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During this such a file with regards to entrepreneurial profile 10tm methodology report.
Sangeeta Bharadwaj Badal, Ph.D., and Joseph H. Streur, Ph.D.
DECEMBER 2014
ENTREPRENEURIAL
PROFILE 10
TM
METHODOLOGY REPORT
ACKNOWLEDGEMENTS
Te authors would like to thank Frank L. Schmidt, Professor Emeritus at the
Department of Management and Organizations, Tippie College of Business, University
of Iowa; Jim Harter, Chief Scientist of Workplace Management and Well-Being for
Gallup’s Workplace Management Practice; Jim Asplund, Chief Scientist for Gallup’s
Strengths Practice; and Yongwei Yang, Principal Researcher for Methodology
and Predictive Analytics at Gallup, for their help, comments and suggestions.
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®
, Gallup Panel
™
,
Entrepreneurial Profle 10
TM
, EP10
TM
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Table of Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Psychology of Entrepreneurship: Review of the Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PART I: Instrument Development Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Theoretical Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Overview of Instrument Development Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Conduct Qualitative Research. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Design and Administer the Pilot Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Analyze the Data and Develop the Field Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Overview of Validity Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Support for the Use of Talent-Based Structured Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Analyses and Results From the Pilot Sample . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
PART II: Collecting Further Validity Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
U.S. High School Sample . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Nationally Representative Sample of Entrepreneurs in the U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Mexico City High School Sample . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
PART III: Assessment Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Feedback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Improper Use of Assessment Outcomes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
ENTREPRENEURIAL PROFILE 10
METHODOLOGY REPORT
Sangeeta Bharadwaj Badal, Ph.D., and Joseph H. Streur, Ph.D.
DECEMBER 2014
Copyright © 2014 Gallup, Inc. All rights reserved.
INTRODUCTION
Gallup developed the Entrepreneurial Profle 10 (EP10
TM
) to assess an individual’s entrepreneurial
talent. Extending across disciplinary boundaries of economics, psychology and management,
Gallup researchers wanted to understand entrepreneurship’s psychological roots.
Scientists at Gallup developed the EP10 assessment based on qualitative and quantitative research
using professional standards (i.e., American Educational Research Association/American
Psychological Association/National Council on Measurement in Education, 1999; Society for
Industrial and Organizational Psychology, 2003) and the Uniform Guidelines on Employee
Selection Procedures. Te result of Gallup’s research and development was a structured, Web-
based assessment designed to assess the talents needed for success in entrepreneurial activities.
Tis report describes the development of the EP10 assessment and provides validity evidence to
support its proper applications.
PSYCHOLOGY OF ENTREPRENEURSHIP: REVIEW OF THE RESEARCH
Personality research in industrial and organizational psychology has long tied personality
variables to organizational (Hunter, 1986; Barrick & Mount, 1991) and leadership performance
(Judge, Bono, Ilies & Gerhardt, 2002). Many researchers defne personality traits as enduring
dispositions that are relatively stable over time and across situations (Rauch & Frese, 2005). In
the realm of entrepreneurship, traits explain entrepreneurial behavior. Numerous studies show
that entrepreneurial attitudes toward autonomy, risk, work and income are more important than
factors such as access to credit or location in determining the success of a frm (Davidsson &
Honig, 2003; Dimov & Shepherd, 2005; Duchesneau & Gartner, 1990; Haber & Reichel, 2007;
Lerner & Haber, 2001; Shaw & Williams, 1998). In other words, an individual’s unique traits can
infuence his or her ability to recognize a business opportunity and act to make the most of that
opportunity in ways that others cannot (Badal, 2010). So what are the characteristics that drive an
individual to business creation under great resource scarcity and high uncertainty? How do these
characteristics afect the entrepreneur’s decision-making process leading to venture creation and
success or failure? Te answers lie in understanding the inherent traits that infuence behaviors
driving business creation and success.
Researchers have identifed numerous traits, such as risk propensity (Arenius & Minniti, 2005;
Engle, Mah & Sadri, 1997; Smith-Hunter, Kapp & Yonkers, 2003; Stewart & Roth, 2004),
creativity (Engle, Mah & Sadri, 1997), problem-solving and overcoming obstacles (Morris, Avila
& Allen, 1993; Smith-Hunter, Kapp & Yonkers, 2003), achievement orientation (Collins, Hanges
& Locke, 2004; Smith-Hunter, Kapp & Yonkers, 2003), self-efcacy (Arenius & Minniti, 2005;
Chen, Greene & Crick, 1998) and high sense of responsibility (Smith-Hunter, Kapp & Yonkers,
2003), as key characteristics of a successful entrepreneur. In addition, behavioral economists
consider bounded rationality (Simon, Houghton & Aquino, 1999), inherent biases in probability
perception (Kunreuther et al., 2002) and biases in self-perception (Koellinger, Minniti & Schade,
2007; Minniti & Nardone, 2007; Hoelzl & Rustichini, 2005) as signifcant factors afecting an
entrepreneur’s decision-making process, which ultimately afects business outcomes.
ENTREPRENEURIAL PROFILE 10
TM
Copyright © 2014 Gallup, Inc. All rights reserved.
1
Gallup research indicates that an individual’s inherent talent for a role — one’s natural capacity for
excellence in a role — results in greater efciency and productivity in that activity and provides a
more fulflling experience for the individual. Talent is a broader concept than personality traits.
Talent is a composite of innate personality traits, attitudes, motives, cognition and values. Using
selection science, Gallup researchers could determine if a candidate possesses a critical mass of
talent relative to the typical characteristics of the most successful people in a given role and predict
whether that candidate was more likely to naturally and consistently behave in ways that lead to
excellence in the role. Certain patterns are dominant and become salient descriptors of a person’s
approach to everyday experiences, including work. Consequently, these talents ofer the greatest
area for potential growth (Clifton & Nelson, 1992). Tese talents can be used to understand
people and predict their behaviors in a particular context.
A major component of Gallup’s eforts involves identifying and studying patterns of excellence
among successful people. Tis study focuses on recurring and consistent patterns of thought,
feeling or behavior of successful entrepreneurs — manifestations that consistently occur when
talented entrepreneurs are exposed to specifc stimuli. Trough Gallup researchers’ more than 40
years of qualitative and quantitative research, it was determined that, when objectively assessed,
successful people respond diferently than less successful people. Te development of the EP10
Index used this cumulative experience and knowledge. Gallup used its database and senior
researchers’ experience and expertise to develop a pilot selection assessment with the potential to
understand the patterns of excellence that characterize outstanding entrepreneurs.
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2
PART I: INSTRUMENT DEVELOPMENT PROCESS
Te conceptual foundation on which Gallup researchers built the fnal EP10
Index begins with
delineating the demands of the role and the desirable behavioral responses to meet such demands,
and hypothesizing the talents that enable those desirable behavioral responses that lead to
entrepreneurial success. An adaptation of the Giessen-Amsterdam model (Rauch & Frese, 2000)
appears below and shows the link between individual diferences and entrepreneurial performance.
ENTREPRENEURIAL PROFILE
10
:
PATHWAYS FROM TALENT TO BUSINESS SUCCESS
KNOWLEDGE
SKILLS
TALENTS
Risk-Taker
Confdence
Relationship-Builder
Business Focus
Creative Tinker
BEHAVIORS
Failure Tolerance/Internal Locus
of Control
Experimentation
High Social Awareness
Business Tinking/Goal Setting
Ideation
Cognitive Style
Biases
Heuristics
Contextual
Environment
OUTCOMES
Recognize Opportunities
Start a Venture
Access Resources and Build Trust
Proftability
Disrupt Markets
Tis modifed model shows how talents afect key behaviors that enable an entrepreneur to meet
the demands of the job and ultimately lead to business creation or success. Tus, the talent-based
assessment solutions predictive of successful performance in the role are those that efectively
capture the talents that could enable the key behaviors. Many other factors also play a role in
determining entrepreneurial performance, such as knowledge/skills, cognitive styles, biases and
several contextual factors (industry type, life stage, economic and political environment, access to
credit and others), but this report focuses on an entrepreneur’s innate talents and their relationship
to business outcomes.
THEORETICAL
CONSIDERATIONS
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Following the model previously mentioned, the development of a talent-based assessment begins
with the study of a role and the successful incumbents in that role. Tese two interrelated topics
become the focal point of the qualitative research. Specifcally, the qualitative research intends to:
• defne the target roles by describing the demands they place on the individuals in the role
• delineate the behavioral responses needed to meet the demands of the role
• diferentiate the behavioral responses according to the extent that they meet the job
demands, from low to high
• derive the talent constructs that might enable those behavioral responses
Te foundation for building the EP10 assessment began in the late 1980s, when Gallup
researchers developed a framework for the process of new venture creation and studied the
psychological factors that drive successful entrepreneurship (SRI/Gallup, 1989). In 2008, Gallup
collaborated with NaturTalent Stiftung in Baden-Wurttemberg, Germany, to study the talents
that diferentiate entrepreneurs from non-entrepreneurs (von, Dabiri & Truscott-Smith, 2009).
Learnings from the qualitative research conducted in 1989 and 2008 led to the development of
the current EP10 assessment. Te present EP10 assessment further extends the talent model to
diferentiate successful entrepreneurs from less successful ones.
Te development of the EP10 assessment involved the following steps:
1. Conduct qualitative research.
2. Design and administer the pilot study.
3. Analyze the data and develop the fnal assessment.
Conduct Qualitative Research
Te qualitative research provided initial evidence regarding the content relevance of the EP10
assessment to the entrepreneurial role. Gallup researchers conducted systematic investigations of
high-performing entrepreneurs in a study of U.S. entrepreneurs in 1989 and in a study of German
entrepreneurs in Baden-Wurttemberg, Germany, in 2008. Researchers conducted stakeholder
interviews and focus groups with existing entrepreneurs who had successful company operations.
With participants’ agreement, researchers recorded all interviews and focus groups (conducted
face to face or via telephone). Participants in these discussions answered many questions about
the functions they routinely perform. Researchers paid particular attention to the attitudes and
behaviors that outstanding entrepreneurs exhibited and used information collected through the
discussions to identify the talents that enable success in an entrepreneurial role. Te research led to
a description of the role, the job demands and the initial talent model.
In 2009, Gallup researchers conducted a comprehensive literature review that led to the further
refnement of the talent model and development of the current EP10 instrument. Researchers
identifed additional constructs to diferentiate a successful entrepreneur from a less successful
one. To ensure the content appropriateness of the EP10
assessment to the role of a successful
OVERVIEW OF
THE INSTRUMENT
DEVELOPMENT
PROCESS
ENTREPRENEURIAL PROFILE 10
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4
entrepreneur, Gallup researchers used information gathered through stakeholder interviews and
focus groups in Nebraska and Germany and the extensive literature review. Te goal of the EP10
assessment is to identify entrepreneurs who are likely to signifcantly grow their business.
Findings From the Qualitative Research
The Target Role
An “entrepreneur” is someone who builds economic value by creating products and services
for the market. Following Timmons’ (1994) conception of entrepreneurship as the “process of
creating or seizing an opportunity and pursuing it,” Gallup researchers focused on entrepreneurs
who are driven to fulfl a gap in the market rather than starting businesses to make ends meet.
Tough the reasons for starting a business can be complex, Bogenhold (1987) diferentiated
“opportunity-driven” entrepreneurs, who are motivated to enter entrepreneurship more out of
choice to exploit an opportunity, from “necessity-driven” entrepreneurs, who are pushed into
entrepreneurial activity in the absence of other options for work. Studies show that opportunity-
driven entrepreneurs difer from their necessity-driven counterparts in their entrepreneurial
behaviors and growth aspirations and business growth (Acs, Desai & Hessels, 2008). Because
opportunity-driven entrepreneurs expect higher growth and create more jobs (Acs et al., 2008),
Gallup researchers focused on the individuals engaged in the more desirable opportunity-driven
entrepreneurship rather than the necessity-induced entrepreneurship.
To accomplish their objective of creating goods and services for the market, entrepreneurs must
engage in various tasks or activities to start and subsequently grow a business. Te phases of
business setup: 1) recognizing opportunities that arise because of changing economic, social or
technological conditions; 2) pursuing these opportunities proactively; 3) gathering human and
fnancial resources that enable a startup; 4) creating a road map or a strategy to produce a product
or service; 5) launching a new venture; and fnally, 6) actively managing the company (Shane,
2003; Bygrave, 1989).
Each phase of the entrepreneurial process requires that the entrepreneur perform specifc
activities. For instance, in the early stages, recognizing opportunities leads to evaluating these
opportunities, thinking through all the possibilities and practicalities and leveraging relationships
to fnd partnerships to launch a venture. After establishing the company, actively managing the
company means the entrepreneur must oversee a workforce, infuence and motivate others, and
conduct negotiations with customers or suppliers (Baron, 2006).
Te study of the entrepreneur’s role revealed that successful entrepreneurs exhibited various
behaviors allowing them to meet the needs of the role at each stage of the business. Table 1
provides a list of the behaviors successful entrepreneurs exhibit and the underlying talents that
drive the behaviors that ultimately result in business creation and success. Tough the table below
matches a specifc talent to a set of behaviors, in reality, multiple talents can drive a behavior. Te
table lists the talents that are dominant in driving specifc behaviors.
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Table 1: Entrepreneurial Behaviors and Talents
Behaviors That Enable Entrepreneurs to Meet the Demands of the Role
Talents That Drive
the Behaviors
• Know themselves and present themselves efectively and with confdence — even in the face
of rejection
• Clearly understand others
• Build trust and invest in people
• Able to articulate the competitive advantage of their frm in the marketplace
• Align employee activities with their individual strengths, leading to business growth
Confdence
• Show a strong personality and are charismatic and confdent
• Show enthusiasm and emotion in taking on challenges
• Have highly optimistic perception of risk
• Can easily make decisions in complex situations
• Can easily establish emotional connections with customers, are more likely to understand
what customers need, share new ideas with customers and are more likely to exceed customer
expectations
Risk-Taker
• Imagine beyond the boundaries of what exists now
• Explore options and can think their way through problems
• Are constantly thinking of creating new products and/or services for their customers
• Have minds that are typically fring with many diferent ideas
• Are curious and quick learners
Creative Tinker
• Have a clear, strong voice and speak boldly on behalf of their company
• Have the ability to make their case efectively and have others follow their decisions
• Communicate their vision of their company to employees and customers
• Have a clear growth strategy
Promoter
• Are proft-oriented
• Establish clear goals and objectively measure their progress toward the goal
• Judge the value of an opportunity, a relationship or a decision by its efect on business
• Invest time in planning growth strategies
• Align employee responsibilities with company goals
Business Focus
• Seek knowledge that is relevant to growing their business
• Push themselves to acquire in-depth information about every aspect of their business
• Have a preoccupation with their business that borders on obsession
• Anticipate knowledge needs and use knowledge well
Knowledge-Seeker
• Depend on themselves to get the job done
• Have a strong sense of responsibility
• Can handle multiple tasks successfully
• Are resolute, with a high level of competence in every aspect of managing a business
Independent
• Push to achieve more and have a tremendous work ethic
• Instigate the action to get something started
• Are eager to make decisions and quick to act
• Confront obstacles directly and overcome them
• Are persistent and undeterred by failure and/or roadblocks
Determination
• Understand that they cannot do everything themselves if the business is going to expand
• Can readily delegate authority and responsibility
• Can proactively collaborate with others
• Recognize and draw on people’s special abilities
• Help ensure that team members become efective contributors to the company
Delegator
• Have high social awareness
• Can attract and maintain a constituency
• Build mutually benefcial relationships
• Use their relationship talents to access internal and external resources
• Forge relationships with employees and customers that go beyond work or products or
services
• Have an open demeanor, positive attitude and personal integrity that helps build trust
Relationship-Builder
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Te 10 talents described in Table 1 infuence behaviors that best explain success in an
entrepreneurial role. An individual’s inherent talents and acquired ability (skills, knowledge and
experience) infuence how successfully and by what means he or she responds to the needs of the
role. Te individual’s dispositions or talents enable appropriate behavioral responses. Typically, the
more prevalent the talent, the higher the likelihood of success in the role.
Design and Administer the Pilot Study
Using a talent-based description of a successful entrepreneur, Gallup researchers created an online
(Web-based) interview to assess the existence of the attributes listed in the talent model. Te
pilot assessment included 113 items. Researchers selected a combination of multiple-choice and
Likert items based on their content relevance and statistical properties indicated by item histories.
Te items came from the Gallup Item Bank. Te Item Bank contains more than 9,000 items of
diferent types that Gallup has used previously. Many of these items tap into entrepreneurial
talents specifcally. An item history includes information about each item’s performance with
past research participants, including statistics on item characteristics, relationships between item
responses and performance measures, and relationships between item responses and race, gender
and age variables.
In addition, Gallup researchers included a series of questions about participants’ business
backgrounds and demographics to ensure that those who Gallup classifed as successful
entrepreneurs were correctly assigned to each group. Tese questions asked about the number of
businesses participants had started, business successes and failures they may have had, number of
employees, proft, sales goals and expectations of business performance in the future.
Gallup invited 1,736 self-employed Gallup Panel members (a probability-based, nationally
representative panel of U.S. households) to participate in the Web-based pilot study to test the
existence of the hypothetical talents and build the instrument. Of these Panel members, 1,188
identifed themselves as “primary owners” of a business and provided valid responses to enough
items for Gallup to use in the research sample.
Gallup researchers focused their attention on opportunity-driven entrepreneurs. Tese
entrepreneurs identifed “good startup opportunities in my area,” “opportunity to be independent”
or “opportunity to increase my income” as their main reason for starting a business. Of the 1,188
primary owners, 905 were opportunity-driven entrepreneurs based on their reason for starting a
business. Researchers labeled respondents who gave their reason for starting a business as “no jobs
available in my area” as necessity-based entrepreneurs and excluded them from the sample.
Analyze the Data and Develop the Final Assessment
Gallup researchers used the data gathered from the pilot assessment to evaluate the psychometric
properties of each item and the assessment as a whole. Tis evaluation included, among others,
analyses on:
• appropriateness of each item, and the assessment as a whole, as representation of the talents
identifed as important
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7
• item characteristics such as item difculty
• relationships between item responses and total scores and the performance variable
• relationships between item responses and demographic variables
• reliability of the total score
Conducting descriptive and inferential analyses, Gallup researchers studied which items best
diferentiated top-performing entrepreneurs from others. In addition to prior research, these
analyses provided basis for questions retained for the feld study. Te feld instrument contained
89 items that best cover the common talents needed for achieving high levels of success in starting
or growing businesses. Researchers calculated the Index Total Score using these items. Te
score is an integer between zero and 100, which indicates the percentage of points an individual
received out of the total possible points. Higher scores indicate potentially better performance in
the entrepreneurial role. In addition, various demographic items, 42 nonscored research items,
and nine contextual items that assess the environment in which the entrepreneur exists, are also
included. Te research and contextual items will allow for adjustments to the assessment in the
future to enhance its efciency and utility. As such, the assessment has a degree of fexibility, while
maintaining the core foundational elements for estimating entrepreneurial talent. Te assessment
takes the average respondent 25 to 30 minutes to complete.
Validity is the degree to which both theory and empirical evidence support inferences and actions
based on an assessment. Validation is an ongoing process of developing sound arguments and
gathering evidence that supports the intended interpretation and actions based on the assessment
outcome. Validity evidence may be derived from empirical data, relevant literature, expert
judgments and logical analysis.
Support for the Use of Talent-Based Structured Assessments
Published Meta-Analyses
Te research exploring linkages between broad and specifc traits to business performance has
shown contradictory results. For instance, Brandstatter (1997) did not fnd any diferences in broad
traits between business owners and non-owners, but did fnd a positive link between emotional
stability, independence and entrepreneurial success. On the other hand, Wooten and Timmerman
(1999) found that openness to experience was negatively related to business startup. Another study
(Ciaverella, Bucholtz, Riordan, Gatewood & Stokes, 2004) found a negative relationship between
openness to experience and business survival, but a positive relationship between conscientiousness
and business survival. Despite contradictory results in individual studies, a meta-analysis by
Rauch and Frese (2005) showed that both broad (r=0.151) and specifc traits (r=0.231) had
a signifcant relationship to entrepreneurial success. Following this line of research, Gallup
researchers developed the current EP10 assessment to usefully diferentiate entrepreneurs from
non-entrepreneurs.
OVERVIEW
OF VALIDITY
EVIDENCE
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Gallup Meta-Analyses
Schmidt and Rader (1999) conducted a meta-analysis of 107 of Gallup’s predictive validity
studies and found the type of structured interview process Gallup researchers used (the in-depth
interview) results in scores that are predictive of multiple performance criteria, including sales
data, production records, absenteeism and employee retention. A more recent meta-analysis of
Gallup selection assessments (based on 386 predictive validity studies and expanded to interactive
voice response and Web modes) again indicated that Gallup’s selection assessment methodology
produced positive and generalizable predictive validity across various criterion types and positions
(Harter, Hayes & Schmidt, 2004). Te EP10 is a structured Web assessment developed using the
same methodology and is expected to be predictive of specifc performance criteria such as sales
and proft growth.
Analyses and Results From the Pilot Sample
Sample
A total of 1,188 self-employed people from the Gallup Panel completed the research
assessment. As explained previously, Gallup designated 905 of these people as opportunity-
based entrepreneurs based on their responses to their reason for starting a business. Researchers
identifed the research sample to represent entrepreneurs who performed at low, average and high
levels. Te performance groups in the sample, so formed, are referred to as contrast, middle and
study groups hereafter. Te designations of the performance groups used a composite performance
rating developed by combining several outcome variables.
Table 2 shows the number of entrepreneurs in the sample by performance category.
Table 2: Sample of Opportunity-Based Entrepreneurs
All Invitees
Total # of Opportunity-
Based Entrepreneurs
Sample by Performance
Total Contrast Middle Study
1,188 905 905 301 302 302
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9
Te companies in the analysis had been in existence from less than 10 years to more than 50 years
(by 2009). Table 3 shows the distribution of businesses by start year.
Table 3: Distribution of Businesses by Start Year
Year Business Started In Sample Percentage
1959 or prior 2 0.2%
1960-1969 16 1.8%
1970-1979 46 5.1%
1980-1989 141 15.6%
1990-1999 244 27.0%
2000-2009 456 50.4%
Total 905 100%
Table 4 shows sample sizes broken out by race, gender and age. All research participants
completed the assessment in U.S. English.
Table 4: Demographics
Variable In Sample
Race
White (not Hispanic or Latino) 825
All nonwhite (not Hispanic or Latino) 70
Black (not Hispanic or Latino) 13
Hispanic or Latino 0
Native American (not Hispanic or Latino) 22
Asian (not Hispanic or Latino) 7
Pacifc Islander (not Hispanic or Latino) 3
Other 25
Missing race information 10
Gender
Male 539
Female 366
Age
Younger than 40 92
40 and older 759
Missing age information 54
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Reliability of the Index Score
Reliability, in the context of measurement, refers to the degree of consistency and stability of
outcomes produced by a measurement process (e.g., a selection assessment administered via the
Web) across the replications of some aspects of the process. Tere are many types of reliability
indexes; each characterizes somewhat diferent aspects of error in a measurement process. Te
magnitude of diferent aspects of measurement errors can be described by the standard error of
measurement (SEM), which directly relates to the magnitude of the reliability coefcient of the
corresponding type.
Internal Consistency Reliability
Te assessment development study allows for evaluation of the internal consistency reliability.
A higher degree of internal consistency is desirable because it indicates an assessment is able to
obtain consistent responses from the respondents. Gallup’s minimum standard for total score
reliability on its assessments is 0.70. Table 5 reports the internal consistency reliability (Cronbach’s
alpha coefcient) of the EP10 assessment.
Table 5: Reliability and Descriptive Statistics for EP10 Assessment
Index
Number of
Items
a Mean SD SEM
EP10 89 .90 58.02 9.59 3.03
Note:
a = Cronbach’s alpha
SD = standard deviation
SEM = standard error of measurement
Identifying the Talent Themes: Factor Analyses
In addition to the Total Index Score, which is indicative of overall entrepreneurial potential,
researchers conducted factor analysis to parse items into talent themes. Researchers used principal
components analysis because the primary purpose was to identify and calculate composite scores
for the talent themes underlying the EP10 assessment.
Researchers defned a-priori 10-factor structure based on theoretical support for talents
entrepreneurs need to be successful in the role. Using varimax and oblimin rotations of the
factor-loading matrix, researchers examined solutions for 10 factors. Results of both methods
were similar. Te 10-factor structure explained 41% of the variance. Items with a factor loading
of 0.30 or above on a factor were retained. To label the factors in the model, researchers examined
the factor pattern to see which items loaded highly (0.30 or above) on which factors and then
determined the common theme of the items. For the most part, the items loaded on the correct
factors (all nine Confdence items loaded together on a single factor, all Risk-Taker items loaded
together on a single factor, and so on), thus confrming that the analysis produced the correct
factor structure. Researchers made minor adjustments where items did not load on the expected
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11
factors. In sum, the conceptual talent model created by the researchers closely matched the results
of the principal component analysis (PCA), indicating that the correct conclusions regarding the
underlying factor structure for those items have been attained by the PCA.
All factors except Delegator have fve or more strongly loading items (0.40 or better), indicating a
solid factor. Researchers examined internal consistency for each of the themes using Cronbach’s
alpha. Te alphas were moderate: all above 0.50 except Delegator (a=0.32). No substantial
increases in alpha for any of the themes could have been achieved by eliminating more items.
Individual themes are not intended as independent predictors of entrepreneurial success. Te
primary use of individual theme measurement is for developmental purposes.
Next, researchers created composite scores for each of the 10 talent themes based on the mean of
the items that had their primary loadings on each factor. Higher scores on the theme indicated
greater likelihood of success in meeting a specifc need of the role.
Te talent themes of entrepreneurship represent what an entrepreneur needs to do to be successful
in starting or growing a business. While the themes are comprehensive, they are not intended as
predictors of entrepreneurial success individually. Continuing research will focus on strengthening
each of the themes through revision (rewriting) items with lower primary loadings and possibly
adding new items. In addition, confrmatory factor analysis, as well as other latent variable
modeling techniques, will also be used to further refne the thematic structure.
Table 6: Reliability and Descriptive Statistics for Talent Theme Scores
Talent Themes Number of Items a Mean SD
Confdence 9 0.74 65.22 11.69
Risk-Taker 12 0.67 50.85 11.48
Creative Tinker 9 0.67 63.58 14.41
Promoter 8 0.60 56.27 16.91
Business Focus 6 0.50 51.80 20.03
Knowledge-Seeker 6 0.47 66.49 14.52
Independent 10 0.60 54.49 14.29
Determination 14 0.69 69.57 13.57
Delegator 4 0.32 24.53 24.11
Relationship-Builder 12 0.69 57.79 15.82
Note:
a = Cronbach’s alpha
SD = standard deviation
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Test-Retest Reliability
Test-retest reliability indicates the stability of assessment outcomes over time and across occasions.
Although Gallup could not collect such evidence with the current study, researchers’ analyses on
similar assessments generally show a high degree of test-retest reliability. A Gallup study on Web-
based assessments involving diferent samples and assessments reported a sample-size-weighted
average test-retest reliability of 0.81 (Harter, 2003). It should also be pointed out that the EP10
Index measures talent constructs that have high trait composition. Tus, they are expected to be
relatively stable over the course of one’s lifespan.
Concurrent Criterion-Related Validity Evidence
Criterion-related validity evidence indicates the extent to which assessment outcomes are
predictive of individual performance in specifed activities. Gallup gathers criterion-related
validity evidence by examining the relationships between its assessment outcomes and measures
that adequately refect performance in the role. Researchers can use both concurrent and predictive
designs to gather such evidence.
Gallup collects concurrent criterion-related validity evidence from assessment development
studies, such as the one described in this report. In these studies, researchers collect outcomes
on assessment and performance data from existing entrepreneurs at approximately the same
time. Concurrent studies allow for demonstrations of desirable relationships between assessment
outcomes and performance in the role. Such relationships further support the role-relatedness and
business relevance of the assessment outcomes.
Properties of Performance Measure
In criterion-related validity analysis, the quality of performance measures researchers use as
criteria is vital. Te appropriateness and quality of performance measures may be evaluated with
respect to the extent that they:
• are aligned with the key demands of the role
• have crucial implications to business outcomes
• refect the defnitions of various performance levels
• have clear defnition and calculation/process/rubric
• can be attributable to the individual being measured
• are resistant to biasing factors in the measurement process
• are reliable across measurement occasions
• produce reasonable variance to efectively separate various performance levels
• are accessible and can be obtained with reasonable data collection time/eforts
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Te key criterion measure used in the analysis was a composite of nine questions that capture
the entrepreneur’s current proft and sales performance (Q04-Q09), future expectations (Q01)
and job creation potential (Q02 and Q03). Gallup researchers used self-reported proft and sales
performance to capture performance because collecting objective metrics from a large sample
of entrepreneurs was not practical. To provide a more stable measure of the various business
outcomes, researchers formed a composite with unit-weighted z scores of constituent variables
(Ackerman & Cianciolo, 2000). Te group designations — study, middle, contrast — were based
on the tri-tiles of the composite score.
Q01. In the next fve years, I expect proft to be a) very high, b) moderate to good, c) poor
to fair.
Q02. Has the number of employees in your most recent business a) increased, b) decreased,
or c) remained about the same since you started your business?
Q03. I expect to create a minimum of ______ additional jobs in the next fve years.
Q04. How did your most recent business perform relative to proft goals for 2008?
Q05. How did your most recent business perform relative to proft goals for 2007?
Q06. How did your most recent business perform relative to proft goals for 2006?
Q07. How did your most recent business perform relative to sales goals for 2008?
Q08. How did your most recent business perform relative to sales goals for 2007?
Q09. How did your most recent business perform relative to sales goals for 2006?
Te composite score has values between -1.41 and 2.00. Correlation between the grouping
variable and the performance composite score is 0.89 and statistically signifcant at 0.01 level.
Tis indicates that those designated in the study group had better performance in the role than
those in the middle group, and those in the middle had better performance than those in the
contrast group. Tese strong relationships support the use of the performance-grouping variable
as a holistic and key measure of entrepreneurial performance for evaluating the criterion-related
validity of the EP10.
Table 7: Performance Composite Score
Number of
Items
a Mean SD SEM
Performance Composite
Score
9 0.83 -0.015 0.644 0.265
Note:
a = Cronbach’s alpha
SD = standard deviation
SEM = standard error of measurement
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Concurrent Criterion-Related Validity Coef?cients
Table 8 shows the observed correlation between the EP10 and the composite performance variable
in the fold-back sample. Te observed correlation of talents to entrepreneurial success is of similar
magnitude as meta-analytic observed correlations reported in Rauch and Frese (2005), where r
was 0.231.
Table 8: Relationship Between the EP10 Index Score and Performance
r*
95% Con?dence Interval
Lower Bound Upper Bound
EP10 Index (n=905) 0.26 0.19 0.32
* Correlation between EP10 Index Score and Composite Performance
Score is signi?cant at .01 level (two-tailed)
Table 9 shows the observed correlations between the talents and the composite performance
variable.
Table 9: Relationship Between Theme Scores and Performance
Talent Themes
(n=905)
r*
95% Con?dence Interval
Lower Bound Upper Bound
Confdence 0.161 0.09 0.22
Risk-Taker 0.241 0.17 0.30
Creative Tinker 0.116 0.05 0.18
Promoter 0.137 0.07 0.20
Business Focus 0.199 0.13 0.26
Knowledge-Seeker 0.130 0.06 0.19
Independent 0.172 0.10 0.23
Determination 0.203 0.13 0.26
Delegator 0.103 0.03 0.16
Relationship-Builder 0.164 0.09 0.22
* Correlation between Theme Scores and Composite Performance
Score is signi?cant at 0.01 level (two-tailed)
Regression Analysis: Relationship Between Talent and Business
Performance
Next, the researchers conducted hierarchical regression analysis to understand the unique
contribution of talent in explaining entrepreneurial performance, beyond the size of the company
(measured as a dichotomous variable
During this such a file with regards to entrepreneurial profile 10tm methodology report.
Sangeeta Bharadwaj Badal, Ph.D., and Joseph H. Streur, Ph.D.
DECEMBER 2014
ENTREPRENEURIAL
PROFILE 10
TM
METHODOLOGY REPORT
ACKNOWLEDGEMENTS
Te authors would like to thank Frank L. Schmidt, Professor Emeritus at the
Department of Management and Organizations, Tippie College of Business, University
of Iowa; Jim Harter, Chief Scientist of Workplace Management and Well-Being for
Gallup’s Workplace Management Practice; Jim Asplund, Chief Scientist for Gallup’s
Strengths Practice; and Yongwei Yang, Principal Researcher for Methodology
and Predictive Analytics at Gallup, for their help, comments and suggestions.
COPYRIGHT STANDARDS
Tis document contains proprietary research, copyrighted materials and literary property of
Gallup, Inc. It is for the guidance of your organization only and is not to be copied, quoted,
published or divulged to others outside of your organization. Gallup
®
, Gallup Panel
™
,
Entrepreneurial Profle 10
TM
, EP10
TM
, Clifton StrengthsFinder
®
and StrengthsFinder
®
are
trademarks of Gallup, Inc. All other trademarks are the property of their respective owners.
Tis document is of great value to both your organization and Gallup, Inc. Accordingly,
international and domestic laws and penalties guaranteeing patent, copyright, trademark
and trade secret protection safeguard the ideas, concepts and recommendations related
within this document.
No changes may be made to this document without the express written permission of
Gallup, Inc.
Table of Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Psychology of Entrepreneurship: Review of the Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PART I: Instrument Development Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Theoretical Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Overview of Instrument Development Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Conduct Qualitative Research. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Design and Administer the Pilot Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Analyze the Data and Develop the Field Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Overview of Validity Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Support for the Use of Talent-Based Structured Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Analyses and Results From the Pilot Sample . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
PART II: Collecting Further Validity Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
U.S. High School Sample . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Nationally Representative Sample of Entrepreneurs in the U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Mexico City High School Sample . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
PART III: Assessment Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Feedback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Improper Use of Assessment Outcomes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
ENTREPRENEURIAL PROFILE 10
METHODOLOGY REPORT
Sangeeta Bharadwaj Badal, Ph.D., and Joseph H. Streur, Ph.D.
DECEMBER 2014
Copyright © 2014 Gallup, Inc. All rights reserved.
INTRODUCTION
Gallup developed the Entrepreneurial Profle 10 (EP10
TM
) to assess an individual’s entrepreneurial
talent. Extending across disciplinary boundaries of economics, psychology and management,
Gallup researchers wanted to understand entrepreneurship’s psychological roots.
Scientists at Gallup developed the EP10 assessment based on qualitative and quantitative research
using professional standards (i.e., American Educational Research Association/American
Psychological Association/National Council on Measurement in Education, 1999; Society for
Industrial and Organizational Psychology, 2003) and the Uniform Guidelines on Employee
Selection Procedures. Te result of Gallup’s research and development was a structured, Web-
based assessment designed to assess the talents needed for success in entrepreneurial activities.
Tis report describes the development of the EP10 assessment and provides validity evidence to
support its proper applications.
PSYCHOLOGY OF ENTREPRENEURSHIP: REVIEW OF THE RESEARCH
Personality research in industrial and organizational psychology has long tied personality
variables to organizational (Hunter, 1986; Barrick & Mount, 1991) and leadership performance
(Judge, Bono, Ilies & Gerhardt, 2002). Many researchers defne personality traits as enduring
dispositions that are relatively stable over time and across situations (Rauch & Frese, 2005). In
the realm of entrepreneurship, traits explain entrepreneurial behavior. Numerous studies show
that entrepreneurial attitudes toward autonomy, risk, work and income are more important than
factors such as access to credit or location in determining the success of a frm (Davidsson &
Honig, 2003; Dimov & Shepherd, 2005; Duchesneau & Gartner, 1990; Haber & Reichel, 2007;
Lerner & Haber, 2001; Shaw & Williams, 1998). In other words, an individual’s unique traits can
infuence his or her ability to recognize a business opportunity and act to make the most of that
opportunity in ways that others cannot (Badal, 2010). So what are the characteristics that drive an
individual to business creation under great resource scarcity and high uncertainty? How do these
characteristics afect the entrepreneur’s decision-making process leading to venture creation and
success or failure? Te answers lie in understanding the inherent traits that infuence behaviors
driving business creation and success.
Researchers have identifed numerous traits, such as risk propensity (Arenius & Minniti, 2005;
Engle, Mah & Sadri, 1997; Smith-Hunter, Kapp & Yonkers, 2003; Stewart & Roth, 2004),
creativity (Engle, Mah & Sadri, 1997), problem-solving and overcoming obstacles (Morris, Avila
& Allen, 1993; Smith-Hunter, Kapp & Yonkers, 2003), achievement orientation (Collins, Hanges
& Locke, 2004; Smith-Hunter, Kapp & Yonkers, 2003), self-efcacy (Arenius & Minniti, 2005;
Chen, Greene & Crick, 1998) and high sense of responsibility (Smith-Hunter, Kapp & Yonkers,
2003), as key characteristics of a successful entrepreneur. In addition, behavioral economists
consider bounded rationality (Simon, Houghton & Aquino, 1999), inherent biases in probability
perception (Kunreuther et al., 2002) and biases in self-perception (Koellinger, Minniti & Schade,
2007; Minniti & Nardone, 2007; Hoelzl & Rustichini, 2005) as signifcant factors afecting an
entrepreneur’s decision-making process, which ultimately afects business outcomes.
ENTREPRENEURIAL PROFILE 10
TM
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1
Gallup research indicates that an individual’s inherent talent for a role — one’s natural capacity for
excellence in a role — results in greater efciency and productivity in that activity and provides a
more fulflling experience for the individual. Talent is a broader concept than personality traits.
Talent is a composite of innate personality traits, attitudes, motives, cognition and values. Using
selection science, Gallup researchers could determine if a candidate possesses a critical mass of
talent relative to the typical characteristics of the most successful people in a given role and predict
whether that candidate was more likely to naturally and consistently behave in ways that lead to
excellence in the role. Certain patterns are dominant and become salient descriptors of a person’s
approach to everyday experiences, including work. Consequently, these talents ofer the greatest
area for potential growth (Clifton & Nelson, 1992). Tese talents can be used to understand
people and predict their behaviors in a particular context.
A major component of Gallup’s eforts involves identifying and studying patterns of excellence
among successful people. Tis study focuses on recurring and consistent patterns of thought,
feeling or behavior of successful entrepreneurs — manifestations that consistently occur when
talented entrepreneurs are exposed to specifc stimuli. Trough Gallup researchers’ more than 40
years of qualitative and quantitative research, it was determined that, when objectively assessed,
successful people respond diferently than less successful people. Te development of the EP10
Index used this cumulative experience and knowledge. Gallup used its database and senior
researchers’ experience and expertise to develop a pilot selection assessment with the potential to
understand the patterns of excellence that characterize outstanding entrepreneurs.
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TM
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2
PART I: INSTRUMENT DEVELOPMENT PROCESS
Te conceptual foundation on which Gallup researchers built the fnal EP10
Index begins with
delineating the demands of the role and the desirable behavioral responses to meet such demands,
and hypothesizing the talents that enable those desirable behavioral responses that lead to
entrepreneurial success. An adaptation of the Giessen-Amsterdam model (Rauch & Frese, 2000)
appears below and shows the link between individual diferences and entrepreneurial performance.
ENTREPRENEURIAL PROFILE
10
:
PATHWAYS FROM TALENT TO BUSINESS SUCCESS
KNOWLEDGE
SKILLS
TALENTS
Risk-Taker
Confdence
Relationship-Builder
Business Focus
Creative Tinker
BEHAVIORS
Failure Tolerance/Internal Locus
of Control
Experimentation
High Social Awareness
Business Tinking/Goal Setting
Ideation
Cognitive Style
Biases
Heuristics
Contextual
Environment
OUTCOMES
Recognize Opportunities
Start a Venture
Access Resources and Build Trust
Proftability
Disrupt Markets
Tis modifed model shows how talents afect key behaviors that enable an entrepreneur to meet
the demands of the job and ultimately lead to business creation or success. Tus, the talent-based
assessment solutions predictive of successful performance in the role are those that efectively
capture the talents that could enable the key behaviors. Many other factors also play a role in
determining entrepreneurial performance, such as knowledge/skills, cognitive styles, biases and
several contextual factors (industry type, life stage, economic and political environment, access to
credit and others), but this report focuses on an entrepreneur’s innate talents and their relationship
to business outcomes.
THEORETICAL
CONSIDERATIONS
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TM
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3
Following the model previously mentioned, the development of a talent-based assessment begins
with the study of a role and the successful incumbents in that role. Tese two interrelated topics
become the focal point of the qualitative research. Specifcally, the qualitative research intends to:
• defne the target roles by describing the demands they place on the individuals in the role
• delineate the behavioral responses needed to meet the demands of the role
• diferentiate the behavioral responses according to the extent that they meet the job
demands, from low to high
• derive the talent constructs that might enable those behavioral responses
Te foundation for building the EP10 assessment began in the late 1980s, when Gallup
researchers developed a framework for the process of new venture creation and studied the
psychological factors that drive successful entrepreneurship (SRI/Gallup, 1989). In 2008, Gallup
collaborated with NaturTalent Stiftung in Baden-Wurttemberg, Germany, to study the talents
that diferentiate entrepreneurs from non-entrepreneurs (von, Dabiri & Truscott-Smith, 2009).
Learnings from the qualitative research conducted in 1989 and 2008 led to the development of
the current EP10 assessment. Te present EP10 assessment further extends the talent model to
diferentiate successful entrepreneurs from less successful ones.
Te development of the EP10 assessment involved the following steps:
1. Conduct qualitative research.
2. Design and administer the pilot study.
3. Analyze the data and develop the fnal assessment.
Conduct Qualitative Research
Te qualitative research provided initial evidence regarding the content relevance of the EP10
assessment to the entrepreneurial role. Gallup researchers conducted systematic investigations of
high-performing entrepreneurs in a study of U.S. entrepreneurs in 1989 and in a study of German
entrepreneurs in Baden-Wurttemberg, Germany, in 2008. Researchers conducted stakeholder
interviews and focus groups with existing entrepreneurs who had successful company operations.
With participants’ agreement, researchers recorded all interviews and focus groups (conducted
face to face or via telephone). Participants in these discussions answered many questions about
the functions they routinely perform. Researchers paid particular attention to the attitudes and
behaviors that outstanding entrepreneurs exhibited and used information collected through the
discussions to identify the talents that enable success in an entrepreneurial role. Te research led to
a description of the role, the job demands and the initial talent model.
In 2009, Gallup researchers conducted a comprehensive literature review that led to the further
refnement of the talent model and development of the current EP10 instrument. Researchers
identifed additional constructs to diferentiate a successful entrepreneur from a less successful
one. To ensure the content appropriateness of the EP10
assessment to the role of a successful
OVERVIEW OF
THE INSTRUMENT
DEVELOPMENT
PROCESS
ENTREPRENEURIAL PROFILE 10
TM
Copyright © 2014 Gallup, Inc. All rights reserved.
4
entrepreneur, Gallup researchers used information gathered through stakeholder interviews and
focus groups in Nebraska and Germany and the extensive literature review. Te goal of the EP10
assessment is to identify entrepreneurs who are likely to signifcantly grow their business.
Findings From the Qualitative Research
The Target Role
An “entrepreneur” is someone who builds economic value by creating products and services
for the market. Following Timmons’ (1994) conception of entrepreneurship as the “process of
creating or seizing an opportunity and pursuing it,” Gallup researchers focused on entrepreneurs
who are driven to fulfl a gap in the market rather than starting businesses to make ends meet.
Tough the reasons for starting a business can be complex, Bogenhold (1987) diferentiated
“opportunity-driven” entrepreneurs, who are motivated to enter entrepreneurship more out of
choice to exploit an opportunity, from “necessity-driven” entrepreneurs, who are pushed into
entrepreneurial activity in the absence of other options for work. Studies show that opportunity-
driven entrepreneurs difer from their necessity-driven counterparts in their entrepreneurial
behaviors and growth aspirations and business growth (Acs, Desai & Hessels, 2008). Because
opportunity-driven entrepreneurs expect higher growth and create more jobs (Acs et al., 2008),
Gallup researchers focused on the individuals engaged in the more desirable opportunity-driven
entrepreneurship rather than the necessity-induced entrepreneurship.
To accomplish their objective of creating goods and services for the market, entrepreneurs must
engage in various tasks or activities to start and subsequently grow a business. Te phases of
business setup: 1) recognizing opportunities that arise because of changing economic, social or
technological conditions; 2) pursuing these opportunities proactively; 3) gathering human and
fnancial resources that enable a startup; 4) creating a road map or a strategy to produce a product
or service; 5) launching a new venture; and fnally, 6) actively managing the company (Shane,
2003; Bygrave, 1989).
Each phase of the entrepreneurial process requires that the entrepreneur perform specifc
activities. For instance, in the early stages, recognizing opportunities leads to evaluating these
opportunities, thinking through all the possibilities and practicalities and leveraging relationships
to fnd partnerships to launch a venture. After establishing the company, actively managing the
company means the entrepreneur must oversee a workforce, infuence and motivate others, and
conduct negotiations with customers or suppliers (Baron, 2006).
Te study of the entrepreneur’s role revealed that successful entrepreneurs exhibited various
behaviors allowing them to meet the needs of the role at each stage of the business. Table 1
provides a list of the behaviors successful entrepreneurs exhibit and the underlying talents that
drive the behaviors that ultimately result in business creation and success. Tough the table below
matches a specifc talent to a set of behaviors, in reality, multiple talents can drive a behavior. Te
table lists the talents that are dominant in driving specifc behaviors.
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Table 1: Entrepreneurial Behaviors and Talents
Behaviors That Enable Entrepreneurs to Meet the Demands of the Role
Talents That Drive
the Behaviors
• Know themselves and present themselves efectively and with confdence — even in the face
of rejection
• Clearly understand others
• Build trust and invest in people
• Able to articulate the competitive advantage of their frm in the marketplace
• Align employee activities with their individual strengths, leading to business growth
Confdence
• Show a strong personality and are charismatic and confdent
• Show enthusiasm and emotion in taking on challenges
• Have highly optimistic perception of risk
• Can easily make decisions in complex situations
• Can easily establish emotional connections with customers, are more likely to understand
what customers need, share new ideas with customers and are more likely to exceed customer
expectations
Risk-Taker
• Imagine beyond the boundaries of what exists now
• Explore options and can think their way through problems
• Are constantly thinking of creating new products and/or services for their customers
• Have minds that are typically fring with many diferent ideas
• Are curious and quick learners
Creative Tinker
• Have a clear, strong voice and speak boldly on behalf of their company
• Have the ability to make their case efectively and have others follow their decisions
• Communicate their vision of their company to employees and customers
• Have a clear growth strategy
Promoter
• Are proft-oriented
• Establish clear goals and objectively measure their progress toward the goal
• Judge the value of an opportunity, a relationship or a decision by its efect on business
• Invest time in planning growth strategies
• Align employee responsibilities with company goals
Business Focus
• Seek knowledge that is relevant to growing their business
• Push themselves to acquire in-depth information about every aspect of their business
• Have a preoccupation with their business that borders on obsession
• Anticipate knowledge needs and use knowledge well
Knowledge-Seeker
• Depend on themselves to get the job done
• Have a strong sense of responsibility
• Can handle multiple tasks successfully
• Are resolute, with a high level of competence in every aspect of managing a business
Independent
• Push to achieve more and have a tremendous work ethic
• Instigate the action to get something started
• Are eager to make decisions and quick to act
• Confront obstacles directly and overcome them
• Are persistent and undeterred by failure and/or roadblocks
Determination
• Understand that they cannot do everything themselves if the business is going to expand
• Can readily delegate authority and responsibility
• Can proactively collaborate with others
• Recognize and draw on people’s special abilities
• Help ensure that team members become efective contributors to the company
Delegator
• Have high social awareness
• Can attract and maintain a constituency
• Build mutually benefcial relationships
• Use their relationship talents to access internal and external resources
• Forge relationships with employees and customers that go beyond work or products or
services
• Have an open demeanor, positive attitude and personal integrity that helps build trust
Relationship-Builder
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Te 10 talents described in Table 1 infuence behaviors that best explain success in an
entrepreneurial role. An individual’s inherent talents and acquired ability (skills, knowledge and
experience) infuence how successfully and by what means he or she responds to the needs of the
role. Te individual’s dispositions or talents enable appropriate behavioral responses. Typically, the
more prevalent the talent, the higher the likelihood of success in the role.
Design and Administer the Pilot Study
Using a talent-based description of a successful entrepreneur, Gallup researchers created an online
(Web-based) interview to assess the existence of the attributes listed in the talent model. Te
pilot assessment included 113 items. Researchers selected a combination of multiple-choice and
Likert items based on their content relevance and statistical properties indicated by item histories.
Te items came from the Gallup Item Bank. Te Item Bank contains more than 9,000 items of
diferent types that Gallup has used previously. Many of these items tap into entrepreneurial
talents specifcally. An item history includes information about each item’s performance with
past research participants, including statistics on item characteristics, relationships between item
responses and performance measures, and relationships between item responses and race, gender
and age variables.
In addition, Gallup researchers included a series of questions about participants’ business
backgrounds and demographics to ensure that those who Gallup classifed as successful
entrepreneurs were correctly assigned to each group. Tese questions asked about the number of
businesses participants had started, business successes and failures they may have had, number of
employees, proft, sales goals and expectations of business performance in the future.
Gallup invited 1,736 self-employed Gallup Panel members (a probability-based, nationally
representative panel of U.S. households) to participate in the Web-based pilot study to test the
existence of the hypothetical talents and build the instrument. Of these Panel members, 1,188
identifed themselves as “primary owners” of a business and provided valid responses to enough
items for Gallup to use in the research sample.
Gallup researchers focused their attention on opportunity-driven entrepreneurs. Tese
entrepreneurs identifed “good startup opportunities in my area,” “opportunity to be independent”
or “opportunity to increase my income” as their main reason for starting a business. Of the 1,188
primary owners, 905 were opportunity-driven entrepreneurs based on their reason for starting a
business. Researchers labeled respondents who gave their reason for starting a business as “no jobs
available in my area” as necessity-based entrepreneurs and excluded them from the sample.
Analyze the Data and Develop the Final Assessment
Gallup researchers used the data gathered from the pilot assessment to evaluate the psychometric
properties of each item and the assessment as a whole. Tis evaluation included, among others,
analyses on:
• appropriateness of each item, and the assessment as a whole, as representation of the talents
identifed as important
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• item characteristics such as item difculty
• relationships between item responses and total scores and the performance variable
• relationships between item responses and demographic variables
• reliability of the total score
Conducting descriptive and inferential analyses, Gallup researchers studied which items best
diferentiated top-performing entrepreneurs from others. In addition to prior research, these
analyses provided basis for questions retained for the feld study. Te feld instrument contained
89 items that best cover the common talents needed for achieving high levels of success in starting
or growing businesses. Researchers calculated the Index Total Score using these items. Te
score is an integer between zero and 100, which indicates the percentage of points an individual
received out of the total possible points. Higher scores indicate potentially better performance in
the entrepreneurial role. In addition, various demographic items, 42 nonscored research items,
and nine contextual items that assess the environment in which the entrepreneur exists, are also
included. Te research and contextual items will allow for adjustments to the assessment in the
future to enhance its efciency and utility. As such, the assessment has a degree of fexibility, while
maintaining the core foundational elements for estimating entrepreneurial talent. Te assessment
takes the average respondent 25 to 30 minutes to complete.
Validity is the degree to which both theory and empirical evidence support inferences and actions
based on an assessment. Validation is an ongoing process of developing sound arguments and
gathering evidence that supports the intended interpretation and actions based on the assessment
outcome. Validity evidence may be derived from empirical data, relevant literature, expert
judgments and logical analysis.
Support for the Use of Talent-Based Structured Assessments
Published Meta-Analyses
Te research exploring linkages between broad and specifc traits to business performance has
shown contradictory results. For instance, Brandstatter (1997) did not fnd any diferences in broad
traits between business owners and non-owners, but did fnd a positive link between emotional
stability, independence and entrepreneurial success. On the other hand, Wooten and Timmerman
(1999) found that openness to experience was negatively related to business startup. Another study
(Ciaverella, Bucholtz, Riordan, Gatewood & Stokes, 2004) found a negative relationship between
openness to experience and business survival, but a positive relationship between conscientiousness
and business survival. Despite contradictory results in individual studies, a meta-analysis by
Rauch and Frese (2005) showed that both broad (r=0.151) and specifc traits (r=0.231) had
a signifcant relationship to entrepreneurial success. Following this line of research, Gallup
researchers developed the current EP10 assessment to usefully diferentiate entrepreneurs from
non-entrepreneurs.
OVERVIEW
OF VALIDITY
EVIDENCE
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Gallup Meta-Analyses
Schmidt and Rader (1999) conducted a meta-analysis of 107 of Gallup’s predictive validity
studies and found the type of structured interview process Gallup researchers used (the in-depth
interview) results in scores that are predictive of multiple performance criteria, including sales
data, production records, absenteeism and employee retention. A more recent meta-analysis of
Gallup selection assessments (based on 386 predictive validity studies and expanded to interactive
voice response and Web modes) again indicated that Gallup’s selection assessment methodology
produced positive and generalizable predictive validity across various criterion types and positions
(Harter, Hayes & Schmidt, 2004). Te EP10 is a structured Web assessment developed using the
same methodology and is expected to be predictive of specifc performance criteria such as sales
and proft growth.
Analyses and Results From the Pilot Sample
Sample
A total of 1,188 self-employed people from the Gallup Panel completed the research
assessment. As explained previously, Gallup designated 905 of these people as opportunity-
based entrepreneurs based on their responses to their reason for starting a business. Researchers
identifed the research sample to represent entrepreneurs who performed at low, average and high
levels. Te performance groups in the sample, so formed, are referred to as contrast, middle and
study groups hereafter. Te designations of the performance groups used a composite performance
rating developed by combining several outcome variables.
Table 2 shows the number of entrepreneurs in the sample by performance category.
Table 2: Sample of Opportunity-Based Entrepreneurs
All Invitees
Total # of Opportunity-
Based Entrepreneurs
Sample by Performance
Total Contrast Middle Study
1,188 905 905 301 302 302
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Te companies in the analysis had been in existence from less than 10 years to more than 50 years
(by 2009). Table 3 shows the distribution of businesses by start year.
Table 3: Distribution of Businesses by Start Year
Year Business Started In Sample Percentage
1959 or prior 2 0.2%
1960-1969 16 1.8%
1970-1979 46 5.1%
1980-1989 141 15.6%
1990-1999 244 27.0%
2000-2009 456 50.4%
Total 905 100%
Table 4 shows sample sizes broken out by race, gender and age. All research participants
completed the assessment in U.S. English.
Table 4: Demographics
Variable In Sample
Race
White (not Hispanic or Latino) 825
All nonwhite (not Hispanic or Latino) 70
Black (not Hispanic or Latino) 13
Hispanic or Latino 0
Native American (not Hispanic or Latino) 22
Asian (not Hispanic or Latino) 7
Pacifc Islander (not Hispanic or Latino) 3
Other 25
Missing race information 10
Gender
Male 539
Female 366
Age
Younger than 40 92
40 and older 759
Missing age information 54
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Reliability of the Index Score
Reliability, in the context of measurement, refers to the degree of consistency and stability of
outcomes produced by a measurement process (e.g., a selection assessment administered via the
Web) across the replications of some aspects of the process. Tere are many types of reliability
indexes; each characterizes somewhat diferent aspects of error in a measurement process. Te
magnitude of diferent aspects of measurement errors can be described by the standard error of
measurement (SEM), which directly relates to the magnitude of the reliability coefcient of the
corresponding type.
Internal Consistency Reliability
Te assessment development study allows for evaluation of the internal consistency reliability.
A higher degree of internal consistency is desirable because it indicates an assessment is able to
obtain consistent responses from the respondents. Gallup’s minimum standard for total score
reliability on its assessments is 0.70. Table 5 reports the internal consistency reliability (Cronbach’s
alpha coefcient) of the EP10 assessment.
Table 5: Reliability and Descriptive Statistics for EP10 Assessment
Index
Number of
Items
a Mean SD SEM
EP10 89 .90 58.02 9.59 3.03
Note:
a = Cronbach’s alpha
SD = standard deviation
SEM = standard error of measurement
Identifying the Talent Themes: Factor Analyses
In addition to the Total Index Score, which is indicative of overall entrepreneurial potential,
researchers conducted factor analysis to parse items into talent themes. Researchers used principal
components analysis because the primary purpose was to identify and calculate composite scores
for the talent themes underlying the EP10 assessment.
Researchers defned a-priori 10-factor structure based on theoretical support for talents
entrepreneurs need to be successful in the role. Using varimax and oblimin rotations of the
factor-loading matrix, researchers examined solutions for 10 factors. Results of both methods
were similar. Te 10-factor structure explained 41% of the variance. Items with a factor loading
of 0.30 or above on a factor were retained. To label the factors in the model, researchers examined
the factor pattern to see which items loaded highly (0.30 or above) on which factors and then
determined the common theme of the items. For the most part, the items loaded on the correct
factors (all nine Confdence items loaded together on a single factor, all Risk-Taker items loaded
together on a single factor, and so on), thus confrming that the analysis produced the correct
factor structure. Researchers made minor adjustments where items did not load on the expected
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factors. In sum, the conceptual talent model created by the researchers closely matched the results
of the principal component analysis (PCA), indicating that the correct conclusions regarding the
underlying factor structure for those items have been attained by the PCA.
All factors except Delegator have fve or more strongly loading items (0.40 or better), indicating a
solid factor. Researchers examined internal consistency for each of the themes using Cronbach’s
alpha. Te alphas were moderate: all above 0.50 except Delegator (a=0.32). No substantial
increases in alpha for any of the themes could have been achieved by eliminating more items.
Individual themes are not intended as independent predictors of entrepreneurial success. Te
primary use of individual theme measurement is for developmental purposes.
Next, researchers created composite scores for each of the 10 talent themes based on the mean of
the items that had their primary loadings on each factor. Higher scores on the theme indicated
greater likelihood of success in meeting a specifc need of the role.
Te talent themes of entrepreneurship represent what an entrepreneur needs to do to be successful
in starting or growing a business. While the themes are comprehensive, they are not intended as
predictors of entrepreneurial success individually. Continuing research will focus on strengthening
each of the themes through revision (rewriting) items with lower primary loadings and possibly
adding new items. In addition, confrmatory factor analysis, as well as other latent variable
modeling techniques, will also be used to further refne the thematic structure.
Table 6: Reliability and Descriptive Statistics for Talent Theme Scores
Talent Themes Number of Items a Mean SD
Confdence 9 0.74 65.22 11.69
Risk-Taker 12 0.67 50.85 11.48
Creative Tinker 9 0.67 63.58 14.41
Promoter 8 0.60 56.27 16.91
Business Focus 6 0.50 51.80 20.03
Knowledge-Seeker 6 0.47 66.49 14.52
Independent 10 0.60 54.49 14.29
Determination 14 0.69 69.57 13.57
Delegator 4 0.32 24.53 24.11
Relationship-Builder 12 0.69 57.79 15.82
Note:
a = Cronbach’s alpha
SD = standard deviation
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Test-Retest Reliability
Test-retest reliability indicates the stability of assessment outcomes over time and across occasions.
Although Gallup could not collect such evidence with the current study, researchers’ analyses on
similar assessments generally show a high degree of test-retest reliability. A Gallup study on Web-
based assessments involving diferent samples and assessments reported a sample-size-weighted
average test-retest reliability of 0.81 (Harter, 2003). It should also be pointed out that the EP10
Index measures talent constructs that have high trait composition. Tus, they are expected to be
relatively stable over the course of one’s lifespan.
Concurrent Criterion-Related Validity Evidence
Criterion-related validity evidence indicates the extent to which assessment outcomes are
predictive of individual performance in specifed activities. Gallup gathers criterion-related
validity evidence by examining the relationships between its assessment outcomes and measures
that adequately refect performance in the role. Researchers can use both concurrent and predictive
designs to gather such evidence.
Gallup collects concurrent criterion-related validity evidence from assessment development
studies, such as the one described in this report. In these studies, researchers collect outcomes
on assessment and performance data from existing entrepreneurs at approximately the same
time. Concurrent studies allow for demonstrations of desirable relationships between assessment
outcomes and performance in the role. Such relationships further support the role-relatedness and
business relevance of the assessment outcomes.
Properties of Performance Measure
In criterion-related validity analysis, the quality of performance measures researchers use as
criteria is vital. Te appropriateness and quality of performance measures may be evaluated with
respect to the extent that they:
• are aligned with the key demands of the role
• have crucial implications to business outcomes
• refect the defnitions of various performance levels
• have clear defnition and calculation/process/rubric
• can be attributable to the individual being measured
• are resistant to biasing factors in the measurement process
• are reliable across measurement occasions
• produce reasonable variance to efectively separate various performance levels
• are accessible and can be obtained with reasonable data collection time/eforts
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Te key criterion measure used in the analysis was a composite of nine questions that capture
the entrepreneur’s current proft and sales performance (Q04-Q09), future expectations (Q01)
and job creation potential (Q02 and Q03). Gallup researchers used self-reported proft and sales
performance to capture performance because collecting objective metrics from a large sample
of entrepreneurs was not practical. To provide a more stable measure of the various business
outcomes, researchers formed a composite with unit-weighted z scores of constituent variables
(Ackerman & Cianciolo, 2000). Te group designations — study, middle, contrast — were based
on the tri-tiles of the composite score.
Q01. In the next fve years, I expect proft to be a) very high, b) moderate to good, c) poor
to fair.
Q02. Has the number of employees in your most recent business a) increased, b) decreased,
or c) remained about the same since you started your business?
Q03. I expect to create a minimum of ______ additional jobs in the next fve years.
Q04. How did your most recent business perform relative to proft goals for 2008?
Q05. How did your most recent business perform relative to proft goals for 2007?
Q06. How did your most recent business perform relative to proft goals for 2006?
Q07. How did your most recent business perform relative to sales goals for 2008?
Q08. How did your most recent business perform relative to sales goals for 2007?
Q09. How did your most recent business perform relative to sales goals for 2006?
Te composite score has values between -1.41 and 2.00. Correlation between the grouping
variable and the performance composite score is 0.89 and statistically signifcant at 0.01 level.
Tis indicates that those designated in the study group had better performance in the role than
those in the middle group, and those in the middle had better performance than those in the
contrast group. Tese strong relationships support the use of the performance-grouping variable
as a holistic and key measure of entrepreneurial performance for evaluating the criterion-related
validity of the EP10.
Table 7: Performance Composite Score
Number of
Items
a Mean SD SEM
Performance Composite
Score
9 0.83 -0.015 0.644 0.265
Note:
a = Cronbach’s alpha
SD = standard deviation
SEM = standard error of measurement
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Concurrent Criterion-Related Validity Coef?cients
Table 8 shows the observed correlation between the EP10 and the composite performance variable
in the fold-back sample. Te observed correlation of talents to entrepreneurial success is of similar
magnitude as meta-analytic observed correlations reported in Rauch and Frese (2005), where r
was 0.231.
Table 8: Relationship Between the EP10 Index Score and Performance
r*
95% Con?dence Interval
Lower Bound Upper Bound
EP10 Index (n=905) 0.26 0.19 0.32
* Correlation between EP10 Index Score and Composite Performance
Score is signi?cant at .01 level (two-tailed)
Table 9 shows the observed correlations between the talents and the composite performance
variable.
Table 9: Relationship Between Theme Scores and Performance
Talent Themes
(n=905)
r*
95% Con?dence Interval
Lower Bound Upper Bound
Confdence 0.161 0.09 0.22
Risk-Taker 0.241 0.17 0.30
Creative Tinker 0.116 0.05 0.18
Promoter 0.137 0.07 0.20
Business Focus 0.199 0.13 0.26
Knowledge-Seeker 0.130 0.06 0.19
Independent 0.172 0.10 0.23
Determination 0.203 0.13 0.26
Delegator 0.103 0.03 0.16
Relationship-Builder 0.164 0.09 0.22
* Correlation between Theme Scores and Composite Performance
Score is signi?cant at 0.01 level (two-tailed)
Regression Analysis: Relationship Between Talent and Business
Performance
Next, the researchers conducted hierarchical regression analysis to understand the unique
contribution of talent in explaining entrepreneurial performance, beyond the size of the company
(measured as a dichotomous variable