Entrepreneurship promotes employment, productivity growth, innovation activity, and the commercialization of innovations. However, only a small number of firms create a significant portion of new jobs, and a large share of firms experience limited or decreasing growth. Because of the economic benefits of successful entrepreneurship, the questions of who becomes and what makes a successful entrepreneur are of interest to both academics and policymakers.
What is required of a successful entrepreneur?
Entrepreneurship differs from paid employment in several ways. For example, entrepreneurs bear substantial risk, which is typically poorly diversified. They are characterized as “jacks-of-all-trades” who must be competent in many skills, and they need to detect and exploit opportunities and make rapid decisions in uncertain conditions. Due to these characteristics, entrepreneurship, particularly when successful, frequently requires “entrepreneurial capital,” consisting of financial, social, and human capital dimensions. Personality traits can be considered as a part of this capital. Previous research has found that entrepreneurship is related to personality traits such as high openness to new experiences, the need for achievement, and high risk tolerance. However, the personality traits that drive people to open new businesses are not always the same ones that make entrepreneurs successful. For example, founder CEOs are not necessarily best suited for management, and traits such as openness to new experience, which are related to entry into entrepreneurship, may not predict firm survival.
Our finding: Self-confidence predicts the propensity to become and succeed as an entrepreneur
In the study published in Journal of Business Venturing Insights, we examined how personality traits (neuroticism, extraversion, sociability, hostility, self-confidence, and conscientiousness) were related to the propensity to become and succeed as an entrepreneur. We used Finnish survey data (The Older Finnish Twin Cohort Study) on personality traits linked with long-term administrative register data, which enabled us to track entrepreneurial activity and success over a 20-year period (1990–2009). We found that higher self-confidence was associated with a higher probability of becoming an entrepreneur and better entrepreneurial performance measured by exit from entrepreneurship, entrepreneurial income, and the firm’s productivity. The link between self-confidence and entrepreneurial outcomes remained positive when the potential confounders from shared family and genetic background were controlled for using a sample of identical twins.
Previous studies support the notion that self-confidence is positively related to entrepreneurial outcomes
Previous studies examining self-confidence and entrepreneurship have focused on entrepreneurial self-efficacy (ESE). This specific domain of self-confidence refers to a person’s belief in their ability to successfully launch an entrepreneurial venture. In line with our results, these studies have shown that ESE is positively related to entrepreneurial intention, venture creation, and entrepreneurial performance. In addition, general self-efficacy, which is not specifically related to the entrepreneurial domain, has been found to predict start-up performance and survival during the first years after business creation.
Entrepreneurial self-confidence can be enhanced
Earlier studies have shown that self-confidence, which is specifically related to entrepreneurship, may not be stable and can change. For example, entrepreneurship education may increase the level of ESE, particularly among females. Therefore, providing support that enhances people’s self-confidence may promote both entrepreneurship and entrepreneurial performance in society.
Read the full paper here to find out more: https://doi.org/10.1016/j.jbvi.2023.e00382
Author bio
Terhi Maczulskij is Chief Research Scientist at ETLA Economic Research, Research Director at Yrjö Jahnsson Foundation, and IZA Fellow.
Jutta Viinikainen is Associate Professor at University of Jyväskylä.
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