The Psychology of Entrepreneurs
Research on entrepreneurship is of increased demand in industrial or organizational psychology since the inception of the field. There are different definitions proposed about entrepreneurship based on different perspectives. Among them, one of the popular definition put forward by Shane & Venkataraman (2000) defined entrepreneurship as the process that includes discovery, evaluation, and use of opportunities to develop new products, services, processes, organizing ways, or markets. It is evident from the history of entrepreneurship that the initial research carried out in the field was always enclosed within a psychological perspective. Schumpeter and McClelland are regarded to be the fathers of entrepreneurship research whose studies and findings were mainly psychological in nature. Though there was a tendency to minimize the importance of psychology in entrepreneurship development due to the emphasis on economics, contemporary research again signifies the role of psychology in explaining the dynamics of entrepreneurship (Frese and Geilnik, 2014).
Frese and Geilnik (2014) published a paper on the psychology of entrepreneurship and proposed an action-characteristics model of entrepreneurship which was a modification of the Giessen-Amsterdam model conceptualized by the same group of researchers in an earlier study. The model categorizes the influencing factors of entrepreneurial success into personal characteristics and action characteristics. The action characteristics are considered to be the most significant for success which the researchers formulated as having personal initiatives, precise goals or visions, searching for right opportunities, searching for accurate information, proper planning, processing feedback, social networking, seeking of niche and resources, deliberate practice, and entrepreneurial orientation. The model also divided entrepreneurial success in three phases; opportunity identification, refinement of business concept and resource acquisition, as well as survival and growth. Apart from these factors, the researchers conceptualized that the following characteristics also indirectly influence entrepreneurial success; personality (achievement need, locus of control, autonomy, generalized self-efficacy, innovativeness, stress tolerance, and risk taking), motivational or affective antecedents (passion, affect, self-efficacy, and entrepreneurial orientation), cognitive and social precondition (education, mental abilities, and models in family or environment), cognitive antecedents (general and specific knowledge, tacit knowledge, entrepreneurial orientation, expertise or practical intelligence, and heuristics), and environmental determinants (life cycle, dynamism, unpredictability, hostility, and industry) (Frese and Geilnik, 2014).
Zhang and Zhang (2013) analyzed the psychological traits of entrepreneurs through a study on Chinese college students. The researchers classified the major facets of entrepreneurial success as entrepreneurial capacity, entrepreneurial belief, entrepreneurial consciousness, entrepreneurial motivation, and entrepreneurial determination. Such characteristics are important for both entrepreneurial success as well as for overall professional development (Zhang and Zhang, 2013).
Kerr, Kerr, and Xu (2017) published a review paper on the existing literature regarding the personality features of entrepreneurs. Conclusions drawn from an extensive review of previous studies revealed that individuals high on openness to experience and consciousness while low on agreeableness and neuroticism tend to be successful entrepreneurs. Findings related to correlation with extraversion were found to be debatable. Research has proved that extraversion is more significant for managers than for entrepreneurs. The researchers also identified from previous studies that self-efficacy is a crucial factor for entrepreneurial success with more significance for entrepreneurial self-efficacy. Among the major components of entrepreneurial self-efficacy formulated by Chen et al. (1998); innovation, risk-taking, management, marketing, and financial control, the researchers of the study identified that innovativeness is a potential influencing factor in entrepreneurship. Furthermore, the review also determined that successful entrepreneurs are high on internal locus of control and need for achievement. Additional to these basic personality traits, researchers also identified that entrepreneurial intentions and business planning skills are also necessary for successful entrepreneurship. Besides, optimism and risk attitudes such as risk preferences, risk tolerance, risk aversion, and risk propensity are also inevitable for successful entry in entrepreneurship (Kerr, Kerr, and Xu, 2017). In alignment with the previous study, Chavez (2016) also summarized from literature review that achievement need, locus of control, and risk-taking propensity are significant influencing factors of entrepreneurship.
Integrating the different personality traits necessary for entrepreneurship development, Obschonka and Stuetzer (2016) developed a model labeled the Entrepreneurial Personality System (EPS). Initially, the model covers the fundamental big five factors of personality with biological traits playing a mediating role. Secondly, it consists of characteristic adaptations which are specific traits like attitudes, belief patterns, personal strivings, habits, skills, and relationships. Such characteristics are influenced by culture and social ecology. Then the model formulates the significant entrepreneurial outcomes such as entrepreneurial career choice, nascent entrepreneurship, habitual entrepreneurship, entrepreneurial success and failure. Finally, the model consists of self-concept including entrepreneurial self-identity and entrepreneurial life narratives (Obschonka and Stutter, 2016).
A conference on the “Advances in the Psychology of Entrepreneurship” was conducted at the management school of the University of Sheffield, UK in 2012 in which several papers related to recent psychological research in entrepreneurship were presented. Some of the major findings drawn from papers based on psychological profiling of entrepreneurs enable us to draw the following conclusions. A study by Obschonka et al analyzed the importance of big five traits in entrepreneurship using the Giessen-Amsterdam model and arrived at the conclusion that entrepreneurial success is determined by high extraversion, high conscientiousness, high openness to experience, low agreeableness, and low neuroticism. They also found from the German Socio-Economic Panel and Thuringian Founder Study that the big five profile of entrepreneurs is directly correlated with self-employment status and it is moderated by risk propensity and locus of control. They also found from Thuringian Founder Study that the big five profile is associated with founding intentions, with mediating role played by entrepreneurial self-efficacy (Obschonka, 2012). Moriano, Linan, and Jaen showed that openness to change and self-enhancement values are necessary for entrepreneurial intention which has potential influence on entrepreneurial success. Besides, apart from the personality components, Ahmetoglu, Almeida, and Premuzic (2010) identified that vocational interests are also associated with entrepreneurial outcomes such as entrepreneurial potential and entrepreneurial activity. Furthermore, a paper by Yitshaki proved that emotional intelligence and transformational leadership traits are also relevant in entrepreneurship development. Additionally, several other cognitive factors could also play a crucial role in entrepreneurship development like opportunity recognition and decision making based on informational and peripheral cues.
The following article is not an exhaustive summary of psychological characteristics identified to be the most significant in entrepreneurship. Research in entrepreneurship is very popular nowadays and thus numerous results are drawn from various studies conducted across the globe. Only some of those findings are mentioned in this article. Thus an extensive analysis of the psychological nature of entrepreneurship is necessary for the expansion of organizational research in psychology. Additionally, psychologists could also involve in further research thereby filling the research gap existing in the field and also by developing potential implications so that we can bring out some of the best entrepreneurs among us.