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The Psychological Characteristics of Entrepreneurs: Extract from the Dissertation of Selina Vasdev

Background to the Extract (written by Mike Smith)

Chapter 1 (p 9) of the book ‘Fundamentals of Management’ describes briefly the concepts of entrepreneurs and their ‘cousins’ intrapreneurs. It stresses their importance to national prosperity and explains how they establish businesses and obtain funding. But, the topic is much wider. Ideally I would have liked to include much more. However this would have increased the size of the book and put its price beyond the means of many students. Instead, McGraw-Hill agreed to put extra information on the book’s website.

At the time I was planning extra material I supervised an MSc dissertation researching the psychological characteristics of entrepreneurs by a very talented student at Manchester Business School, Selina Vasdev. Her review of the literature was so good that I thought it deserved a wide readership and she agreed that sections could be made available on this website. The factual information it gives on entrepreneurs is the main reason it is included here. However, it also serves two extra functions.

First there is an intense argument involving complex issues. Hence it is not as easy to read as a popular or even serious magazine such as Newsweek or The Economist. However, good students of management need to develop skills in reading and understanding at this high intellectual level. This extract is good practice!

Second, it sets the standard that you should achieve, perhaps two or three years hence when you have to submit a formal dissertation during the final part of your degree or for an advanced requirement for a professional qualification. In either case, the extract provides a good model.

Most dissertations are divided into 12 sections: 1. A declaration of originality 2. An abstract 3. Acknowledgements. Make fulsome acknowledgements to your supervisor however bad or god she or he may have been! They are likely to mark the dissertation or have contact with those who do! 4. Contents – this should be quite detailed. Dissertations do not usually have an index, thus readers rely on the contents to help them locate material that is most relevant to their needs. 5. Introduction - explaining why the subject is worthy of study and how it fits into existing knowledge. This often includes the aim of the dissertation 6. A literature review that amasses and organises what is already known on the subject. The literature review often finishes by stating specific ideas (hypotheses) that the rest of the dissertation will examine. 7. Methodology – giving details of the way that the hypotheses will be examined and tested 8. Results – a dispassionate reporting of the results that almost always tests whether the results could have been a fluke (statistical significance). NEVER be afraid of reporting results that are not significant or results that do not support your original hypothesis 9. Conclusions – drawing together the important results and relating them to the themes identified in the literature review (stage 6) 10. Limitations – a discussion of the weaknesses of the study and the implications they have on the conclusions drawn (stage 9). You should NEVER be afraid to outline the limitations of your work. External examiners strongly support students that are self critical! 11. Practical Implications and Suggestions for Future Research. Often stages 10 and 11 are combined into a single chapter. 12. References – EVERY work cited in the other sections must be included here. Full details must be given. Above all, be consistent in your style of referencing. If in doubt adopt the Harvard Convention or, better, the style of the American Psychological Association. Details usually include:  Names and initials of every author  Date of publication  Title of article  Title of publication (book or periodical). This should be in italics or underlined  - for books only: place of publication and publisher. For journals and periodicals: volume number, issue number and page 13. Appendices. Detailed tables and information that support other parts of the dissertation but which would distract the reader from the main argument if they are included in the main text.

This extract contains only three of these sections – the abstract, the literature review and the references. It includes references to works cited in other sections.

You should try to achieve the same standards in any assignments you submit. It WILL take a lot of time and effort! As chapter 8 (Reporting and Communication) in Fundamentals of Management notes:  Be clear the actions you wish the reader to initiate  Identify the readership  Collect relevant information  Arrange the information under a coherent system of headings (Selina is exquisitely good at this)  Work out the actions needed – a methodology to investigate the situation?

The extract given here is:  An excellent example of formal English. It is written in the third (dispassionate) person. With very few exceptions it is grammatically correct. There are few, if any, spelling errors. It is well organised and there is a consistent system of headings and spacing.  It is concise – avoiding repetition and meaningless sentences or phrases  Every major idea is supported with facts or reference to a reputable source which does not include – except for demonstration or criticism – popular press or anecdote

Selina almost avoids the sin of using footnotes: there are only a few examples. Can you work out how you would avoid them?

The full version of the dissertation, including important results is available from the University of Manchester Precinct Library. The reference is: Vasdev, S.J. (2006). In Search of an Entrepreneurial Personality: an investigation of personality variables, demographic and situational factors associated with entrepreneurial status. Unpublished MSc Dissertation, Manchester Business School. The Psychological Characteristics of Entrepreneurs: Selina Vasdev

Abstract

This study employed a mixed methodology approach into examining personality, intelligence, demographic and situational factors of 30 entrepreneurs and 30 non entrepreneurs. The study sought to identify the role of personality and entrepreneurial status in attempts to successfully differentiate entrepreneurs from finance professionals. Personality was tested using the five factor model. Results indicate significant differences between entrepreneurs and non entrepreneurs on four of the five dimensions. With evidence that entrepreneurs scored significantly higher on traits of openness to experiences (t=4.080,p=.000) and conscientiousness (t=2.931,p=.005) and lower on traits of neuroticism (t=-4.119, p=.000) and agreeableness (t=-3.501,p=.001) at the 0.05 significance level. No statistically significant difference was found on the trait of extraversion (t=2.169,p=034). Furthermore, investigation into narrow personality traits also revealed significant differences between the two groups, where entrepreneurs reported significantly higher scores on achievement motivation (t=10.558, p=.000) and risk taking propensity (t=10.004,p=.000). Tests of intelligence, revealed differences between entrepreneurs on sub scales of similarities (t= 3.863, p= .000) but not block design (t= 1.501, p= .139). In addition, there has been evidence to suggest that there are certain commonalities among entrepreneurs in terms of demographic and situational variables. Where entrepreneurs are more likely to have had similar childhood experiences, have more of an internal locus of control, are more likely to have personal role models and are also more likely to have parents who are self employed. Further factors are also discussed. Therefore, taking approaches from the trait and social cognitive theories, this study hopes to have been able to provide some indication of factors that relate to entrepreneurial status, with the aim that it gives rise to other research in associated areas and provides practical implications to this arena. Chapter 2: Literature Review

Given the growing importance of entrepreneurship, there is practical value in being able to identify entrepreneurial characteristics. Furthermore, there is an interest to try and isolate qualities that may be distinctively common to entrepreneurs. A popular debate remains whether entrepreneurs are born or made; whether they are a product of their personality structures or whether they are shaped by their experiences? This chapter intends to review pertinent literature on the subject of entrepreneurs, personality traits and demographic variables, in order to provide the reader with reasonable insights about the current state of the subject matter.

2. 1 Contribution of Entrepreneurs

“The problem of explaining why some succeed while others fail is crucial to the study of economic development” (Casson, 1982).

Entrepreneurship and the creation of new business ventures is well recognised as being essentially vital to economic prosperity. It is a major factor in the national economy where entrepreneurs are fundamental contributors to economic growth through their innovation, leadership, competitiveness, and formations of new industries. There is a widespread recognition that “entrepreneurship is the engine that moves the economy and society of most of the nations” (Brock & Evans, 1989) As a result of major interest and development in the theory and practice of entrepreneurship, it has attracted a lot of attention over the past 100 years, and specifically in the last 20 years it has made significant progress. Yet despite their importance to economy and society as a whole, little is concretely known about entrepreneurs. Thus, it is important to understand the characteristics that are associated to those who choose to be entrepreneurs and why some are successful as opposed to others.

Almost a century ago the renowned economist, Joseph Schumpeter (1934), stressed the importance of entrepreneurship for economic and social development. At the centre of his considerations he situated the personality of the entrepreneur. For him it was obvious that individuals who succeed in fulfilling the entrepreneurial function are exceptional figures and that only a few outstanding characters combine all the qualities necessary to realise creative responses in the face of changing conditions (Salvisberg, 2002).

2.1.1 Definition of Entrepreneurs

For more than one hundred years researchers interested in new venture creations have attempted to construct definitions of what constitutes an entrepreneur. Ever since, the discipline of entrepreneurship has followed several different patterns of development, resulting in an extensive body of research that reveals some similarities, but also depicts a number of differences in the factors that define an entrepreneur. Entrepreneurship can therefore be defined in many ways, incorporating individual differences, behaviours or a combination of the two.

The word entrepreneur is derived from the French ‘entreprendre’ meaning ‘to undertake’, therefore, the entrepreneur can be seen as one who undertakes to organise, manage and assume the risks of a business (Kuratko & Hodgetts, 2001). The term was initially proposed and coined by a French Economist Richard Cantillon in 1925 who linked the risk bearing activities in the economy with that of entrepreneurs (Burch, 1986). Others have maintained the commonly held view of the entrepreneur as a risk-taker, as someone willing to take calculated risks as long as the expected outcome is profitable. Interestingly, the German equivalent, ‘untemehmer’, closely translates to owner-manger (as cited by Drucker, 1985).

In recent years there has been recognition for a broader definition and so in the 21st Century business context, it typically refers to a person who undertakes or controls a business enterprise and bears the risk of profit or loss (Brown, 1995). Modern use of the term ‘entrepreneur’ is, however, usually credited to Schumpeter (1934) who emphasised the role of innovation. Nevertheless, it is generally recognised that entrepreneurs serve as agents of change and provide creative, innovative ideas to help businesses grow and become profitable (Kuratko & Hodgetts, 2004). Some researchers have defined entrepreneurs as someone who recognises an opportunity and marshals the resources to take advantage or act on that opportunity (Begley, 1995). According to Timmons (1994) entrepreneurship is “the ability to create and build something from practically nothing. It is initiating, doing, achieving and building an enterprise or organisation, rather than just watching, analysing or describing one.” The entrepreneur label has also been applied to describe a person who starts a business of their own and manages it. This simple definition avoids any subjective distinctions such as strategic performance and orientation towards innovation (Begley & Boyd, 1987a).

Historically then, there has been little or no consensus among researchers on a working definition or explanation of entrepreneurs and the area of entrepreneurship. There is generally a strong disagreement as how to describe entrepreneurs and interpret their activities and the area is further clouded with disagreements, as to the best method of researching the subject. Yet without agreeing on a common definition studies have attempted to understand the topic with greater intensity. This makes comparisons across studies difficult and creates further barriers in the interpretation of results in the context of the situation. It would therefore be important to note that every researcher working in this area is responsible for making explicit the meaning they intend, when referring to ‘entrepreneurs’ or ‘entrepreneurship’, and many researchers can be criticised for making unspoken assumptions about the nature of entrepreneurs (Stewart & Roth, 2001).

In conclusion, not only is a common definition of the entrepreneur elusive (Brockhaus, 1980) it is also highly controversial (Gartner, 1989). The absence of a standard definition of the terms ‘entrepreneur’ and ‘entrepreneurship’ creates a number of challenges. According to Carsrud, Olm and Eddy (1986), ‘lack of a generally agreed upon definition is a shortcoming that misdirects research efforts and leads to a lack of a coherent body of research literature. Because of the problem of operationalising the terms, it is difficult to undertake research replication precisely and to base subsequent research on previous work (Carsrud & Olm et al, 1986). Cunningham and Lischeron (1991) have stated that the conventional association of entrepreneurship with small business has blurred the subject matter and has largely eliminated large firms from consideration.

2.1.2 Theories of Entrepreneurship

In order to understand the nature of entrepreneurship it is important to consider some of the theoretical developments that have emerged over the years. Research in this area was initially instigated by a largely economic interest in the study of entrepreneurial activities, predominantly due to the wealth of income and prosperity generated by entrepreneurs. However, not long afterwards the psychological approach became quite distinct. Confusion in the definitions of entrepreneurship might therefore arise from the fact that they come from different disciplines (Davidson, 2003). For instance, different approaches in entrepreneurship research have resulted from differing disciplinary foci; with the Economists considering the entrepreneur as an agent contributor to the economic activity, while the Sociologists focus on the social conditions which facilitate behaviour and action. The Management perspective on the other hand, emphasises the organisational factors which promote survival or success, while it is the Psychological approach that is interested in the manifestations of personality characteristics among particular groups of people.

Entrepreneurship is a multidimensional process and is a term that incorporates the individual, the environment, the organisation, as well as the process. Cunningham and Lischeron (1991) proposed that entrepreneurship can be studied from a variety of standpoints and that ‘each approach provides insights into different aspects of entrepreneurial behaviour’.

There are usually two schools of researchers in the field of entrepreneurial psychology. The more traditional group of researchers have focused on the personality characteristics of the individual while, the second group have taken a more social and cognitive approach. The latter have concentrated on the relationships between the individual and his or her environment. While there is formal recognition and acceptance of the importance of situational factors (Shapero, 1975) and the value of social function as being integral components of the entrepreneurial process, not all people will become entrepreneurs under comparable circumstances. Consequently, early research focused heavily on the personality traits of entrepreneurs and this became both popular and fashionable as an explanation for entrepreneurial behaviour and intentions (Llewellyn & Wilson, 2003). However, it soon become apparent that this approach suffered not only by a failure to define entrepreneurship but also a lack of agreement about the essential traits (Chell, Haworth & Brearley, 1991). Nevertheless, with major developments in personality theories and greater consensus on a Five Factor Model the situation changed the direction of research once again, in its favour. Therefore, psychological attributes should be an integral part of entrepreneurship, as they are a significant element of a comprehensive theory of entrepreneurship (Cromie & Johns 1983).

2.1.3 Entrepreneurial Success

“Success in entrepreneurial terms is achieved when the objectives and goals of both the entrepreneur and of the external environment are either met or exceeded” (Ankarcrona & Robinson, 2000).

Success can be defined in many ways. While success has often been equated with rapid growth or high turnover rates, some scholars have lately shown that entrepreneurs can achieve success in more qualitative terms (Brytting, 1998 as cited by Levander & Raccuia, 2001). In most studies success was defined as surviving the first two or three years that the company was in business. In Hornaday & Bunker (1970) for example, the ‘successful’ entrepreneur was defined as an individual who started a business, building it up where no previous business had been functioning, and continuing for a period of at least five years to the present profit-making structure. Other studies on the personality of entrepreneurs (Begley, 1995) defined success in more financial terms, linking the most common characteristics found among entrepreneurs to measures such as return on investment, growth in sales, and profit every year, or to the personal income of the owner/manager of the business. It is proposed that the relationship between the characteristics of entrepreneurs and success measured in terms of survival is more convincing than that with success measured in financial terms.

Miner’s (1997) suggestion on research in this area is that entrepreneurial success may be a function of particular personality patterns and a specific work environment. It was believed that focus on this area would be a more productive direction in entrepreneurial research. He argued that there is an entrepreneurial personality in which certain kinds of people can achieve entrepreneurial success, whereas others cannot. Miner (1997) contends that there are four different types of entrepreneurs each with distinct personalities and that each type of entrepreneur must follow a distinct career route to succeed1. This major breakthrough came from an understanding of the literature based on leadership that transpired when researchers recognised the importance of the situation upon leader’s behaviours (Vecchio, 2003).

Therefore the personality characteristics of business owners are not only relevant to the emergence of entrepreneurship, but also with respect to the entrepreneurial success. A typical approach in this area is to ask business owners to fill in a general personality questionnaire and then correlate the personality scales with performance measures. Singh (1988) for example, used five questionnaires that measured 29 scales. He found that eight personality scales were related positively to growth, three scales were negatively related, and 18 scales were unrelated to growth. One major problem with such an approach is that the study is purely descriptive and lacks theory.

In recent years attempts have been made to identify factors which make a person a successful entrepreneur (McClelland, 1965a). These studies have shown that attempts to explain entrepreneurship in simple terms as not as easy as intuition would lead us to believe. It has been documented that entrepreneurship is a function of a number of factors, i.e. entrepreneurial personality, opportunities, economic situations and support available for the development of entrepreneurial attitudes, skills, and behaviour. The issue whether entrepreneurial success may be predicted by the personality of the entrepreneur has been researched by many including McClelland (1961) and Miner (1997). Even suggestions from as early as 1934 proposed by Schumpeter stated that entrepreneurial success is likely to be related to an innovative personality, and many other researchers have since followed these lines.

The most commonly discussed and perhaps most widely studied personality factors that have been associated as potentially relevant for entrepreneurial success include, achievement motivation (Brockhaus & Horwitz, 1986; Begley & Boyd, 1987b) risk- taking (Stewart, & Roth, 2001), and internal locus of control (Cromie, 2000).

However, it is important to recognise that the emergence and subsequent success of the entrepreneurs are two very different areas and there would be different processes by which a person decides to become an entrepreneur and by which a 1 Miner proposed a four way psychological typology described as; personal achievers, real managers, expert idea generators and empathic super sales people in an attempt to relate these types to entrepreneurial personality and try to determine whether the personality types related to firm growth and success. For a complete review see Miner (2000). person achieves entrepreneurial success (Utsch, Rauch, Rothfuss & Frese, 1999). Studies aiming at the relationship between personality characteristics and entrepreneurial success are scarce and those which do exist have produced mixed results. The reason may be that in most of the studies use different indicators of entrepreneurial success (Stewart, 1996).

2.2 Personality

The study of personality has proved invaluable in its contributions to the development of research in organisational psychology. There are numerous ways in which personality can be studied and understood and the following section endeavors to review some of the related areas. In the scientific study of personality it is important to distinguish clearly scientific theory from everyday knowledge about character differences. Personality can be defined as "the distinctive and characteristic patterns of thought, emotion, and behaviour that define an individual's personal style and influence his or her interactions with the environment" (Atkinson, Atkinson, Smith & Bem, 1993). Personality traits are enduring dispositions and tendencies of individuals to behave in certain ways. Personality is not one single article. Instead, personality refers to a spectrum of individual attributes that consistently distinguish people from one another in terms of their basic tendencies to think, feel, and act in certain ways (Ones, Viswesvaran & Dilchert, 2005). The enduring nature and consistency of personality characteristics are manifested in predictable dispositions of individuals to behave in similar ways across situations and settings. There are thousands of personality characteristics that can be used to distinguish individuals from one another.

The central features of personality definitions lay around distinctiveness and stability. Some researchers claim that behaviour and feelings are as characteristic for the individual as are his or her fingerprints (Judge, Heller & Mount, 2002). Thereby, confirming everyone has his unique pattern of feelings, thoughts and behaviours. Furthermore, it has been verified that these patterns are formed by different levels of personality traits. It is claimed that the unique combination of these trait levels subsequently forms the unique individual. While some may argue that personality is fairly stable and predictable throughout different situations and time. Others will dispute that personality traits may be more or less visible dependent on the situation and that a person may also change his personality over time. Though such changes in personality are usually consequences of major life events or as a result of deliberate effort (Costa & McCrae, 1992a). Most personality theories agree that personality traits are consistent patterns of behaviour over time and across situations (Goldsmith, 1989). Cattell (1950) states that there are personality traits composed in ways that formulates depth where the innermost layer is the basis and is hard to change, while the outermost layer is situation-bound and influenced by, the environment and personal interests.

In recent years, researchers have acknowledged and well documented the fact that we all have personalities (Goldberg, 1990). More specifically evidence has highlighted the fact that personality matters, because it predicts and explains behavior in all aspects of our lives. Research based on a construct oriented approach primarily using the “Big Five” traits, has consistently shown that personality predicts job performance across a wide variety of outcomes that are valued by organisations. Furthermore, it has demonstrated its importance in jobs far ranging from skilled and semiskilled workers to far more complex positions such as senior executives. With personality theorists agreeing that an individual’s personality predicts his or her behavior (Funder, 1994), it would seem logical that the personality traits of entrepreneurs would have significant implications for the long-term success of their ventures. In as much as the entrepreneur’s behaviour is likely to influence venture success. Entrepreneurs with personalities that enhance their ability to perform in various situations should have a greater probability of sustaining the operations of founding a firm and maintaining the process which inevitably lead to the success of the organisation (Hunt & Adams, 1998).

2.2.1 Trait Approach

Personality has been conceptualised from a variety of theoretical perspectives, and at various levels of abstraction or breadth (John & Srivastava, 1999). Each of these levels has made unique contributions to our understanding of individual differences in behavior and experience. There are several ways of looking at personality but it could be argued that the two most widely used and accepted in the workplace are the trait and the type approaches. Due to the restrictions of the study this literature review will only focus on the trait approach.

One of the long held goals of psychology has been to establish a model that can conveniently describe human personality. Currently, a handful of models have risen to prominence, and have so far stood the test of time. Some models are more widely accepted than others. Trait theories are generally agreed to be the most useful way of conceptualising personality and aim to reflect ‘real’ underlying differences rather than phenomenological insights that are difficult to compare (Cooper, 1998). Therefore, the trait theories aim to enhance the understanding of the mental capacity of an individual by explicating underlying the enduring qualities of individuality that influence cognitions and behaviours2.

Researchers have sought to identify the personality traits and characteristics which are unique for entrepreneurs and, more specifically, identifiable among successful entrepreneurs. A question typically posed under these circumstances would be “why do certain individuals start firms when others, under similar conditions, do not?” (Gartner, 1989). The entrepreneur’s traits are seen as the key to explaining the entrepreneurship phenomenon (Gartner, 1989).

2.2.2 Characteristics of entrepreneurs

A number of writers have suggested that entrepreneurs possess some key psychological attributes or characteristics, and that these in turn produce specific personality traits. Psychological personality theory assumes that people's behaviour can be explained to some extent in terms of underlying personality constructs (Allport, 1962). Personality and motivations are fundamental characteristics of people that cause them to act in certain ways (Smith & Smith, 2005). Psychological characteristics influence the likelihood that people will exploit opportunities because these characteristics lead them to make different decisions about situations, compared to other people in the same situation and who have been given the same set of skills and information.

The first substantial body of research on entrepreneurship has focused on the individual aspects of the entrepreneur. Entrepreneurs are considered to have particular traits that predispose them to engaging in successful activities. Broad personality traits have been found to be stable over time and can be linked to a wide

2 range of behaviours in the workplace and in other aspects of people’s lives. Consequently, Kamineni (2002) asserted that ‘the use of psychological attributes has found a prominent place in the entrepreneurship literature and hence cannot be ignored’.

Hornaday & Aboud (1971) lists 42 characteristics while other researchers have singled out a few or a combination of many essential traits that are found to be associated with entrepreneurs. A literature review related to entrepreneurial characteristics reveals the existence of a large number of factors that can be consolidated into much smaller set of dimensions (Johnson, Newby & Watson, 2003). Koa (1991) identified 11 common characteristics which include; drive to achieve and grow, total commitment and determination, seeking and using feedback, internal locus of control, opportunity and goal orientation, and calculated risk taking and seeking to name a few.

Brandstatter (1997) investigated the personality profiles of 157 small to medium sized business founders, 98 people who had taken over a business, and 104 people who expressed an interest in setting up a private business. Business founders were more emotionally stable (t=1.96, p=.051), less rational and therefore more intuitive (t=- 2.28, p=.023) and more independent (t=3.35, p=.001) than those who had taken over the business from others, as measured by the 16-Personality-Adjective Scales (16PA) Envick & Langford (2000).

Research by Stevenson & Gumpert (1991) provides an outline of the entrepreneurial orientations that reveals such characteristics such as imagination, flexibility and willingness to accept risks. Gartner (1989) examined the literature and reported characteristics such as confidence, energy, leadership and creativity, among many others.

It is quite evident that there are a substantial number of characteristics that have been attributed to entrepreneurs and the ever growing lists reveal certain characteristics that are most often cited as entrepreneurial characteristics. Yet despite these claims it would seem that entrepreneurial psychology would benefit from incorporating recognition of the influence of environmental factors in mediating the effect of personality traits and characteristics of the entrepreneur and their behaviour. Initial research questions such as ‘How are entrepreneurs different from non-entrepreneurs?’ have not generated a reliable or valid list of characteristics that can be attributed as entrepreneurial across situations. Consequently it has been proposed that it would be more insightful to identify and study the situations in which types of entrepreneurship can be predicted for some people (Gartner, 1990).

According to Kao (1989), the major drawbacks of the personality approach is that traits found to describe entrepreneurs can also be used for managers. They lack specificity, focus mostly on men, and are not applicable across cultures. Despite such pessimism, many researchers have identified and confirmed the existence of certain personality traits and behavioural characteristics that may drive entrepreneurs. Despite growing interest in personality and the mounting evidence that personality influences work attitudes (Judge, Heller & Mount, 2002) and behaviour (e.g. Barrick & Mount, 1991), the exact mechanisms by which personality affects organisational behaviour are not as well understood.

2.2.3 Five Factor Model

Personality traits are now thought of as components of a multidimensional causal model, which also incorporates individual cognitions, abilities, biological and social influences (Rauch & Frese, 2000). Contemporary theorists agree that there are five fundamental personality dimensions which are often referred to as the ‘Five Factor Model’ or the ‘Big Five’ (Costa & McCrae, 1988).

The Big Five factors were discovered through a statistical procedure called factor analysis, which was used to analyse how various personality traits are correlated in humans. The five-factor model (FFM) of personality is a descriptive typology of the five major dispositional dimensions that encompass the human personality (Goldberg, 1990). It has been extensively used in occupational psychology and has demonstrated tremendous value in areas such as selection and assessment and job related attitudes. A major development that has emerged in the last 20 years that can help us to draw meaningful conclusions from the literature of personality and entrepreneurial status is the emergence of a consensus regarding this fundamental structure of personality (Digman, 1990).

The five factors…“have provided personality psychology with a clear measurement framework and are responsible for the resurgence of interest to personality in the field of work and organisational psychology” (Nikalaou & Robertson, 2001).

The FFM provides a parsimonious yet comprehensive taxonomy of personality. Each personality dimension describes a broad domain of psychological function that is composed from a set of more specific traits. The FFM brings together over 40 years of research on individuals. The work of Costa and McCrae has provided what is perhaps the most ground breaking development of the FFM. Rather than replacing all previous systems, the Big Five taxonomy serves an integrative function because it can represent the various and diverse systems of personality description in a common framework (John & Srivastava, 1999).

The Big Five is a robust model that has gained acceptance across cultures and demonstrated its value in a variety of contexts and situations. The model has been applied in clinical settings and it is in the area of personnel selection that the field of management has focused its Big Five research. Overwhelming evidence exists within the vocational psychology literature that demonstrates mean personality scores differ across jobs, occupations, and work environments (Ones & Viswesvaran, 2003). Managers and entrepreneurs are perceived as two groups of individuals that are commonly studied in management studies.

The personality factors compromising the Big Five are: 1) Extraversion, 2) Agreeableness, 3) Conscientiousness, 4) Neuroticism and 5) Openness to Experience. Each of these broad dimensions of personality consist of a smaller number of narrow traits which can be used to predict behaviours. However, the extent to which they can do this is still a matter of debate. Previous attempts to study the relationship between personality traits and entrepreneurship centred on the use of narrow traits have produced mixed results. However, limited as it may be, there is evidence to suggest that there are clear links between entrepreneurship and certain broader characteristics.

The FFM has important implications on the study of entrepreneurs since much of the existing research concentrates on the lower order personality traits of the individual. Only a minority of studies have used the more general and wider descriptive five factor framework (Digman, 1990). At present there has been no study that has been able to successfully link all the dimensions to entrepreneurs. It is possible to see however, how some of the dimensions in particular, may be more predominant among this target group. Personality researchers have maintained that individuals seek out situations that correspond with their personalities and the Big Five personality dimensions have been used to predict the behaviour of individuals. Thus it is plausible that it could provide insight into how they can influence entrepreneurial activities.

There is evidence to suggest a link between entrepreneurship and low neuroticism and agreeableness, high conscientiousness, openness to experience and extraversion (Brandstatter, 1997). Schmitt-Rodermund (2001) examined the efficacy of psychological predictors of entrepreneurial success and results suggested that low levels of agreeableness were closely related to entrepreneurial success. There also appears to be evidence suggesting that successful entrepreneurs may be higher in conscientiousness than unsuccessful ones (Zhao & Hills, 2005). Envick and Langford (2000) examined potential differences between 119 entrepreneurs and 99 managers using a psychometric measure of the Five Factor Model of personality. Entrepreneurs were found to be significantly lower than managers in conscientiousness (F=not reported, p=.052) and agreeableness (F=not reported, p=.043), but no significant differences were found with extraversion, neuroticism or openness to experience (p>.1). The main limitation with this study relates to the psychometric measure used.

Numerous researchers from many traditions were able to replicate the findings, thereby sustaining the theory of five basic dimensions of personality. While the Big Five personality traits represent an attempt to capture meaningful personality variance that may relate to entrepreneurial status, other narrow-bandwidth traits are also informative and will therefore be discussed.

2.2.4 Relevance of Big Five to Management studies

The idea that personality relates meaningfully to the kinds of careers people choose and how they perform in these careers has a long history in career psychology and is an issue of paramount importance. Although this is an area that has been researched with relation to entrepreneurs, it would seem a viable option to consider research in other areas of work psychology in order to gain some insight into the implications of such an approach and in an attempt to provide a more comprehensive overview. Studies in areas related to entrepreneurship have also found similar results.

In a study conducted by Judge & Bono (2000) on transformational leadership behaviour in relation to the five factor model, they identified three dimensions able to predict its occurrence (extraversion, openness to experience and agreeableness). Such work may generate interest suggesting that it is possible that that the Big Five personality traits (Costa & McCrae, 1988) can offer some useful insights into the combination of personality factors that may best help decide which individuals are most likely to be successful. This is regarded as an important study and is perhaps the first significant piece of empirical work that has been done in the area which holds considerable value. It can be reasoned that entrepreneurs are similar to transformational leaders in organisations because of their need and ability to motivate their workforce by the use of their personal skills, such as charisma, as well as their ability to influence investors and even customers. However, this is not to say that all transformational leaders are entrepreneurs and vice versa. So we may expect to find differences. It is also important to recognise that a number of activities undertaken by entrepreneurs do resemble many other jobs and therefore it would be wise to consider in the literature review studies that have been done in areas that may be applicable. It is important to note that an entrepreneur will probably have the knowledge and expertise in most of their business functions and thus will incorporate many different positions within their role.

A number of meta-analyses (e.g., Barrick & Mount, 1991) have significantly helped us develop our empirical and theoretical understanding of the nature of the relation between personality constructs, particularly the Big Five traits, and job performance. Over the years, data accumulated by meta-analyses has shown that the validities of two of the Big Five traits; conscientiousness and emotional stability, are influential in the prediction of overall performance. Research also reveals that the other three personality traits, extraversion, agreeableness, and openness to experience, are also valid predictors of performance, but only for specific occupations or for some criteria (Barrick, Mount & Judge, 2001). For example, extraversion has been found to be related to job performance in occupations where a significant portion of the job involves interacting with others, particularly when that interaction is focused on influencing others and obtaining status and power (Barrick et al., 2001). In such jobs, especially sales and management, being sociable, gregarious, assertive, energetic, and ambitious is likely to contribute to success within the position. Agreeableness also has been found to be an important predictor in jobs that involve significant interpersonal interaction. In this case, however, agreeableness matters only when that interaction involves helping and cooperating with others. Finally, Openness to Experience have been found to be related to creativity and to influence the ability to adapt to change (George & Zhou, 2001; LePine, Colquitt, & Erez, 2000). Employees who are artistically sensitive, intellectual, curious, polished, original, and independent are likely to deal with change and contribute more to innovation at work. Thus, through application of meta-analysis, combined with the use of meaningful personality constructs, like the Big Five, researchers have been able to summarise results quantitatively across a large number of studies to confirm that personality traits do matter at work. Other studies have revealed that Big Five personality traits predict multiple facets of career success, whether assessed intrinsically (i.e. satisfaction) or extrinsically (e.g. occupational status), using either subjective reactions or objective indicators, which have demonstrated that there are enduring relations between personality traits (e.g. conscientiousness and emotional stability) assessed in childhood, and career success assessed in late adulthood, with (uncorrected) correlations ranging up to .49 (Barrick & Mount, 1991).

The remaining part of the literature review will focus on each of the personality dimensions comprising the Big Five as well as the narrow personality traits that are relevant to this study. In addition, there are reviews of demographic variables and environmental situations that are of interest for this area of research.

2.2.5 Neuroticism

Neuroticism represents individual differences in adjustment and emotional stability. Individuals who score high on neuroticism lack self confidence (Costa & McCrae, 1992b). Reviews of previous studies have shown neuroticism to be negatively related to job performance across a wide range of occupations (Barrick, Mount & Judge, 2001). This would immediately suggest that such an individual would steer clear of any form of entrepreneurial activity or career, since confidence is often a characteristic that has been argued as being central to success (Knight, 1921). People who score low on neuroticism can be described as being self-confident, calm and relaxed and entrepreneurs are generally seen as confident individuals who do not give up easily when faced with obstacles. Additionally, they tend to hold an optimistic view of the environment rather than become disheartened or feel threatened by the uncertainties. The activities involved in forming and successfully running a business are significantly exhausting both physically and psychologically. It would seem that any form of negative emotions such as intense anxiety and helplessness are likely to restrain the individual from engaging in such activities. Therefore it is thought that entrepreneurs would score low on neuroticism. Judge & Bono (2000) argue that neuroticism should be conceptualised even more broadly, incorporating emotional stability and negative emotionality, along with other tendencies related to self-evaluation, such as self-esteem, generalised self-efficacy, and locus of control.

2.2.6 Extraversion

Extraversion is an aspect of personality that incorporates the attributes of sociability, assertiveness, ambition, talkativeness, gregariousness and activeness (Shane, 2003). People who score high on extraversion tend to be cheerful, like people and seek excitement and stimulation. People possessing this trait are more likely than other people to exploit potential opportunities to succeed. While people who score low on this dimension are characterised as reserved, quiet and independent and thus tend to spend time alone (Costa & McCrae, 1992a). Earlier research has indicated that entrepreneurs are more extraverted than other members of society. It is generally assumed that entrepreneurs must be energetic, outgoing and sociable as opposed to being shy and withdrawn. Wooten et al (1999) as cited by Shane (2003) found entrepreneurs to be more sociable than non entrepreneurs. Support has also come from studies which have shown extraversion to be positively related to both leadership emergence and effectiveness (Littunen, 2000). Extraversion has also found to be positively related to interest in enterprising occupations (Costa, McCrae & Holland, 1984) and performance jobs requiring significant interaction with others (Barrick, Mount & Judge, 2001). Therefore it would be expected that extraversion be positively associated with entrepreneurial status. Furthermore, extraverts tend to be more physically and verbally active and so it is presumed that entrepreneurs must be able to successfully interact with a diverse range of individuals including partners, venture capitalists, employers and employees. As their business grows they spend more time influencing, motivating and managing and because they play an active role in the day to day running of the business they quickly resemble to role of a leader. Many authors also describe this trait as being important to organisational adjustment, for the prediction of job tenure and for influencing how one tries to accomplish work (Caldwell & Burger, 1998). Extroversion associates with “activity” and “dominance,” typically associated with success in positions of leadership (Dunn, Mount, Barrick, & Ones, 1995).

2.2.7 Openness to Experience

Openness to experience is a measure of depth, breadth and variability in a person’s imagination and urge for experiences (Pervin & John, 2001). This dimension incorporates broadmindedness. People who score highly on openness to experience are characterised as intellectually curious and tend to be more open to new ideas. People with a high openness to experience have broad interests, are liberal and like novelty (Howard & Howard, 1998). Someone who scores low on openness would be characterised as un-analytical and conventional. Individuals with low openness to experience are conservative and prefer familiarity (Howard & Howard, 1998). Openness is positively correlated with aspects of intelligence (Kline, 2001) that are related to creativity such as divergent thinking. Thus, entrepreneurs are likely to score highly on such a dimension and it is reflected in their venturesome approaches to business (Knight, 1921). One of the key characteristics of an entrepreneur is the willingness to explore new ideas and take on innovative approaches in their products, strategies and even business methods and research has found that there is a strong desire on their part to be different.

Open individuals are autonomous and are less attracted to traditional and conventional roles and careers. Individuals who are open to experiences are therefore more likely to be able to recognise opportunities and identify potential projects. They are more likely to be able to exploit novel situations as to create new and products or markets. Openness to Experience is therefore likely to differentiate entrepreneurs from non entrepreneurs. However, this trait has had mixed results in predicting occupational outcomes (Barrick et al., 2001) and appears to be a complex trait. Individuals low on the trait would be expected to be more likely to focus on the practical side with restrictions on their use of imagination; this can be very useful when the purpose of the organisation is to focus on unexciting details and just get the job done. On the other hand, in organisations that require flexibility, or foster independent and creative problem solving, individuals high on the trait are likely to be beneficial.

2.2.8 Agreeableness

Agreeableness can be characterised as, forgiving, caring and altruistic. Agreeable individuals are warm, generous and trusting (Costa & McCrae, 1992a). Such individuals are able to form successful social alliances since there is a strong preference for positive interpersonal relationships. It is an aspect of personality that incorporates the attributes of friendlessness, flexibility, a tendency to trust people, cooperation and tolerance (Shane, 2003). However, consensus and conformity does not usually fit the traditional view of an entrepreneur who is regarded as a risk taker and someone who may be deviant or non-conforming. Therefore, an individual displaying high levels of agreeableness is unlikely to be attracted to a career in entrepreneurship. Someone displaying low levels of agreeableness however can be characterised as manipulative, self centred and ruthless (Digman, 1990). It would normally be accepted that the ability to influence and manipulate others would be necessary component of entrepreneurial behaviour. Meta-analysis studies have shown that agreeableness is positively related to job performance for individuals in nurturing professions (Barrick et al, 2001) whilst it is negatively related to salary level and career satisfaction even for these people orientated jobs (Judge, Bono & Locke, 2000).

Individuals high on agreeableness are easy to get along with and trust, while individuals low on the trait may be cautious of direct and personal contact. Agreeableness also associates with being trusting, and compliant, which could also be perceived as a tendency to follow rather than lead. It is also argued that agreeable individuals are altruistic, sympathetic, and eager to help others, and who strive for cooperation rather than competition (Liao & Chuang, 2004). Although agreeableness may suggest one to be seen as trustworthy and helpful in forming cooperative working relationships, high levels of agreeableness may inhibit one’s ability to look out for one’s own self interest, and influence or even manipulate others for one’s own advantage.

2.2.9 Conscientiousness Conscientiousness can be defined as the degree to which a person is able to inhibit impulses and direct behaviour along socially acceptable lines (Smith & Smith, 2005). It also refers to the degree of motivation in goal directed behaviour. Conscientiousness indicates the individual’s degree of organisation, hard work and motivation in the pursuit of a goal. Therefore, it is the trait most often and directly related to job performance across all types of occupations as it is indicative of persistence, responsibility and self control. Since conscientiousness has been positively related to job performance in a number of occupations it is likely that highly conscientious individuals perform entrepreneurial activities better than others. Research has found that individuals high on conscientiousness are more likely to emerge as group leaders (cited by Stewart & Roth, 2001). Conscientiousness is likely to express itself in persistence and high achievement and therefore would be expected to be a trait common to entrepreneurs. Psychological research has been consistent in reporting that activities that are successful or done well produce confidence and these encouragements in the form of reinforcements would promote repeat activities of a similar nature. Individuals with high conscientiousness have been reported to be dependable, responsible, organised, hardworking, and achievement oriented (Barrick & Mount, 1991). Due to these characteristics, people tend do to what is expected of them to accomplish work (Liao & Chuang, 2004). Positive effects of conscientiousness on work performance have clearly been demonstrated (Barrick & Mount, 1991). Therefore it could be claimed that this might be the most important of the big five traits in terms of impact on work performance and adjustment to organisations (Barrick, Mount, & Judge 2001).

2.2.10 The problem with the trait approach

Even with considerable attention and widespread interest towards the trait approach it does not come without its limitations. Efforts to isolate psychological or even demographic characteristics that are unique to entrepreneurs, has generally met with inconsistencies. Researchers have been unable to report a general consensus among a unique set of personality traits that characterise the entrepreneur (Brockaus & Horowitz, 1986). So it was concluded that any attempt in trying to find an ‘entrepreneurial personality was a myth’ (Chell, 1985). Past methodological mistakes and theoretical errors have distorted the subject area and often produce contradictory findings. Qualitative reviews of the area concluded that there is no identifiable relationship between personality and entrepreneurial status and that future research using the trait paradigm should therefore be abandoned (Brockhaus & Horwitz, 1986). Despite all the attention, the trait approach still seems to be unable to capture the entrepreneurship phenomenon to the full extent. The rejection of the personality traits is an extreme claim but Lyewellyn & Wilson (2003) felt that it was ‘justifiable in the light of the lack of empirical support’.

Examination of literature reveals a number of conceptual and methodological limitations both in the previous research (Gartner, 1989) and in narrative reviews (Stewart & Roth, 2001). These limitations might mask the emergence of reliable conclusions. The history of studying entrepreneurship by looking at personality traits therefore remains highly controversial. It is thought that those who adopt the trait approach ignore many other potential influences.

Previous attempts to make connections between personality traits and entrepreneurs has also been criticised for the use of psychometric measures which have unknown reliability and validity. A problem associated with research in this area is that very small samples are often used which leads to doubts about the confidence of extending findings to the general population. Few studies have been able to report statistically significant findings. The nature of the personality approach would argue that the interaction between individual’s characteristics and situational conditions would predict entrepreneurial behaviour better than any one of the factors alone (Rauch & Frese, 2000).

In spite of these flaws, the trait approach still remains a very popular view as even the most recent issues of scientific journals contain articles belonging to this approach (e.g. Ardichvili & Gasparishvili, 2003). It is important to take note of the advances this approach has made in the past 20 years which have led to a new and revived interest in the area. Furthermore, although the relationships may not have been significant all of the time, there have been breakthroughs in understandings and differences that have been highlighted. So rather than claiming that it as an area that can be developed no further there should be attempts to re-assess the usefulness and endeavour to make significant contributions or clarifications on the current situation.

Hence this study aims to focus not only on the broad personality traits but take into account narrow personality traits as well as important environmental and situational variables as well as demographic influences.

2.3 Narrow Personality Traits

2.3.1 Achievement Motivation

McClelland (1961) identified the need for achievement as a basic need that influences behaviour. He established the construct in the entrepreneurship literature by positing that a high need for achievement predisposes a young person to seek out an entrepreneurial position to attain more achievement satisfaction than could be derived from other types of positions McClelland’s work (1961) was not only a major contribution to the literature but was also a pioneering effort in an attempt to determine whether entrepreneurs tend to hold a certain psychological set (Vesper, 1993). Certainly this is the most widely cited characteristic of entrepreneurs and has much appeal and surface validity.

Achievement motivation can be defined as ‘behaviour towards competition with a standard of excellence’ (McClelland, 1965a). People who have high levels of achievement motivation tend to set challenging goals and attempt to achieve these. Achievement orientated people have a strong tendency to plan, to establish future goals, to gather information and to learn (Miner, 2000). McClelland (1961) showed that entrepreneurial behaviour can be associated with personality characteristics like high need for achievement, moderate risk-taking propensity, preference for energetic and or novel activity, and the tendency to assume personal responsibility for successes or failure. McClelland (1965b) proposed that certain situations stimulated the need for achievement. These situations are where the individuals can assign success through their own skills and efforts and when there is a perceived risk.

Many empirical studies have supported the existence of a link between entrepreneurship and the need for achievement, Lee & Tsang (2001) found positive relationships between an owner-operator’s need for achievement and their intended or actual business growth. Similarly, Begley & Boyd (1987a) reported that founders of organisations had a higher need for achievement than non founders. Stewart et al (1999) also established that entrepreneurs had a higher need for achievement compared to both managers and small business owners. Collins, Hanges & Locke (2004) conducted a meta-analysis and found support for McClelland’s theory that achievement motivation is significantly related to both occupational choice and performance in and entrepreneurial role.

Research indicates that achievement motivation is higher in the company founders compared to managers as reported on many instances (Begley & Boyd, 1987b; Miner, Smith & Bracker, 1989). Johnson (2001) examined the evidence that there might be a link between entrepreneurship and achievement motivation, and provides an overview of 23 studies published between 1961 and 1989. These studies included both psychometric and projective techniques, and a variety of sample types consisting of students, entrepreneurs of various kinds and managers. Despite these differences Johnson (2001) found that 20 out of 23 studies were in the expected direction and statistically significant (p<.05).

However, Rauch & Frese (2000) produced non significant results, when comparing the need for achievement of founders and non founders as well entrepreneurs and managers. McClelland’s need for achievement was widely criticised, most notable though for the use of the Projective Thematic Apperception Test as a measure of achievement motivation due to its relatively low reliability. Furthermore, the theory was considered to be strongly influenced by Western culture and values that were not transferred or applied to other countries.

Research also suggests that managers are more similar to entrepreneurs in terms of their achievement motivation than are individuals who are attracted to less similar careers such as engineers or scientists. Studies tend to agree that the entrepreneurial person has a high need to achieve- that is a strong desire to be successful. Although studies have been able to demonstrate that people with higher need for achievement are more likely to exploit entrepreneurial opportunities there is a debate whether these individuals actually perform better at entrepreneurial activities which is an area that would require further attention.

McClelland (1961) related the concept of achievement motivation to economic development and growth. Frey (1984) supported the result that need for achievement among nations leads to economic development. Cooper & Gimeno-Gascon's (1992) review found, in three out of four studies, a positive relationship between need for achievement and success of small-scale enterprises. One study that showed that personality characteristics can change over time, which leads to the suggestion that levels of motivation, can be increased through training programs which, in turn, increases business performance. However the reported mean correlation was found to be quite small which might imply that there are possibly other variables that moderate the need for achievement-success relationship.

2.3.2 Locus of Control

Locus of Control is a personality trait introduced by Rotter (1966) in the context of his social learning theory and is thought to be closely related to the concept of a high need for achievement. The concept of locus of control refers to a generalised belief that a person can or cannot control his or her own environment through their own actions (Rotter, 1966). People with an internal locus of control are those individuals who believe themselves to be in control of their destiny (Chell, Haworth & Brearley, 1991). While, an individual with an external locus of control tends to see themselves as passive agents, and attribute outcomes of events and situations to explanations outside their control such as chance, luck, or powerful others. In the management literature, the locus of control concept has been applied extensively over the past three decades.

It has been proposed that locus of control is another important entrepreneurial dimension (Brockhaus, 1980). Rotter (1966) hypothesised that individuals with internal beliefs would be more likely to strive for achievement than would individuals with external beliefs. Indeed, an entrepreneur’s internal locus of control has been reported to be positively related with; innovative strategies (Miller, Kets de Vries & Toulouse, 1982), financial performance (Lee & Tsang, 2001) and organisational survival (Anderson, 1977). Clearly then, an individual’s locus of control has a significant impact upon her or his behavior and performance as an entrepreneur. Other studies by Brockhaus & Nord (1979) also found support for high locus of control among entrepreneurs when compared to managers. However, the primary concern related to the concept of locus of control, in relation to entrepreneurial studies is the fact that its original scale does not relate to entrepreneurial activities and was not specifically designed for entrepreneurial settings.

2.3.3 Risk Taking Propensity

Risk taking propensity is defined as ‘the inclination to accept risk’ and is a commonly studied psychological trait associated with entrepreneurship. Chell et al, (1991) described a risk-taker as someone “who in the context of a business venture, pursues a business idea when the probability of succeeding is low”. McClelland (1961) proposed that entrepreneurs do exhibit moderate risk taking propensities while some other researchers such as Begley & Boyd (1987b) found that business founders reported significantly higher risk taking propensity than non founders.

However other studies have found no difference between risk taking behaviours between entrepreneurs and the normal population. Thus, there are inconsistencies in findings which should therefore be explored. Although there is no consistency in the literature with regard to risk taking and entrepreneurs, studies lead us to believe that entrepreneurs do tend to exhibit higher levels of risk taking than the general working population. A possible explanation for the discrepancies in the results lies in the methodology chosen by researchers. Much of the early studies relied heavily of the Choice Dilemmas Questionnaire by Kogan & Wallach (1964) which was designed to measure risk attitudes but has since been criticised for several reasons. Firstly, it is criticised for its low predictive validity of entrepreneurial risk-taking propensity (Shaver & Scott, 1991), and secondly the questions asked are required to be related to a fictitious person and not the individual themselves. The absence of a consensus in the literature regarding the risk-taking propensities of entrepreneurs does not negate the rich abstract discussions that surround risk-taking propensity. Moreover, because of the potential limitations associated with the use of the choice dilemma questionnaires in previous studies, a more rigorous examination of the issue is warranted.

However, according to Timmons, Smollen & Dingee (1985), successful entrepreneurs take calculated risks, a position which suggests a non-linear relationship between risk- taking and success. Similar, Begley & Boyd (1987a) found that risk-taking predicted success only up to a point. Beyond that point risk taking had a negative effect on success. Some inconsistencies about risk taking and its relationship to success might be due to different perspectives of considering something as risky. From an observer's perspective a behavior might be judged to be highly risky while a business owner might judge the same behavior as an attempt to minimise risk (Chell et al. 1991). Another issue could relate to the fact that, to become an entrepreneur is risky but doing a business in a risky way might be dangerous. In conclusion then, while ambiguity exists, there is reason to believe that those who enter new markets have a higher tolerance for risk than those in the general public.

2.4 General Cognitive Ability

Intelligence is a term that is commonly used in everyday language yet, the politically correct term for it, is otherwise known as general cognitive ability. Individuals differ from one another in their ability to understand complex ideas; to adapt effectively to the environment, to learn from experience, to engage in various forms of reasoning and to overcome obstacles by taking thought (American Psychological Association, 1995). In the field of psychology, intelligence has been defined by prominent researchers including; Binet & Simon (1905) as cited by Smith & Smith (2005) who claimed that intelligence is ‘the ability to judge well, to understand well and to reason well,’ while, Terman (1916) defined it as ‘the capacity to form concepts and to grasp their significance.’ Although controversial, intelligence is a widely accepted construct and is regarded to be the largest human characteristic that is believed to account for the biggest variation in human behaviour (Smith & Smith, 2005).

Despite a variety of concepts surrounding intelligence, the most influential approach to understanding the subject (i.e. the one that has generated the most systematic research) is based on psychometric testing. Tests of general ability attempt to measure a person's ability to problem solve, analyse, understand and adapt to new situations or challenges. They usually produce an IQ score or measure of 'g'. Intelligence tests are psychometric devices in which sets of standardised questions and tasks are included as a means of assessing an individual’s potential. In practice, they are designed to measure mental abilities. General mental ability has a rich heritage in the history of psychological research and application, but like the five factor model, it’s most notable application to organisational psychology can be found in the area of job performance.

Research has clearly demonstrated that scores on a general mental ability test are one of the most consistently positive predictors of job performance (Schmidt, Ones, & Hunter, 1992) with correlations reported at around r = .51 and that the validity of this predictor rises as the complexity of the job rises. That is, the more the job requires complex decision-making or high level cognitive processing, the more useful ability testing is as a prediction tool (Hunter & Hunter, 1984). Cognitive ability has been found to be the best, general predictor of performance across a variety of occupations (Hunter & Schmidt, 1996). As a result, cognitive ability has been used frequently as a predictor of performance for employee selection. However, there has been little research examining the exact mechanisms through which cognitive ability affects performance. Several studies have also found that general mental ability is predictive of earnings (Siegel & Ghiselli, 1971).

More succinctly, general cognitive ability may be referred to as the fundamental ability required to complete a vast number of analytical tasks and is therefore, a commonly employed measure used for a basis of comparison against groups or individual people. Because initial success of entrepreneurs is highly dependent on an individual themselves it would be correct to assume that their higher levels of cognitive ability would lead to greater success and performance. Furthermore, it could be assumed that the higher levels of general mental ability, the more likely the individual is to develop entrepreneurial ability and practical ability. Intelligence has not received much attention in academic discussions of entrepreneurship, perhaps this is because adult intelligence is commonly conceived in general terms (“g”) wherein; it is stable and not subject to significant improvement through training (Ryna, Sattler, & Lopez, 2000). Nevertheless, intelligence remains an assumption of entrepreneurship success, just as it is a significant predictor of leadership in larger established organisations (Mumford, Zaccaro, Harading, Jacobs, & Fleishman, 2000).

The most commonly used IQ tests for adults and children were developed by David Wechsler (1896-1981). Building on Binet’s pioneering work the Wechsler scales came to embody the psychometric assessment of intelligence.

In summary of this variable it is important to note that the study of human intelligence is perhaps the most controversial area in psychology. At the same time, psychometric assessment of intelligence is a flourishing enterprise and a prominent aspect of applied psychology, which should encourage researchers to look at the influence of general cognitive ability in the area of entrepreneurship.

2.5 Demographics

According to Deakins (1996) studies on the personality characteristics of entrepreneurs have not yielded useful information because of the unstable nature of traits, subjectivity of judgements, and a lack of attention to the cultural and environmental factors when undertaking measurement. Other factors often overlooked in personality research have included gender, age, social class and education. All of these have the potential to influence entrepreneurial disposition (Morrison, Rimmington & Williamson, 1999).

Therefore recent researchers have studied other incubating factors in an individual's entrepreneurial behaviour and developments have advocated a relatively new field of research which asserts that entrepreneurship is influenced by demographic factors such as childhood experiences, family background, age, experience, gender, education levels of potential entrepreneurs and their parents, socio-economic status, previous work experience, birth order, and work habits. The remaining section will focus on some of the factors that have been associated with entrepreneurial circumstances and therefore may be of relative importance to this research project.

2.5.1 Ethnicity

It is fairly common for people who have immigrated to Britain or who have parents or relatives who have immigrated within one or two generations to go into their own business. Several authors have suggested that the high number of ethnic minority entrepreneurs could be seen as an escape from racial discrimination in the labour market or that generations of those who immigrated from other countries have a strong desire for independence. There are several theories to support such claims. Perhaps major reinforcing factors include the desire and capacity to work hard to improve conditions because of previous hardship as well as a desire to have best for children (Gray, 1986), furthermore there is emphasis on a history of self support.

2.5.2 Education

The role of education is consistently argued as being important for the development of entrepreneurs; however, such claims have often met with inconsistencies. Nevertheless a study carried out by Fleming (1996) provides evidence that education is a vital ingredient in the process of entrepreneurship and the development of an entrepreneurial base within an economy. Other theorists note that the educational system also has less desirable repercussions on the development of entrepreneurial abilities. Influential theorists such as Casson (2003), claim that further education is shown as advantageous, but not essential, for the entrepreneur.

Formal education has an opportunity cost in terms of practical experience and on the job training. A number of studies have shown years of formal education to be positively correlated with entrepreneurial firm performance (Birley & Norburn, 1987). In addition, a study conducted by Kim (cited in Meng & Liang, 1996) involving entrepreneurs in Singapore disclosed that successful entrepreneurs have higher education levels compared to that of unsuccessful entrepreneurs (p = 0.01). 70% of successful entrepreneurs are university graduated, while 23% are not. According to Staw (1991), after entering the entrepreneurial world, those with higher levels of education are more successful because university education provides them with knowledge and modern managerial skills, making them more conscious of the reality of the business world and thus in a position to use their learning capability to manage a business. Therefore, there seems to be consensus that although education is important it is not necessarily a precondition for success as an entrepreneur.

2.5.3 Childhood

Interest in the childhood experiences of entrepreneurs is often referred to as the Psychodynamic Model (associated with Kets de Vries, 1977), which suggests that an enterprising personality is a deviant behaviour arising from a deprived background and entrepreneurship is a form of self-compensation for reducing dependence on others. Another important input coming from the family is the parental model. It could be proposed that research conducted by Holland (1985) suggests that parent’s occupations often match children’s types either due to the heritability of temperamental characteristics or as the result of social learning within the family. In many studies it was shown that entrepreneurs often had mothers and fathers who were entrepreneurs themselves (Hisrich & Brush, 1986). Some studies find that more than 50% of entrepreneurs have a parent involved in entrepreneurial activities (Gasse, 1982).

2.5.4 Role Models

Numerous authors have put forward the notion that role models are important in the decision to become an entrepreneur. The social learning theory proposes that there are various ways in which learning can occur, vicarious learning is associated with the observation of behaviour of others, who may otherwise be seen as role model (Bandura, 1977) and this theory has effectively been applied to the study of entrepreneurial behaviour. It could be thought that individuals who have greater exposure to other entrepreneurs are more likely to engage in entrepreneurial activities in later life (Shaver & Scott, 1991). However, recent research has also suggested that entrepreneurial role models also appear in various people, either in terms of formal mentors or family members and friends.

2.6 Summary of Literature Review

From the literature review, it can be seen that theoretical and empirical research in the academic and professional entrepreneurship literature has associated psychological characteristics with entrepreneurship. Moreover, few studies have given such an exhaustive list of all of the analysed variables. The literature gives rise to a number of potential areas that should be further developed and considered for further research. The interest in the Five Factor Model has once again generated interest and encourages work to be resumed within this field as well as exploring the relationship of other salient factors. Chapter 10: References

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