Person Entrepreneurship Fit Why Some People Are More Successful

Description
This criteria in relation to person entrepreneurship fit why some people are more successful.

Person–entrepreneurship fit: why some people are more
successful as entrepreneurs than others
Gideon D. Markman
a,
*
, Robert A. Baron
b,1
a
Terry College of Business, University of Georgia, Athens, CA 30602-6256, USA
b
Lally School of Management and Technology, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA
Abstract
Person–organization fit research suggests that the closer the match between individuals’ attitudes,
values, knowledge, skills, abilities, and personality, the better their job satisfaction and performance.
We suggest that the closer the match between entrepreneurs’ personal characteristics and the
requirements of being an entrepreneur (e.g., creating new companies by transforming discoveries into
marketable items), the more successful they will be. Specifically, we argue that to the extent
entrepreneurs are high on a number of distinct individual-difference dimensions (e.g., self-efficacy,
ability to recognize opportunities, personal perseverance, human and social capital, superior social
skills) the closer will be the person–entrepreneurship fit and, consequently, the greater the likelihood
or magnitude of their success. This framework offers potentially valuable new avenues for assisting
entrepreneurs in their efforts to exploit opportunities through the founding of new ventures because the
dimensions of individual differences we identify are readily open to modification (e.g., through
appropriate, short-term training).
D 2003 Published by Elsevier Science Inc.
Keywords: Person–entrepreneurship fit; Entrepreneurs; Person–organization fit
1. Introduction
Person–organization fit research is concerned with the antecedents and consequences of
compatibility between persons and the jobs they perform or the organizations in which they
1053-4822/03/$ – see front matter D 2003 Published by Elsevier Science Inc.
doi:10.1016/S1053-4822(03)00018-4
* Corresponding author. Tel.: +1-706-542-3751.
E-mail addresses: [email protected] (G.D. Markman), [email protected] (R.A. Baron).
1
Tel.: + 1-518-276-2864.
www.socscinet.com/bam/humres
Human Resource Management Review
13 (2003) 281–301
work (Kristof, 1996). The findings of such research indicate that individuals choose work
environments as a result of many different factors, including their attitudes, values, abilities,
personality, and various job dimensions, as well as factors relating to organizational structure
and culture (Van Vianen, 2000). While traditional recruiting manuals emphasize matching a
person’s knowledge, skills, and abilities to the requirements of a particular job, the notion of
person–organization fit emphasizes congruence in values, goals, attitudes, and personal
preferences. Stated differently, people are attracted to work settings that are consistent with
their values and fulfill their needs (Cable & Judge, 1996).
While much research in personnel selection has focused on important components of fit
with respect to existing, well-established organizations and routines, far less attention has
been directed to person–organization fit in the context of new venture formation. More
notably, to date, neither person–organization fit literature nor entrepreneurship research offers
concrete guidance as to the factors that make some persons, but not others, successful as
technological entrepreneurs. This paper focuses primarily on the task of filling this gap.
Specifically, we develop a model in which to identify various individual-difference factors
that may play an important role in entrepreneurs’ success. It is understood that entrepreneurial
success takes many forms, but since entrepreneurs often create new companies, we explicitly
conceptualize such success in these terms, primarily as success in launching a new company
into the marketplace. Finally, we recognize that entrepreneurship is multidimensional, but
since technological innovation is a key source of economic growth and prosperity, we cast our
discussion to fit particularly well with such contexts.
The paper is divided into four major sections. In Section 1, we define two research
domains—one encompassing person–organization fit and the other concerning person–
entrepreneurship fit. In Section 2, we focus on some of the ways in which mature and start-up
companies differ, and how these differences may be reflected in the role requirements for
employees (of mature companies) and entrepreneurs who start new ventures. For example,
the main and most obvious task entrepreneurs, but not others, embark on involves a series of
actions leading to new venture formation. In Section 3, we discuss person–entrepreneurship
fit and show how specific individual-difference variables are crucial for successful execution
of key tasks and functions entrepreneurs fulfill. We conclude the third section by introducing
a model of person–entrepreneurship fit and entrepreneurial success. In the final section, we
suggest new directions for future research in which individual-difference factors can further
our theoretical understanding of entrepreneurial activities and also describe practical
implications of our framework.
2. Person–organization fit and person–entrepreneurship fit: some basic considerations
In this section, we review previous research on person–organization fit and examine recent
research on person–entrepreneurship fit—a smaller but rapidly expanding body of know-
ledge. Research on person–organization fit is highly diverse; thus, a comprehensive
examination of this topic is beyond the scope of the present paper. Instead, we present a
brief overview of key findings in this domain, primarily as a means of establishing clear
G.D. Markman, R.A. Baron / Human Resource Management Review 13 (2003) 281–301 282
boundaries and parameters (interested readers are referred to several reviews of this topic,
including Cable & Judge, 1996, 1997; Chatman, 1991; Kristof, 1996; O’Reilly, Chatman, &
Caldwell, 1991; Schneider, Goldstein, & Smith, 1995).
All organizations—established ones and newly founded ones—face intense competitive
pressure. Literature on person–organization fit holds that one solution to this problem is to
attract, recruit, and retain talented persons who invigorate the organization and mobilize it to
achieve its performance goals. For example, Jack Welch personally interviewed all candidates
for the top 500 ranking positions at GE. This view—that hiring the right people is crucial
(Pfeffer, 1998)—has stimulated substantial research on person–organization fit. Research
building on Kirton’s (1976) Adaption–Innovation Theory of problem-solving style at work
found that although cognitive misfit may not influence engineers’ job performance, it does
predict their turnover (after 3 years) (Chan, 1996). Similarly, Cable and Judge (1996) reported
that value congruence (between job seekers and organizations) is more important than
whether job seekers and organizational representatives share similar background. Controlling
for the attractiveness of job attributes, they also report that high person–organization fit
predicts both job choice and work attitudes. This suggests that when newcomers adequately
evaluate their fit with an organization, it helps them to better manage their future work
attitudes.
Interestingly, much research on the question of person–organization fit asks: To what
extent is such fit a function of the person, the situation, or the interaction between the two?
Although strong theoretical arguments have been made in support of each position, an
increasing volume of research suggests that both persons and situations matter, and that the
interaction between the two determines individual task performance and organizations’
longevity (Bowen, Ledford, & Nathan, 1991). Moreover, if institutional environments shape
organizational structures and outcomes, what is the role of strategic choice in managing
organizations (Beckert, 1999)? Building on theories in evolution and organizational ecology,
Ghoshal and Lovas (2000) proposed that organizational leaders play a major role in shaping
their companies’ direction and outcomes. According to this view, organizations, through
managerial foresight and personnel action, have limited, yet consequential, degrees of
freedom to maneuver within their environments. In other words, top management and
entrepreneurs bring timely interventions that guide and shape the outcomes that firms
experience (Balkin, Markman, & Gomez-Mejia, 2000).
We propose that because knowledge and intellectual property are becoming more
important than physical capital, individuals now exert stronger relative control over the
management of their own careers and vocations than was true in the past. The fact that
individuals seek opportunities for professional growth, along with increased job mobility,
suggests that notions of person–career fit may be more practical than the concept of person–
organization fit. Indeed, highly skilled persons find that it is more difficult to change lines of
work than to change employers. Or as suggested by Neal (1999), workers are more likely to
change employers without changing careers than seek out feasible lines of work while
working for the same employer.
Person–organization fit, which is frequently assessed by the compatibility between
organizations and their incumbents (Kristof, 1996), has important implications both for
G.D. Markman, R.A. Baron / Human Resource Management Review 13 (2003) 281–301 283
individual employees and their companies. To name just a few, compatibility between
incumbents and their organization is commonly associated with job longevity, greater
organizational commitment, better job performance, higher job involvement, improved
employee attitudes, lower turnover and tardiness rates, higher levels of socialization and
co-workers’ likeability, and improved personal health and adaptation, (cf. O’Reilly et al.,
1991). Schneider’s (1987) attraction–selection–attrition (ASA) model holds that people are
first attracted to organizations as a function of their perceived congruence between the
institution and their own characteristics (Cable & Judge, 1997; Schneider et al., 1995). Then,
a positive selection occurs when those hired also have the attributes the organization desires.
And finally, once incumbents realize that there is no longer adequate fit with their work
environment, they tend to leave. This indicates that people continuously shape, and are
shaped by, their own workplace. On the basis of recent tests of the ASA model, which point
out that organizations are indeed relatively homogeneous with respect to incumbents’
personality attributes (Schneider, Smith, Taylor, & Fleenor, 1998), Van Vianen (2000) has
suggested that a match between newcomers’ characteristics and those of tenured incumbents
also determines a good person–organization fit. Not surprisingly, congruence between
persons and their organization is—at least to some extent—a function of similarity: the
extent to which individuals share attitudes and values, demographic and social backgrounds,
work ethics, and a host of other factors (e.g., professional interests, needs, aspirations, etc.).
To recap, research suggests that interactively, persons and their institutions affect attitudes,
behaviors, and task performance; that job seekers are attracted to organizations whose
mission and values are congruent with their own; that incumbents select job candidates who
match their values and even background; and finally, that a lack of congruence between
persons and organizations will result in high attrition or turnover rate (e.g. Chatman, 1991).
3. The intersection between person–organization fit and person–entrepreneurship fit
Shane and Venkataraman (2000) define entrepreneurship as a ‘‘scholarly examination of
how, by whom, and with what effects opportunities to create future goods and services are
discovered, evaluated, and exploited’’ (p. 218). Consequently, in the context of the high-tech
industry, entrepreneurs are persons who evaluate, discover, and exploit technology-based
opportunities. Successful entrepreneurs have the insight to match technical discoveries with
buyers’ needs and the stamina, knowledge, skills, and abilities to fruitfully deploy their
offerings in the market. This suggests that the main, but not the only, tasks entrepreneurs
embark upon while creating new companies range from transforming technological discov-
eries into marketable items, working intensely despite uncertainty and limited capital to
establish market foothold, and fending off retaliatory actions from rivals in the marketplace.
Another role that many entrepreneurs fulfill, particularly when launching high-growth
ventures, is dealing with informed investors. While entrepreneurs deal with a small,
homogeneous, and highly involved group of investors (e.g., business angels, venture
capitalists, and bankers), incumbents are normally accountable to heterogeneous stockholders
exhibiting diffused ownership.
G.D. Markman, R.A. Baron / Human Resource Management Review 13 (2003) 281–301 284
An appreciation of the diverse roles that entrepreneurs fulfill is particularly apparent when
considering the key differences between emerging and existing organizations. Indeed, a
growing stream of research suggests that although entrepreneurial firms share much in
common with established organizations, managerially and operationally, these two company
types differ in important respects. To name several distinctions, entrepreneurial firms are
substantially smaller and have fewer resources, their product line is limited and largely
unknown, and they lack name recognition. That is, young firms suffer from the liabilities of
smallness, newness, and legitimacy (Aldrich & Fiol, 1994). Entrepreneurship also entails
considerably higher internal change and instability than that commonly observed among more
established firms (Shane & Venkataraman, 2000). In fact, not only do entrepreneurs face
market volatility, but also their very pursuits of ‘‘new combinations’’ (Schumpeter, 1934)
actively instigate further turbulence. The processes of firm creation (either as an independ-
ently formed venture or as a spin-off new business unit within an established corporation)
take place when teams or individuals successfully convert original discoveries into innovative
products and services that benefit society (Arrow, 1962; Kirzner, 1997). While many
established firms innovate and compete under adverse market conditions, entrepreneurial
firms must—simultaneously—build their internal infrastructure. New ventures and estab-
lished organizations also vary in terms of access to resources, available capability and assets,
and knowledge capital, which again give rise to challenges characteristic of the liabilities of
newness and legitimacy. These and other distinct differences explain why young and mature
firms often use different operations, strategies, and tactics to achieve distinct and contrasting
goals (Miller & Friesen, 1982).
Given the distinctions mentioned above, to what extent are persons who choose to create
new organizations different from those who, instead, choose to work for established
organizations? Several views suggest that entrepreneurs and nonentrepreneurs differ with
respect to a number of personal characteristics (cf. Baron, 1998, 2000). Person–organization
fit theory advises that the inclination and motivation to develop novel technology, products,
or services that no one has perceived or harvested before and create organizational infra-
structures to sell them are not the same even among persons enjoying similar levels of
knowledge, skills, and ability. For example, many entrepreneurs—as compared to employees
with comparable backgrounds and experience—earn lower income with lower earnings
growth. Hamilton (2000) explains that such earning differentials reflect entrepreneurs’
readiness to forgo high pay in exchange for the nonpecuniary benefits such as increased
professional autonomy and a sense of personal control. Additionally, motivational paradigms
such as goal setting theory suggest that individual performance in almost any context
depends, to an important extent, on personal goals held by such persons (Locke & Latham,
1991). Building on the view that achievement is determined by personal variability in ability
and motivation, Seligman (1991) adds that optimists are more likely to make the effort
necessary to achieve their objectives. Additional evidence suggests that persons who create
new companies and those who work for existing ones may perceive and react to risk
differently (Busenitz, 1999; Busenitz & Barney, 1997). Entrepreneurs pursue businesses
without fully knowing how the market will react and whether their new products or services
will succeed. Since many first-movers and visionary innovators fail to capture the market
G.D. Markman, R.A. Baron / Human Resource Management Review 13 (2003) 281–301 285
only to see closely following second-movers reap these rewards (Tyagi, 2000), persons who
create new companies shoulder substantially more risk than persons who run established
companies.
Empirical studies also offer support for the view that where entrepreneurship is concerned,
individual differences do indeed matter—different people may be better suited to exploit
commercial opportunities or create new companies than others. According to learned
helplessness theory, it is only when individuals believe that they can achieve a desired
objective that they will make the effort necessary to attain that objective (Bandura, 1995;
Seligman, 1991). Starting from this premise, Markman and Baron (under review) reasoned
that because transforming new technological discoveries into attractive products or services is
difficult, launching a new high-tech venture requires high conviction in one’s ability to
overcome unavoidable challenges. In support of this reasoning, they found that patent
inventors who start new ventures show significantly higher levels of perseverance and self-
efficacy than do inventors who chose to work for established organizations. In fact, the annual
earnings of the most perseverant inventors (top 20% of the sample) were more than
US$35,000 higher than the annual earnings of the least persisting inventors (bottom 20%).
Perceptions and cognitive biases also shape how individuals cope with risks inherent in
their decisions to start ventures. Research indicates that several biases such as illusion of
control and the belief in the law of small numbers lowered perceived risk, suggesting that
entrepreneurs might not realize that certain tasks, important to ventures’ longevity, are beyond
their control (Simon, Houghton, & Aquino, 2000). Other evidence suggests that entrepre-
neurs and nonentrepreneurs may react to environmental complexity differently and may
exhibit variability in their ability to cognitively reduce it to manageable levels. Studying the
relationship between organizational complexity and information processing, McGaffey and
Christy (1975) argued that since entrepreneurs try to reduce complexity associated with their
new firms, they might differ from nonentrepreneurs in their cognitive processes. Meyer and
Dean (1990) suggested that professional managers frequently replace founding entrepreneurs
when the latter reach the ‘‘executive limit,’’ whereby they fail to adequately reduce
complexity and thus limit the growth of their own venture. Other scholars found that
entrepreneurs, more so than managers, tend to be less comprehensive in their decision styles
(Fredrickson & Mitchell, 1984). Kaish and Gilad (1991) report that founders of young firms
spent significantly more time searching for information and paid attention to different risk
cues than did executives of established firms. In contrast, Busenitz and Barney (1997) found
that entrepreneurs, as compared with managers, gathered significantly less information,
utilized less formal techniques to analyze problems, and followed less rational decision
processes. Others noted that entrepreneurs recognize patterns in their field and make quick
decisions (Bird, 1988; Eisenhardt, 1989; Stevenson, Grousbeck, Roberts, & Bhide´, 1999).
Finally, evidence confirms that shared or common cognitive scripts not only explain
similarities in venture decision-making among entrepreneurs across cultures but also
behavioral differences between entrepreneurs and nonentrepreneurs within countries (Mitch-
ell, Smith, Seawright, & Morse, 2000).
Since accumulating evidence suggests that entrepreneurial firms are different than more
established firms and that entrepreneurs are different—at least along certain personal
G.D. Markman, R.A. Baron / Human Resource Management Review 13 (2003) 281–301 286
dimensions and roles—from nonentrepreneurs, a related question arises: To what extent do
successful entrepreneurs differ from less successful ones? It is to this question that we now
turn.
4. Individual differences and entrepreneurial success
Person–organization fit theory advises that environmental forces and situations exert
strong influence on entrepreneurial activities, but we agree with Shane and Venkataraman
(2000) who point that individuals (and opportunities) constitute the core of the entrepren-
eurship phenomenon. Indeed, much research on the role of individual differences in business
contexts distinguishes between ‘‘strong situations’’ that curtail much of the expression of
human variation, and ‘‘weak situations’’ in which individual differences may have profound
impact on the situation (Chatman, 1989). Since emerging ventures are just beginning to form
and evolve as institutions, we view entrepreneurship and entrepreneurial undertaking as
relatively ‘‘weak situations.’’ Young firms are noticeably more open to change than mature
ones and thus human variation seems to bear more pronounced weight. This also suggests
that individuals who actually persist and so see their new ventures grow may wield strong and
enduring influences on their environment including their emerging company.
Although it has been noted elsewhere that incorporating individual-difference factors can
further management theory, research, and practice (Mitchell & Mickel, 1999), initial
entrepreneurship research, often relying on ecological perspectives, questioned the utility
of individual-difference dimensions and person–entrepreneurship fit. Further, early investi-
gations seeking to differentiate entrepreneurs from other persons, or successful entrepreneurs
from ones who are less successful in terms of individual-difference factors, were met with
only modest success. Unfortunately, these preliminary failures led some to conclude that
individual differences are largely irrelevant to entrepreneurship (Gartner, 1988; Shaver &
Scott, 1991). However, the idea that individual differences do indeed matter remained
compelling (Pfeffer, 1998), and currently, even economists suggest that firm performance
and personal success are determined—to an important extent—by human variability rather
than mere exogenous factors such as product differentiation, barriers to entry, or economies of
scale (cf. Bhide´, 2000). For instance, recent findings show that young firms’ performance and
positive cash flow are more significantly related to their human and organizational resources
(e.g., owner’s industry experience and commitment, staff skills) than to their strategy (Brush
& Chaganti, 1999). Others have suggested that entrepreneurial success and performance are a
function of achievement motivation, risk-taking propensity, preference for innovation
(Stewart, Watson, Carland, & Carland, 1999), and the capacity to adapt to and tolerate
ambiguity (Bhide´, 2000).
Our review of recent entrepreneurship research designed to elucidate factors that influence
both performance of new ventures and their market success identified individual-difference
variables that seem to distinguish those who successfully start companies from those who do
not. While these factors are diverse, our review centers on ones for which empirical evidence
for links to entrepreneurial success are strongest: high self-efficacy (Chen, Greene, & Crick,
G.D. Markman, R.A. Baron / Human Resource Management Review 13 (2003) 281–301 287
1998; Markman, Balkin, & Baron, under review), ability to spot and recognize opportunities
(Busenitz, 1999; Kirzner, 1997), high personal perseverance (Markman & Baron, under
review; Stoltz, 2000), high human and social capital (Honig, 1998), and superior social skills
(Baron & Markman, 2000). Other important dimensions, such as the ‘‘Big Five’’ dimensions
may also be important, but have not, as yet, been systematically investigated with respect to
their potential role in the success of new ventures. In the following discussion, we review
evidence regarding the impact of the variables listed above on entrepreneurs’ success.
4.1. Self-efficacy
Self-efficacy refers to the extent to which persons believe that they can organize and
effectively execute actions to produce given attainments (Bandura, 1997; Chen et al., 1998).
As explained below, we propose that entrepreneurs high in self-efficacy will outperform those
who are lower on this dimension. This rationale is based on social cognitive theory and a rich
body of research in applied psychology showing that adaptive human functioning is
motivated, regulated, and directed by the ongoing exercise of self-efficacy. According to
the theory’s triadic reciprocal causation model, self-efficacy operates as an interacting
determinant to bidirectionally influence behaviors (Bandura, 1997). For instance, empirical
research shows that high self-efficacy is fundamental in most human functioning, including
efforts at overcoming substance abuse (Bandura, 1999), avoiding homelessness (Epel,
Bandura, & Zimbardo, 1999), attaining high academic achievement and social influence
(Bandura, Pastorelli, Barbaranelli, & Caprara, 1999), learning and mastering educational
tasks (Bandura, 1993) and—most importantly from the present perspective—organizational
performance (cf. Bandura, 1997).
Since self-efficacy positively affects diverse human functioning, we suggest that it will
have similar consequences in the context of entrepreneurship. For example, individuals high
in self-efficacy not only prefer challenging activities; they also display higher staying power
in those pursuits (Bandura, 1997). Thus, it stands to reason that entrepreneurs who have high
self-efficacy will outperform entrepreneurs with lower levels of self-efficacy. Similarly,
because the incentive to act is highest when entrepreneurs believe that their actions (e.g.,
starting a new company) lead to attainable outcomes (e.g., successful venture), high self-
efficacy is an important determinant of successful entrepreneurial behaviors. Interestingly,
empirical research shows that self-efficacy successfully differentiates entrepreneurs from
nonentrepreneurs (Chen et al., 1998). Others proposed that because the ability to start a new
venture (i.e., obtain needed funding, recruit key partners and talented employees, and
transform discoveries into salable products or services) requires high levels of conviction,
personal success will be determined, to an important degree, by one’s level of self-efficacy.
Indeed, in a study of patent inventors, Markman et al. (under review) found that high self-
efficacy was a significant predictor of personal success as measured by annual earnings and
that high self-efficacy reliably distinguished between technical entrepreneurs and technical
nonentrepreneurs (technical entrepreneurs being significantly higher on this dimension).
Taken together, social cognitive theory and empirical evidence support the view that
entrepreneurial success is significantly influenced by individual differences in self-efficacy.
G.D. Markman, R.A. Baron / Human Resource Management Review 13 (2003) 281–301 288
4.2. Opportunity recognition
Individuals differ greatly in their abilities to capture, recognize, and make effective use of
abstract, implicit, and changing information (Miller, 1996). Notions of opportunity recog-
nition suggest that the ability to identify high-potential from low-potential opportunities and
to spot obstacles before they become insurmountable would lead to the creation of superior
ventures. Because newness and ambiguity of emerging markets create a powerful incentive
for entrepreneurs to obtain superior information, we suggest that those who are more alert and
better at monitoring and processing information would stand a better chance than those who
are less adept on these dimensions. Our perspective is that individual differences in cognitive
processes (e.g., mental models) may facilitate identification of previously unrecognized
factors that can raise the likelihood of success of new businesses. We suspect that although
most individuals scan their environment, successful entrepreneurs may be better at discov-
ering opportunities embedded in that environment. Stated differently, alertness, or ‘‘lookout
for hitherto unnoticed features of the environment’’ (Kirzner, 1997, p. 72), allows successful
entrepreneurs to spot high-potential opportunities and thus use them to overcome commercial
newness. Since new product development is inherently uncertain, lacking information
regarding its use and market size exacerbates the uncertainties and heightens the chances
of failure. The benefit of alertness is exemplified by research showing that failing to
understand customers, designing cost-ineffective products, and disregarding intermediate
and end-users’ needs, were prescriptions for new-venture failure (Dougherty, 1992).
Past research on opportunity recognition and alertness has assessed entrepreneurs’
behaviors, background, and cognitions. For example, Cooper, Folta, and Woo (1995) suggest
that novice entrepreneurs tend to search for information less extensively than more seasoned
entrepreneurs. Kaish and Gilad (1991), who assessed the number of reading materials or
amount of time spent thinking about their business, report that entrepreneurs and managers
scan and search for information differently. For example, entrepreneurs spent more time on
nonverbal scanning and paid special attention to risk cues about new opportunities, whereas
the executives tended to focus on the economics of the opportunity. Although a replication
study failed to support the entrepreneurial alertness hypothesis (Busenitz, 1996), it still
remains to be seen whether successful entrepreneurs are indeed more adept than less
successful ones at identifying viable opportunities that exist ‘‘out there’’ in the environment.
Thus, what the specific stimulus configuration of such opportunities is, and the processes
(e.g., complex pattern recognition) through which successful entrepreneurs identify them,
remains to be determined.
Shane (2000) found that individuals from different technological backgrounds who assess
the same technological invention (i.e., 3DP) recognize and then develop different business
opportunities. His study offers support for the view that contrasting personal and vocational
backgrounds have important and lasting effects. Additional support for the view that
individual differences play an important role in entrepreneurship is provided by Sarasvathy,
Simon, and Lave (1999), who used think-aloud verbal protocols to show that entrepreneurs
and bankers think about and process information concerning problems differently. These
authors report that while entrepreneurs assume that risk is inevitable, focus on controlling
G.D. Markman, R.A. Baron / Human Resource Management Review 13 (2003) 281–301 289
outcomes, and take greater personal responsibility for these outcomes, bankers focus on
controlling risk and avoiding situations, which involve higher levels of personal responsibil-
ity. Moreover, research in cognitive and social psychology reports consistent individual
differences with respect to alertness (Miller, 1996). Clearly, only additional research can
reconcile the debate on whether successful entrepreneurs are better able to spot opportunities
than less successful ones. Nonetheless, because markets and technological innovations
present diverse profit possibilities, it seems reasonable to suggest that individual differences
in the ability to identify high-potential from low-potential opportunities do indeed play an
important role in entrepreneurs’ success.
4.3. Perseverance
Entrepreneurs try to create and sell ‘‘new combinations’’ and as such they encounter
substantial uncertainty regarding market acceptability and buyers’ demand. In fact, the more
radical the innovation, the harsher the skepticism they must endure, and the more likely they
are to incur additional costs stemming from efforts to educate investors and persuade
disinclined buyers. Starting a new company also incurs many personal costs; entrepreneurs
bear the opportunity cost of other alternatives, a liquidity premium for time and capital, risk
stemming from uncertainty, financial and social perils, and other hazards due to rapid
technological development and obsolescence (cf. Shane & Venkataraman, 2000). Creating a
new company entails doing more with less; entrepreneurs suffer from limited resources,
unfamiliar brand name, limited product offerings, and questionable access to markets.
Inherent in such undertaking is a constant vulnerability to failure, precipitated by ambiguous
conditions under which new firms are created. Thus, until success is achieved, entrepreneurs
bear numerous disincentives, including unpredictable markets and unknown competitive
rivals. Success often comes at a price of high financial, technological, and legal liabilities.
Inseparable from risk of failure are the ambiguous conditions under which new firms are
created; conditions precipitated by the nature of entrepreneurial work and technological
innovation. This suggests that individuals who engage in venture formation incur, sometimes
personally, substantial amount of financial and social adversity.
Research indicates that under challenging circumstances, individuals high in perseverance
perform more adeptly, whereas individuals who fail to persevere not only perform inad-
equately, but also experience increased anxiety and negative affect (cf. Bandura, 1997). We
noted above that to be successful, entrepreneurs must rise above numerous obstacles
including working intensively despite very uncertain outcomes, establishing market foothold
with frail economic power, fending off retaliatory actions from established and resourceful
rivals, and overcoming liabilities of newness, smallness, and legitimacy. Entrepreneurs also
endure very harsh private difficulties, such as personal and financial liabilities and periods of
social isolation (cf. Baron & Markman, 2000). Since entrepreneurs encounter repeated
obstacles with many uncertain outcomes, the ability to withstand and quickly overcome
adversity would be an important personal advantage.
Learned industriousness theory states that depending on their history of persistent and
effortful behavior, different individuals display contrasting levels of perseverance (Quinn,
G.D. Markman, R.A. Baron / Human Resource Management Review 13 (2003) 281–301 290
Brandon, & Copeland, 1996). Stoltz (2000), who studied personal resilience through what he
terms the Adversity Quotient (AQ), assessed the AQ of over 100,000 persons from diverse
organizations. On the basis of Stoltz’s work, Markman and Baron (under review) suggested
that our ability to handle adversity determines our success. They note that in the face of
adversity, some tend to give up while others persist depending on their explanatory styles—
the customary ways in which individuals explain setbacks and failures. Their study, which
provided additional evidence that resilience is a major factor underlying success in
entrepreneurial settings, reports two interesting findings. First, inventors who used the patents
they were awarded to start or continue to build new companies had significantly higher AQ
scores than those who did not use their patents for that purpose. Second, successful
entrepreneurs had significantly higher AQ score than less successful entrepreneurs. More
specifically, successful entrepreneurs, as measured by higher personal earnings, exhibited
higher levels of perceived control over adversity they face and higher accountability for the
outcome of the adversity (regardless of its origin).
While more research is certainly necessary, such studies suggest that perseverance in the
face of business and technological difficulties may be more important than the idea or the
opportunity itself. If this is so, then perhaps venture capitalists and corporate leaders could
rely on measures of AQ to screen and identify technical people who will then be
successful as champions of new business units. To recap, since perseverance reliably
predicts personal effectiveness and performance under difficult circumstances, and since
creating a new company is an ongoing challenge where success is a function of lasting
personal persistence, perseverant entrepreneurs will tend to outperform those who are less
persistent.
4.4. Human and social capital and social skills
In the past, means of production constituted a major share of an organization’s tangible
assets. Today, however, human talent is capital; talented persons carry within them, in their
knowledge and expertise, important aspects of the means of production. Firms’ capacity to
compete is imbedded in incumbents’ capability, education, and experience. Intellectual
capital and talented labor force is now central to many business enterprises (Rivette &
Kline, 2000) and so persons who have access to vital information become powerful agents
of processes leading to business creation (Shane & Venkataraman, 2000). Human capital
encompasses both abilities, which are influenced in part by genetic factors (e.g.,
intelligence, health, personality, attractiveness) as well as acquired skills such as education,
job training, tenure, work experience, and interpersonal relationships (Shanahan & Tuma,
1994). Several arguments support the view that a high level of human capital is related to
firm survival and growth (cf. Pennings, Lee, & Van Witteloostuijn, 1998). First, Gimeno,
Folta, Cooper, and Woo (1997) found that even among firms of equal economic strength,
survival was a function of variability in human capital. Research on the role of CEO
characteristics shows that human capital affects firm performance (Boone, De Brabander,
& Van Witteloostuijn, 1996). Similarly, since professionals endowed with a high level of
human capital consistently deliver high-quality services, firms championed by such persons
G.D. Markman, R.A. Baron / Human Resource Management Review 13 (2003) 281–301 291
are better able to attract and retain clients and strategic allies. Finally, potential investors
use human capital, such as professional credentials and accolades, as screening devices. To
echo Arrow (1974), since persons successful in their domain have better access to their
professional circles than do less successful persons, professional degrees and industry
experience function as screening and filtering techniques to identify high-potential
individuals.
Social capital, in contrast to human capital, refers to opportunities enabled by social
structure (Maman, 2000); it is a proxy of resources made available through organizational
positions, elite institutional ties, social networks and contacts, and relationships with others.
Not surprisingly, human and social capital are complementary. High levels of social capital
facilitate flows of knowledge and thus determine access to resources and may contribute to
one’s success (Nahapiet & Ghoshal, 1998). Accumulating research suggests that high social
capital provides entrepreneurs with enhanced access to information and increased cooperation
and trust from others. Indeed, a study of 1700 new business ventures in Germany reports a
positive relationship between social capital and venture success (Bruderl & Preisendorfer,
1998). Moreover, entrepreneurs who possess high social capital (as based on extensive social
networks, status, personal ties, and referrals) are more likely to receive funds from venture
capitalists than entrepreneurs who are lower on this dimension (Cable & Shane, 1999). Honig
(1998), who studied Jamaican entrepreneurs, reports that high social capital and high human
capital (e.g., vocational and college education)—controlling for other factors—were pos-
itively related to business profitability. Others suggested that variability in human capital
results in significant differences in the viability and longevity of new ventures (Boden &
Nucci, 2000).
Research in applied and social psychology has repeatedly found that social skills—
competencies that enable individuals to interact effectively with others—play a key role in
many forms of social and professional interactions (Baron & Markman, 2000). Effective
social skills can positively influence the outcomes experienced by individuals in many
different contexts, including job interviews (Riggio & Throckmorton, 1988), performance
reviews (Robbins & DeNisi, 1994), and even legal proceedings (McKelvie & Coley, 1993).
For instance, in one large-scale study involving more than 1400 employees in a wide range of
jobs, Wayne, Liden, Gran, and Ferris (1997) found that social skills were the single best
predictor of job performance and promotion ratings. Social skills have also been found to
influence negotiation outcomes (Lewicki, McAllister, & Bies, 1998), the frequency with
which individuals engage in conflict and aggression (Baron and Richardson, 1994), and even
personal happiness (Thomas, Fletcher, & Lange, 1997). Since entrepreneurs are embedded in
a social context (Steier, 2000), we suggest that many of the tasks entrepreneurs must
accomplish in order to succeed involve elements of socialization. Raising external capital,
generating enthusiasm and commitment in employees, communicating effectively with
people from a wide range of backgrounds, attracting effective partners and employees,
developing business networks and relationships, establishing trust and legitimacy, and
negotiating with others over diverse issues, are only some of the interactions entrepreneurs
must initiate and manage. Since the creation of new companies entails the ability to work
effectively with many constituencies in numerous contexts and under varying degrees of
G.D. Markman, R.A. Baron / Human Resource Management Review 13 (2003) 281–301 292
uncertainty, we propose that, ceteris paribus, proficiency in dealing with others may be a key
ingredient in entrepreneurs’ success.
Baron and Markman (2000), who conducted a study with entrepreneurs from two very
different industries (cosmetics and high-tech), obtained support for the hypothesis that the
higher the entrepreneurs’ social skills, the greater their financial success. Their study reported
that high accuracy in perceiving others (i.e., skill in social perception) was a significant
predictor of financial success for both groups of entrepreneurs and that social adaptability (the
ability to adapt to a wide range of social situations and to interact with individuals from many
different backgrounds) was a significant predictor of financial success for entrepreneurs in the
cosmetics industry. Their study implies that while high levels of human and social capital
may be particularly crucial in facilitating access to resources, social skills might be
particularly important once such access is attained—that is, during the building stages of a
new venture. The success or failure of new organizations hinges in part, on entrepreneurs’
ability to work together to commercialize their discoveries (e.g., Ensley et al., 2002).
Moreover, a high level of social skills may assist entrepreneurs in several other ways—for
example, in forming mutually beneficial strategic alliances with other companies (e.g., Gulati
& Westphal, 1999), in securing orders from new customers, hiring desirable employees, and
so on. Moreover, the fact that in entrepreneurial firms on-the-job and trial-and-error learning
are important (Bhide´, 2000), suggests that hiring and investment decisions should be based,
in part, on whether candidates have high human and social capital as well as sound social
skills. Given the wide and positive impact social skills have on diverse human functioning, it
is surprising that entrepreneurs, researchers, and investors have, until recently, been
somewhat reluctant to recognize it as an important factors in such contexts. The foregoing
discussion provides a foundation for our model of person–entrepreneurship fit and entre-
preneurial success (Fig. 1).
Briefly, this model suggests that becoming an entrepreneur places people in a situation
where certain individual-difference factors will be instrumental to their success: the greater
the person–entrepreneurship fit, the higher the likelihood of entrepreneurial success. As
drawn, the model presents a ‘‘snapshot’’ of the process at a single point in time, however, in
essence, it incorporates both iterative and recursive interactions. That is, the model captures
the nonlinear interplay among several individual-difference factors (e.g., self-efficacy, ability
to recognize opportunities, personal perseverance, human and social capital, and superior
social skills) in the context of tasks that entrepreneurs undertake (e.g., evaluate, deploy to
market, and exploit technology-based opportunities via firm formation) to achieve entre-
preneurial success, multifariously defined. We couched our arguments to suggest causality,
but we acknowledge that in fact, the relationships illustrated are successively and
reciprocally causal in nature. For example, as articulated throughout this discussion, people
with high self-efficacy or human capital become more successful entrepreneurs at the same
time that entrepreneurial success fosters stronger self-efficacy and raises one’s human
capital. Our model also suggests equifinality (Gresov & Drazin, 1997). There are multiple
ways in which all or only some of the five elements discussed and their dynamic interplay
may lead to high person–entrepreneurship fit and subsequently to entrepreneurial success.
Finally, the model is not meant to be inclusive with respect to individual-difference factors;
G.D. Markman, R.A. Baron / Human Resource Management Review 13 (2003) 281–301 293
rather, other factors not discussed here probably also play a role with respect to person–
entrepreneurship fit.
5. Discussion
We have proposed that an individual-difference perspective in assessing person–
entrepreneurship fit has important implications for the field of human resource
management. Specifically, we have suggested that to the extent that entrepreneurs are
Fig. 1. Model of person–entrepreneurship fit and entrepreneurial success.
G.D. Markman, R.A. Baron / Human Resource Management Review 13 (2003) 281–301 294
high on a number of distinct individual-difference dimensions relevant to the entrepren-
eurial role (e.g., self-efficacy, opportunities recognition, perseverance, human and social
capitals, and social skills), the closer will be their person–entrepreneurship fit and,
consequently, the greater their success. We noted that given comparable conditions, not
all individuals, even if equipped with similar knowledge, skills, and abilities, are equally
adept in recognizing opportunities and in harvesting them through the creation of new
ventures. Since new ventures are conspicuously more open to change than established
firms (i.e., they are ‘‘weak situations’’), human variation, as reflected in specific
individual-difference factors, may exert stronger effects on emerging firms than on
mature ones. Moreover, since it is the entrepreneurs who create new ventures, we
suggest that the role of individual-difference factors in person–entrepreneurship fit
merits closer attention.
We examined potential relationships between research on person–organization fit and
entrepreneurship, but more empirical and conceptual work is needed in order to confirm and
extend our preliminary framework. For example, what does the future hold for person–
entrepreneurship fit research and theory? What are the consequences for emerging firms that
do not possess the capital and credibility to attract key personnel that mature corporations
possess? Our view is in agreement with Bowen et al. (1991), who criticized traditional
selection practices that ignore personal characteristics and merely target employees whose
knowledge, skills, and abilities fit with clearly defined job requirements. While new ‘‘body
parts’’ for an organization (e.g., helping hands, muscles, or brute physical force) may
sometimes be appropriate for established and resource-rich organizations, such practices
are particularly detrimental to emerging, resource-starved firms. These issues and related ones
were not fully addressed here, and they remain open and should be carefully examined in
future research.
Because a new business creation is multidimensional with diverse jobs, multitasks, and
transient duties, our perspective complements emerging trends in selection models that
reject theories of person–job fit (O’Reilly et al., 1991; Schneider et al., 1995; Van Vianen,
2000). While several personal and organizational characteristics were assessed, future
studies should also test these and other dimensions of individual characteristics and
organizational outcomes. For instance, we discussed the usefulness of person–career and
person–entrepreneurship fit, but additional research is needed to empirically assess
concerns regarding the utility of selection procedures in these contexts. In sum, people
differ, and individual variance as it applies to person–entrepreneurship fit should, at the
very least, be taken into account in such human resource functions as selection, recruitment,
placement, and retention programs (Mitchell & Mickel, 1999). This human variability may
also be of interest to scholars who focus on motivation, teamwork, and organizational
design.
It has been noted elsewhere (cf. Van Vianen, 2000) that practitioners are reluctant to
rely on person–organization fit measures. This is so, at least in part, because existing
selection procedures are open to manipulation by applicants, subject to legal challenge,
and as noted above, even good person–organization fit may not necessarily lead to
enhanced firm performance. Nonetheless, Van Vianen (2000) found that job candidates are
G.D. Markman, R.A. Baron / Human Resource Management Review 13 (2003) 281–301 295
more likely to actually join an organization when their personal preferences fit with those
of existing incumbents. Research on hiring suggests that interviewers can assess—with
high levels of accuracy—applicant –organization value congruence, and that subjective fit
assessments do impact hiring decisions (Cable & Judge, 1997). Given that in emerging
ventures it is usually the founding team members who do the recruiting and the ones
who, based on their reputation and personal attributes, try to attract new employees,
entrepreneurs may have more influence on newcomers than they realize or suspect.
Further, recruits are unable to fully assess the culture of the new organization until later in
the socialization process. Again, this implies that newcomers’ perceptions of founding
teams—their personalities, attitudes, behaviors, reputations, and professional and social
affiliations—carry heavy weight in evaluating subsequent fit. Interestingly, although many
entrepreneurs are unaware of person–organization theory, they nevertheless rely on its
principles. Silverman (1999) reports that small-business owners use ethnicity, race, and
other identity cues as low-cost screening devices before they contract new employees,
suppliers, and partners.
It is important to note that the individual-difference factors identified in our analyses are, in
contrast to other aspects of personality, readily open to modification. Indeed, techniques for
enhancing self-efficacy, alertness, personal perseverance, human and social capital, and social
skills have been developed and used with considerable success in many contexts (e.g.,
Bandura, 1997; Stoltz, 2000). Seligman (1991) notes that cognitive styles like pessimism and
helplessness can be changed through cognitive training techniques, whereby individuals can
learn ways to overcome self-defeating beliefs. It seems possible that providing entrepreneurs
with appropriate training in such skills and attributes might assist them in their efforts to
exploit opportunities and launch new ventures. Since entrepreneurs’ success and failure have
significant ramifications not only for them personally, but their societies as well, efforts to
provide them with skills serving to tip the balance in favor of success would appear to be well
justified.
6. Conclusion
Although research on person–organization fit is diverse and rich (cf. Judge & Ferris,
1992; Kristof, 1996; Schneider et al., 1995), little effort has been made in the past to
integrate its various conceptualizations, operationalizations, or measurement strategies with
the field of entrepreneurship. In the present paper, we explored the potential contributions
of a person–organization fit framework to address the basic question: ‘‘Why are some
entrepreneurs more successful than others?’’ We proposed that person–entrepreneurship fit
provides part of the answer. That is, the possession by would-be entrepreneurs of the
skills, talents, abilities, and characteristics necessary for identifying opportunities and
founding new ventures is one important component in their ultimate success. To the extent
this suggestion is confirmed by future research, it would also appear that techniques could
be developed for assessing the extent to which individuals are suited for entrepreneurial
roles, just as standard techniques of personnel selection (cf. Smith, 1994) are used to
G.D. Markman, R.A. Baron / Human Resource Management Review 13 (2003) 281–301 296
determine whether, and to what extent, job applicants are suited for specific jobs. To the
best of our knowledge, this is a new and potentially fruitful perspective on entrepreneur-
ship.
While we made the point that the absence of research on person–organization fit as it
applies to the study of entrepreneurship renders our understanding of new business formation
incomplete, it is important to note that we in no sense imply that the effects of individual-
difference factors are stronger or more important than other variables in determining
entrepreneurs’ success. In fact, we fully share the perspective, reflected in strategic
management research, that many factors—including market forces, industry trends, new
technological discoveries, and so on—interact in complex ways to ultimately determine the
success of entrepreneurial firms, (cf. Shane & Venkatarman, 2000). What we wish to
emphasize here is that one important contributor to entrepreneurs’ success is indeed the
extent to which they possess ‘‘what it takes’’—the skills, abilities, and characteristics required
for creating a new venture. When they do—that is, when such person–entrepreneurship fit is
high—John Dos Passos’ (1959) comment that: ‘‘People don’t choose their careers; they are
engulfed by them,’’ may well ring true.
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