Personality Traits of Entrepreneurs

Founders start businesses for a number of reasons and it is difficult to identify a set of personality traits that can associated with everyone that starts a new business.  In fact, a fair number of businesses are started for reasons not chosen by the founder, such as when the founder loses his or her job with an employer.  Putting aside these “accidental” or “reluctant” founders, however, it is useful to explore some of the research that has been done on the personality traits of founders and most of the work in this area has been done by researchers interested in the overall phenomenon of “entrepreneurship”.[1]  This is not surprising given that in recent years entrepreneurs, such as Bill Gates and the late Steve Jobs, have assumed almost mythical positions in the eyes of the public and entrepreneurs in general have come to be referred to as “the hero[s] of capitalism and the free enterprise system”.[2]

In his 1911 classic work entitled The Theory of Economic Development, legendary economist Joseph A. Schumpeter provided the following description of his views regarding the psychology of the entrepreneur: “Entrepreneurs . . . are not propelled solely by a wish to grow rich or by any ‘motivation of the hedonist kind.’  Instead, they feel ‘the will to conquer: the impulse to fight, to prove oneself superior to others, to succeed for the sake, not of the fruits of success, but of success itself . . . There is the joy of creating, of getting things done, or simply of exercising one’s energy and ingenuity.”[3]  It is important to realize that entrepreneurship was a novel, and relatively ignored, concept during Schumpeter’s lifetime and he lacked a body of empirical data that he could use to prove and support his ideas.  As time has passed, however, Schumpeter’s views about economic progress and the role of the entrepreneur have been widely praised and embraced as prophetic.

Attempting to identify the personality traits most commonly found among entrepreneurs has become one of the most popular areas of academic research.[4]  A basic survey of the literature uncovers the following as the most commonly mentioned traits:

• A need for achievement, which goes beyond mere monetary awards to include a drive to establish and build a growing business;
• A high internal locus of control or a need among entrepreneurs to be their own bosses;
• A high propensity for risk taking and ability to absorb and learn from failure[5];
• A need for independence, which sometimes is evidenced by an inability to fit into a more traditional, or large, firm situation[6]; and
• A predisposition toward innovative behavior, including creativity, vision, and capacity to inspire.

Cauthorn has written that “[f]or thinking innovatively, imagination is more important than knowledge” and has noted that “[l]ogic alone points away from entrepreneurial activity”.[7]  Kirzner noted that while successful entrepreneurship is, to a degree, a function of “luck,” entrepreneurs make what appear to be unforeseen discoveries because they are alert to new opportunities and act in systematic ways based on their hunches or vision.[8] In addition, while many of the traits listed above describe some sort of displacement as the catalyst for a person’s pursuit of entrepreneurship, Shapero and Sokol rightly point out that only some people can turn a displacement into an opportunity.[9]  Shapero and Sokol have also mentioned that entrepreneurs are often influenced and inspired by mentors.[10]

Clearly the words that Schumpeter wrote almost 100 years ago were prophetic and anticipated much of what psychologists, anthropologists and sociologists are finding today.  However, while all this is quite interesting is has created a good deal of controversy since it suggests that entrepreneurs are most likely to be born and not made.  If that is the case, universities should stop offering classes and degrees in entrepreneurship and governments should shift their funding activities from training to investments in improving the environment within which these “special personalities” can perform.  A more reasonable interpretation of the data is that the presence of these traits in a particular person can be used as measure of the likelihood that he or she will voluntarily choose an entrepreneurial path.  This leaves open the possibility that entrepreneurship can be an acquired talent and recognizes that, as mentioned above, unforeseen circumstances, such as sudden job loss due to downsizing and offshoring, often turn loyal, long-term employees of large firms into unexpected entrepreneurs.  Even more important to remember is that even if someone possesses the energy, creativity and ability to persevere linked to the entrepreneurial ideal it does not mean that he or she will be successful in launching and managing a business and this brings us to the topic in the next section: the founder’s skills inventory.

While starting and operating a business, particularly a business that is expected to grow rapidly, is a team effort, members of the founding team should not move forward too quickly without closely and carefully analyzing and evaluating their own personal skills, strengths and weaknesses and then comparing them to the skills and other attributes that are expected to be necessary in order to successfully operate the chosen business.  If a founder is not strong in a particular area, he or she must be mindful of the fact that the weakness needs to be addressed by recruiting qualified individuals to work with the business, either as an additional member of founding team or as an employee or key outside consultant.  While introspection necessarily takes time away from the work necessary to launch a new venture, entrepreneurs should be encouraged to undertake some type of formal assessment of their personal characteristics and organizational and managerial skills that includes hard and pointed questions about their motives for embarking on an entrepreneurial path.  In addition to the questions included in this chapter, a wide range of resources are available for assessment.  For example, a Wall Street Journal article on “entrepreneurship” suggested that persons considering self-employment and launching a new business ask themselves the following questions and ask their associates to critically evaluate their answers[11]:

• Are you willing and able to bear great financial risk?
• Are you willing to sacrifice your lifestyle for potentially many years?
• Is your “significant other” on board?
• Do you like all aspects of running a business?
• Are you comfortable making decisions on the fly with no playbook?
• What’s your track record of executing your ideas?
• How persuasive and “well spoken” are you?
• Do you have a concept that you are passionate about?
• Are you a self-starter?
• Do you have a business partner?

This post is part of the Sustainable Entrepreneurship Project’s extensive materials on  Entrepreneurship.

[1] For further discussion of research on the personality traits of entrepreneurs, see “Entrepreneurship: A Library of Resources for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org).

[2] J.G. Burch, Entrepreneurship (New York: John Wiley & Sons, 1986), 24.

[3] See Joseph A. Schumpeter, The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle (translated by Redvers Opie) (Cambridge MA: Harvard University Press, 1934).

[4] For a more detailed discussion of the personal motivational traits of entrepreneurs, see “Entrepreneurship: A Library of Resources for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org).

[5] See, e.g., J.G. Burch, Entrepreneurship (New York: John Wiley & Sons, 1986), 33 (“[f]ew, if any entrepreneurs have escaped failure”).

[6] See, e.g., G. Gilder, The Spirit of Enterprise (New York: Simon and Schuster (1984), 132 (“[t]he fastest-growing new firms often arise through defections of restive managers and engineers from large corporations or through the initiatives of immigrants and outcasts beyond the established circles of commerce”), 247 (entrepreneurship arises in “rebellion against established firms”), and 257 (entrepreneurship is an “irrational process” carried on by “orphans and outcasts”).

[7] R.C. Cauthorn, Contributions to a Theory of Entrepreneurship (New York: Garland Publishing (1989), 28 and 32.

[8] I.M. Kirzner, Perception, Opportunity, and Profit (Chicago: The University of Chicago Press (1979), 180-181.

[9] See, e.g., A. Shapero and L. Sokol, “The social dimensions of entrepreneurship,” In C.A. Kent, D.L. Sexton, & K.H. Vesper (eds.), Encyclopedia of Entrepreneurship (Englewood Cliffs, NJ: Prentice Hall, 1982), 74.

[10] Id.

[11] K. Spors, “So You Want to Be an Entrepreneur”, The Wall Street Journal, February 23, 2009.