uncover what used to work, at least to the degree that is it reproducible.

  2. stevepostrel says:

    Another anecdote somewhat reminiscent of the contrast between your two hires is the story told by journalist David Owen about the genesis of plain-paper photocopying. When Haloid corporation, which owned the rights to Chester Carlsons xerography patents, tried to interest IBM in helping them launch the product, IBM hired Arthur D. Little to estimate market size. ADL looked at the amount of carbon paper used in the U.S. (google that, younguns) and concluded that the total number of plain paper photocopiers needed was quite small.

    A Haloid salesman down at a local Social Security office, by contrast, asked them how much coated paper per month they used for thermal copying. “You mean how many carloads, or what?” was the response. “Carloads???” the salesman thought as his eyes grew wide. Haloid went on to have some small success under its new name, Xerox, selling plain-paper photocopiers.

    The contrast in both anecdotes has to do with gathering on-the-ground intelligence cheaply versus deploying expensive armchair analytics. An emphasis on observation rather than sophisticated analytics based on sketchy data, and a kind of hustle in taking the initiative to look for oneself.

    I also have anecdotes that go in the opposite direction, where “ready, fire, aim” entrepreneurial types have to be rescued by more-professional by-the-book types. So besides Glenn’s astute point, I think that entrepreneurial personality types are pretty contextual and those contexts shift cross-sectionally and over the life cycle of a venture.

  3. Mike, there have been several meta-analytical studies in decent journals in the past ten years on entrepreneurial personality (see below). They consistently find that several personality variables have small but significant effects, however, there is also considerable heterogeneity in entrepreneurial populations, definitions of entrepreneurship, measures of performance, and measures of success.

    Before the meta analytical reviews, it seemed for every study finding a positive relationship there was another finding a negative or nil relationship. The field adopted the view that anyone could become an entrepreneur, even a successful entrepreneur. For every go-getter, it was possible to anecdotally point to an entrepreneur who was successful without the drive or risk taking propensity or social skills.

    This was also a little self serving. If you are trying to expand entrepreneurship across the campus do you really want to say that entrepreneurs are born and not made? To this day, disclosing that you are undertaking research on entrepreneurial personalities is likely to provoke a strong visceral reaction from many in the field.

    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.

    Stewart Jr, W.H., & Roth, P.L. (2001). Risk propensity differences between entrepreneurs and managers: A meta-analytic review. Journal of Applied Psychology, 86(1), 145.

    Zhao, H., & Seibert, S.E. (2006). The big five personality dimensions and entrepreneurial status: A meta-analytical review. Journal of Applied Psychology, 91(2), 259.

    Zhao, H., Seibert, S.E., & Lumpkin, G.T. (2010). The relationship of personality to entrepreneurial intentions and performance: A meta-analytic review. Journal of Management, 36(2), 381-404.

  4. […] Ryall at shares interesting anecdotal evidence for the drive or motive power of successful entrepreneurs. He concludes with stating that the bulk […]

  5. stevepostrel says:

    Dr. Phelan:

    Interesting experimental paper (also super well-written).

    I noticed in your figure, by counting x and + symbols, that the size of the subgroup with both high entrepreneurial competence (1 or above) and experience had 16 subjects while the subgroup with high competence and low experience had 7 subjects. On the left of the figure (competence -1 or below), the ratio is approximately flipped (7 experienced and 13 with no experience). Did you just get an unusual random draw into the two groups or am I missing something? And if it is just a fluctuation, couldn’t that cause this particular sample to underestimate the strength of the interaction effect you were looking for?

    • Steve Phelan says:

      Yes, I think it was simply an unusual random draw. Although the traits were measured prior to the random assignment to treatment and control group, we had no way of knowing which groups had the high competence individuals. I think your intuition is correct that the skewed assignment would tend to underestimate the interaction effect. Thanks for pointing this out!

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