GE 12: The Entrepreneurial Mind finals
the different phases of the business process.
CHAPTER 5
Singh and De Noble (2003)
 studied the relationship between Big-5
characteristics and entrepreneurial intentions,
perceived capacity, and personal investment
among 342 students at a large state
university.
Zhao et al.
 (2010) find that entrepreneurial intentions relate
to openness to experience, awareness,
extraversion, emotional stability, and risk
propensity and that only agreeableness and
neuroticism were of no importance to explain
entrepreneurial intentions (O+, C+, E+, A, N).
 shows that awareness, openness to experience,
and emotional stability relate positively to the
company’s performance, in terms of the
company’s survival, growth, and profitability.
 (2005) found that individuals are more likely to
form entrepreneurial intentions directly as a
result of their high level of ESE.
Korunka et al. (2003)
 surveyed 1,169 nascent entrepreneurs and new
business owner managers to study their activity
patterns.
 find that personality traits of need for
achievement, LOC, and risk-taking predict early
success, but not longer-term business survival.
Hansemark (2003)
 tracks students in an entrepreneurship program
over an 11-year period by combining
psychological data in the early-stage.
Caliendo et al., 2014
 The study of 10 waves of the German Socio-
Economic Group (GSOEP) between 2000 and 2009
describes the appropriateness of LOC.
 find using the GSOEP panel dataset find that
agreeableness increases the likelihood of exit
from entrepreneurship, and an internal LOC
leaves less likely.
 (2009) include the general risk attitude question
Two studies specifically examine the impact of ESE on
 Cassar and Friedman (2009) found in the panel
study of entrepreneurial dynamics (PSED) samples
ESE increases the likelihood of making business
plans.
 Brinckmann and Kim (2015) report that ESE
facilitates the growth of formal business plans,
while entrepreneurial perseverance encourages
involvement in business planning studies.
Utsch and Rauch (2000)
 show that innovativeness predicts employment
growth and net income growth, while amounts of
initiative correlate only with profit growth.
Baum and Locke (2004)
 carried out a six-year longitudinal study on
architectural carpentry companies.
 They find that situational motivations specific to
goals, self-efficacy, and shared vision have direct
effects on venture capital growth, promoting
other characteristics such as passion, tenacity, and
new resource expertise.
Ciavarella et al. (2004)
 find that high conscientiousness positively relates
to long-term venture survival (eight years or
more), compared to a negative relationship for
the entrepreneur’s openness to experience and
no relationship for the other Big-5 personality
traits.
Poon et al. (2006)
 assess performance among 96 entrepreneurs by
asking them to rate their company’s growth, sales
volume, market share, and profit using a scale
relative to that of competitors and their own
expectations.
 They find that internal LOC positively relates to
firm performance, but lesser support exists for
ESE and achievement motivations.
Rauch and Frese (2007a)
 identify the traits most significantly correlated
with business success to include the need for
achievement (.30), innovativeness (.27),
“proactive personality” (.27), generalized self-
efficacy (.25), stress tolerance (.20), need for
autonomy (.16), locus of control (.13), and risk-
taking (.10). The authors point out that these
relationships are moderate in magnitude and the
heterogeneity across the different fields allows
the possibility of moderators, useful in future
surveys.

Hmieleski and Corbett (2008)
 find that improvisational behavior combined with
high ESE has a positive relationship with sales
growth.
Tajeddinj and Mueller (2009)
 found that entrepreneurs scored higher on
surveys in autonomy, risk propensity, and LOC in
one country, while another country scored higher
on achievement need, tolerance for ambiguity,
innovativeness, and confidence.
 attribute the variation to cultural differences
rather than other environmental factors.
intention, entry exit, success, and growth). As shown in
the model, the independent variable cannot influence the
dependent variable directly and instead does so by means
of a third variable (mediator). Full mediation occurs when
the entire relationship between the independent and
dependent variables is through the mediator variable.
Without the mediator, the relationship disappears. Since
the real world is complex with many interactions, partial
mediation is more prevalent. Partial mediation happens
when the mediating variable is only responsible for a part
of the relationship between independent and dependent
variables. Even without the mediating variable, the
relationship between the independent and dependent
variables remains though not Strong.

Hmieleski and Baron (2008)

 examine a three-way interaction of ESE,
dispositional optimism, and environmental
dynamism on firm performance (e.g., revenue 1 Openness to + *Perceived ability and
growth and employment growth). experience [2] personal investment
 define environmental dynamism as the rate of *Entrepreneurial
unpredicted change occurring within a given intention
industry. 2 Awareness + Entrepreneurial
 conclude that high ESE is not always beneficial for intention
entrepreneurs and that environment and industry 3 Extraversion + Entrepreneurial
differences may interact strongly with personality intention
traits in terms of their impact on venture 4 Emotional Stability + Entrepreneurial
outcomes. [3] intention
5 Risk-taking [1] + Entrepreneurial
Dess and Beard (1984) and Sharfman and Dean (1991) intention
 They find that high ESE improved firm 6 Agreeableness Ø Entrepreneurial
performance in dynamic environments when intention
combined with moderate optimism but was 7 Neuroticism - Intention and ability
detrimental when combined with high optimism. 8 (Business Founder) Ø (Business Leader)
Intention, ability, and Intention, ability, and
personal investment personal investment
Mediating Variables:
Self-efficacy 9 Need for + Entrepreneurial
Locus of Control achievement, intentions (e.g.
Need for Achievement
internal locus of owner-manager,
Innovativeness
Risk Tolerance control, risk-taking, nascent, and potential
initiative entrepreneurs)
10 Entrepreneurial self- + Entrepreneurial
efficacy intention
11 Gender ≠ Entrepreneurial
Big Five:
Openness to experience
Entrepreneurial:
intention
Conscientiousness
Intention 12 Gender-specific + Business creation
Extraversion
Agreeableness Entry-Exit entrepreneurial
Neuroticism
Success intention
Environmental:
Cross- Cultural: Growth Table 6. Big Five and Other Traits and Entrepreneurial
Intention

The studies on personality traits relative to intentions,

entry and exit decisions showed moderating variables. A
mediator variable explains how (observed) independent
variables (Big Five, environmental and cultural factors)
relate to the dependent variables (entrepreneurial
 control, and risk-taking
1 Internal locus of + Predictive only to 13 Awareness, Openness + Company’s
control entry of men not to to experience, and performance
women emotional stability (company’s
2 Need for Achievement Ø Gender survival, growth,
3 Need for + Early success and profitability)
achievement, internal 14
locus of control, and 15 Risk-taking + Business
risk-taking Foundation
4 Openness to + Entrepreneurial entry 16 Risk-taking Ø Eventual growth
experience, and success
extraversion, and risk 17 Social intelligence + ESE + Venture growth
tolerance 18 Improvisational + Sales growth
5 Agreeableness and + Exit decisions from Behavior and ESE
risk tolerance self-employment Table 8. Big Five and Other Traits versus Survival,
6 Entrepreneurial self- + Business founding and Growth and Success
efficacy growth of business
planning
Table 7. Big Five and other Traits: Entry, Exit, and Growth
and Success

1 Innovativeness + Employment and

income growth
2 Initiative + Profit growth
3 ESE and innovation + Growth and
success
4 Self-efficacy and shared + Venture capital
vision growth
5 ESE + Personal
investment and
resources
6 Personality + Student time
preparing for
future business
endeavors
7 Conscientiousness + Long-term venture
survival
8 Openness to experience - Long-term business
survival
9 Extraversion, Ø Long term survival
agreeableness, and
neuroticism
10 LOC + Firm business
performance
11 ESE and achievement + Lower support for
business
motivation
performance
12 Moderate need for + Business success
achievement,
innovativeness,
proactive personality,
generalized self-
efficacy, stress
tolerance, need for
autonomy, locus of
CHAPTER 6
Astebro et al, 2014
 Risk plays a big role in the business world,
especially for those looking for very profitable
business opportunities. In fact, over half of the
start-ups are no longer operating after six years,
and 75% of entrepreneurs exit with no equity.
 developed the standard expected utility model of
risk preference as a function of utility over wealth.
Knight (1921)
 proposed that successful entrepreneurs possess
the ability to measure the probability of the
future outcome of risk as opposed to uncertainty
where future outcomes are difficult to determine.
Khilstrom and Laffont (1979)
 develop a model linking risk aversion to
individuals who become employees and low risk
aversion to those who become entrepreneurs.
Feng and Rauch (2015)
 provided simpler forms and extensions of the
model.
Ekelund et al (2005)
 used indirect questions about general risk
attitudes.
Block et al (2015)
 use a self-scoring question.
Hall and Woodward (2010)
 used a model-based approach to back out what
the relative risk aversion of an entrepreneur has
to be for a wealth level and external guaranteed
earnings option, given the wide distribution of
exit outcomes.
 find that entrepreneurs must have a relatively
high-risk tolerance.
RISK AVERSION
 chooses certainty and dislikes risk.
 Gets more wealth in the long run.
RISK SEEKING
 Investor who likes risks.
RISK NEUTRAL
 Ignores risk, use EMV.
 Focus on the gains.
Lazear (2005)
 used a large sample of over 5,000 graduates and
found a variation of industry-level earnings among
the first job Selected.
Stewart and Roth (2001)
 find that the risk propensity of entrepreneurs is
greater than that of managers.
Miner and Raju (2004)
 who present data from 14 other studies by means
of projective techniques to measure risk
preferences rather than self-report measures.
 They find entrepreneurs are more risk-avoidant
than managers.
Hvide and Panos (2014)
 measured risk preference through stock market
participation, personal leverage, and the fraction
of wealth invested in the stock market.
Caggese (2012)
 used expenditure behavior to measure risk
attitudes with the assumption that research for
introducing new products is riskier than investing
in improving existing products.
Xu and Ruef (2004)
 further examined the “myth of the risk-tolerant
entrepreneur.”
Stewart and Roth (2001) and Miner and Raju (2004)
 find that there are large differences between
entrepreneurs whose primary goal is venture
growth versus those whose focus is on producing
family income.
Block et al (2015)
 expanded the distinctions by comparing
opportunity and necessity motivations among a
sample of 1,526 entrepreneurs through an email
questionnaire asking participants to show their
willingness to take risks regarding start-ups and
the amount they would invest in a hypothetical
investment lottery.
Ahn (2010)
 found that relative risk tolerance has a large,
positive, and statistically significant effect on the
probability of entering self-employment.
Ekelund et al. (2005)
 which analyze psychometric data from the Birth
Cohort Study.
  find that harm avoidance carries a negative effect
on the individual’s probability of being self-
employed.
Hombert et al., 2017
 Individuals who are risk-tolerant may be more
likely to exit unemployment by starting their own
business, versus looking for paid work if getting
small incentives from the government.

Hvide and Panos (2014)

 hypothesized that the businesses of risk-tolerant
individuals might underperform over the long run
because more of these individuals select
entrepreneurship (thus bringing more mediocre
ideas) than risk-averse individuals (who thus
might only be tempted to start firms with the very
best ideas).

Cucculelli and Ermini (2013)

 found that firms run by risk-loving entrepreneurs
tend to perform better in their sample of 178
entrepreneurs running Italian manufacturing firms
in 2007.

Densberger (2014)
 considered whether risk propensity is a side effect
of high ESE.

Shane (2009)
 found that entrepreneurs are generally positive in
their performance estimates.
 found entrepreneurs believe five times more
often than occurs in reality that they will have at
least higher sales.

Bengtsson and Ekeblom (2014)

 they noted that entrepreneurs have higher
optimism about the economy, but less forecasting
error.

Puri and Robinson (2007)

 Those who overestimate their lifespan are more
likely to be entrepreneurs, and the most
optimistic are more likely to make high-risk
financial decisions.

Landier and Thesmar (2009)

 Perhaps due to riskier decision-making, optimistic
entrepreneurs earn less than pessimistic
entrepreneurs.

Dawson et al. (2014)

 Controlling for ability and environmental factors,
the researchers reported that optimistic
entrepreneurs earn less than pessimistic
entrepreneurs, with the difference being highest
at the top of the earning scale and insignificant at
the bottom.