Description
Small and medium sized enterprises are important for toady's economy. Small and medium sized enterprises are the major agents of economic growth and employment (ECSB newsletter, 1997). Drucker (1985) described this as a shift from a managerial to an entrepreneurial economy.
Psychological approaches to entrepreneurial success: A general model and an
overview of findings
Andreas Rauch & Michael Frese
Published in:
Rauch, A., & Frese, M. (2000). Psychological approaches to entrepreneurial success. A
general model and an overview of findings. In C.L. Cooper & I.T. Robertson (Eds.),
International Review of Industrial and Organizational Psychology (pp. 101-142). Chichester:
Wiley.
Small and medium sized enterprises are important for toady's economy. Small and
medium sized enterprises are the major agents of economic growth and employment (ECSB
newsletter, 1997). Drucker (1985) described this as a shift from a managerial to an
entrepreneurial economy. About 99% of the European companies are small or medium sized
and they provide 66% of the working places (ECSB newsletter, 1997). Twenty-five years
ago, the field of entrepreneurship research was in its infancy. The number of small-scale
enterprises decreased until 1979 (Bruederl, Preisendoerfer & Ziegler, 1992) and
consequently, research focused on bigger companies. Since 1979 the founding rate of small
and medium sized enterprises has grown and particularly smaller firms showed a
disproportionate rate of increase. At the same time, there has been an increase in research in
this area (Low & McMillan 1988).
Although there are some good reviews on psychological entrepreneurship research
(cf. Chell, Haworth, & Brearly, 1991; Cooper & Gimeno-Gascon, 1992; Furnham, 1992), our
approach is different. First, we are looking at a much larger data base; we do not just
concentrate on one area (e.g. personality), but include all variables of psychological
importance. Second, we start out with a general model of entrepreneurial success and attempt
to give a certain coherence to the literature. Third, our contribution is a start in the direction
of a quantitative review. Unfortunately, it is not possible to do a proper meta-analysis in this
area (and with the exception of Schwenk and Shrader, 1993, there has not been any meta-
analysis), because there are too few studies and the quality of the studies is often not
sufficient (e.g., standard deviations, exact t- or F-value, or exact correlations are often not
reported). However, we think it is time to get away from purely verbal reviews and at least to
start with a quantitative approach in this area. Fourth, this review concerns itself with a
psychological approach to entrepreneurship research. This approach is clearly controversial
in the general entrepreneurship literature and, therefore, it is necessary to show that this
approach is useful; we hope that the reader will be convinced of the usefulness of such an
approach after looking at the evidence without biases. Finally, our conclusions should make it
possible to see, which areas are still under-researched and which methodological approaches
should be favored in future entrepreneurship research.
Entrepreneurship research studies small firms. Compared to bigger companies, small-
scale enterprises have certain strengths and weaknesses. Over the last decade, enterprises
with less than 10 employees provided more new working places than bigger companies
(Mulhern, 1995). On the other hand, small-scale enterprises do not only add jobs faster than
bigger companies but they also eliminate them faster because of a higher failure rate (Ripsas,
1998). However, in all small enterprises to contribute heavily to a net growth in jobs both in
the developed as well as in the underdeveloped world (Birch, 1987; Bruederl et al. 1992,
Mead & Liedholm, 1998). Compared to bigger companies, small-scale firms are more
adaptable, they act more quickly and more flexibly in the face of changing market conditions,
they are more innovative and contribute to a closer contact to customers. On the other hand,
small-scale enterprises often have a weak financial capital basis, lower-than-average wages,
lower labor productivity, lack of strategic marketing approaches, less international orientation
and are restricted to serve highly segmented markets (Mulhern, 1995). While these
weaknesses exist in most areas, the are amazing counter examples, in which small and
medium sized firms actually achieve 100% of a nice world market (e.g., in the production of
theater curtains, cf. Simon, 1996).
In summary, research on small-scale enterprises was an almost neglected field in
organization research. The field can be described as young, at a formative stage and still in its
infancy (Cunningham & Lischeron, 1991). It is multi- disciplinary as various approaches
(e.g., psychology, sociology, economics, management, anthropology, and regional sciences)
provide different insights to entrepreneurship. For psychologists it provides an interesting
area in which individual psychology of the owner/ manager mesh with organizational
conditions and which allows to study predictors and effects of economic success. Thus, the
field of entrepreneurship is a challenging area for academic research.
Unfortunately, it is a difficult field to get a complete overview on. Relevant literature
in this area is distributed in many outlets and can be found in such diverse journals as Journal
of Applied Psychology, Academy of Management Journal and Review, Administrative
Science Quarterly, Journal of Small Business Management, Journal of Business Venturing,
Entrepreneurship Theory and Practice, Journal of Management, Small Business Economics,
World Development, Strategic Management Journal, Organization Studies, and there are
many articles in conference procedures as Frontiers of Entrepreneurship Research,
International Council of Small Business Conference Proceedings, and Academy of
Management Conference Proceedings. Our search has been guided by looking into PsychLit,
SCCI, and EconLit. Unfortunately, not all psychological articles in this area are referenced in
these data bases which makes it well possible that we have overlooked contributions to the
field.
1. A General Model of Entrepreneurial Success
Figure 1 presents the general model that we have worked from (the Giessen-
Amsterdam model of entrepreneurial success). It is a interdisciplinary model, as it takes into
consideration most areas that have been studied in entrepreneurship research. As such, it
helps us to organize this chapter as we describe the literature referring to every box. However
it is a model that clearly has controversial implications if one looks at the arrows. For
example, we do not have direct arrows from personality, human capital, or environment to
success although such relationships have often been studied. The reasoning behind is rather
simple: We assume that there is no success without actions. Actions are mainly determined
by the goals and by the strategies. Thus, the concept of action is central to this model and the
strategies and tactics of actions is the bottleneck through which all of entrepreneurial success
is accomplished or not accomplished. All strategies and tactics are goal oriented and,
therefore, all entrepreneurial success has to start to look at these variables (obviously, most
studies do not do that and, therefore, show less power to predict success than is possible).
Obviously, both goals and strategies may turn out to be wrong, inefficient, or misplaced in a
certain environment. Consequently, prior success and failure has an effect on modifying goals
and strategies. However, we think that the market is made up of actors who have goals, at
least rudimentary strategies, and ideas about how to proceed with their business. For this
reason, all of the influences of personality, human capital, and environment on success have
to be mediated by strategies and tactics of actions. This concept is in stark contrast to the
theoretical stance of the ecological approach which assumes that essentially a random process
of actions is shaped and selected by the environment, including the function of the
environment to produce certain failure and success rates. We shall discuss this theory later
under environment and look at its contribution in more detail.
Our point of view will be taken up again in the conclusions in the end of this chapter.
At the moment, the Giessen-Amsterdam model of entrepreneurial success will be used simply
as a convenient way of guiding the subchapters of this article. In principle the Giessen-
Amsterdam model can be used on different levels of analysis - the organizational level and
the individual level of the firm owner. The level of analysis issue (cf. Klein & Sorra, 1996)
has a slightly different function in the area of entrepreneurship because company size
determines which level is the adequate one. While in large companies, the right level of
analysis of variables that determine organizational success is the organizational level (an
owner may have very different ideas of where this company should go than it actually does),
in small firms, the firm owner is typically the source of action of this firm. When there are
only four or five employees in a firm, the owner usually has a much stronger impact on
company policy, company culture and the company's actions than in larger firms. Thus, the
potential differences between individual and organizational level variables are larger in
bigger organizations and become increasingly smaller with small organizations.
Consequently, an individual level of analysis - using personality, human capital, goals,
strategies and environment of the individual owner - can be used profitably to study success
in these firms (Frese, van Gelderen & Ombach, 1998). In mid-sized companies, the level of
analysis issue is of major importance and it really needs to be empirically determined to
which extent data from the owner/manager are useful as predictors of success or not.
Figure 1: "The Giessen-Amsterdam Model" of small business owners success
2. Definition issues: Entrepreneurs, business owners and other concepts.
As in any new field, there is no agreed upon definition of entrepreneurship,
entrepreneurs, business owners, etc. (Cunningham & Lischeron, 1991, Gartner, 1985).
Moreover, founders and owner/managers are a highly heterogeneous group that defies a
common definition (Gartner, 1985).
The focus of this review is on small-scale enterprises, the founders and the owners
who manage these firms. Some authors differentiate between entrepreneurs, small business
Personality
Goals
Human capital
Strategies
Environment
Success
owner, founders, and CEO's. Carland, Hoy, Boulton, and Carland (1984) distinguished
entrepreneurs from small business owners. An entrepreneur is innovative, employs strategic
management practices, and manages his business for the purpose of profit and growth (p.
358). A business owner establishes the enterprise to follow personal goals. In focusing on
innovative behavior, this definition follows Schumpeter (1935) who emphasized the creative
activities of the innovator. Some other writers use risk- bearing as the key factor to define
entrepreneurs (Mill, 1984; Palmer, 1971; Liles, 1974).
However, if one restricts the concept of entrepreneur to showing innovative behavior
(or risk taking), one needs a clear definition of innovation. Since innovation research is also
an area with fuzzy boundaries and difficult conceptual arguments (cf. West & Farr, 1990),
one does not really gain a lot conceptual clarity with Carland et al.'s approach (Gartner, 88,
p.60). Moreover, it restricts the definition to a very small group of people (e.g., is Bill Gates
an innovator or is it only the person who developed the first direct manipulation approach in
software?).
For all of the definition problems, we agree with Gartner (1988) who used a
descriptive and behavioral definition: Entrepreneurship is the creation of new organizations.
Thus, entrepreneurs are the founders of new firms. This definition may again be too
restrictive because it implies that once the company is established entrepreneurship ends.
Thus, founding, owning, and managing a firm are the important aspects of entrepreneurship.
This comes close to Hisrich's (1990) definition of entrepreneurship: "Entrepreneurship is the
process of creating something different with value by devoting the necessary time and effort,
assuming the accompanying financial, psychic, and social risks, and receiving the resulting
rewards of monetary and personal satisfaction" (p. 209). In contrast to Hisrich, one can argue
that numerous non-profit organizations are created by entrepreneurs as well.
Often articles do not clearly describe their samples and even combine different groups
into one sample without differentiating them. Consequently, it is difficult to compare results
of different studies. Research projects should carefully select the sample appropriate to
answer their research question. Thus, we can differentiate the following groups:
1) Entrepreneurs are founders, owners, and managers of organizations. Thus, to be simply an
owner/manager is not enough to be included in this group (e.g., after taking over the business
from one's parents).
2) Managers may be entrepreneurial to a certain extent but they typically work with other
people's money and not with their own. Thus, they can leave the organization and
organizational death does not carry the same implications for them as it does for
entrepreneurs. However, there is a discussion about corporate entrepreneurship in existing
organizations (cf. Hisrich 1990) and which looks at managers from an entrepreneurial
viewpoint.
3) Size matters and should be taken into consideration. Firm owners without any employees
have a very different psychological situation than owners who have at least one employee.
Closing down is obviously much more difficult if one has to fire employees than if one just
packs up and takes a job somewhere else. One should have at least one employee to be
included in the group of entrepreneurs. Size also matters in other ways: Is the organization
still easy to lead and with only a few employees (e.g. up to 10), the psychological
prerequisites are different than if one has to deal with a small scale firm up to 50 employees
(1-50 employees constitutes the European Union definition of small scale firms). More
delegation and management is needed in a firm above 10 employees. Starting with 50
employees, we should talk about mid-size firms.
4) Finally, one needs to differentiate between studies which are based on representative
samples of small scale enterprises from those with selected business samples, for example
high tech firms, innovative firms, fast growing firms.
3 Characteristics of the entrepreneur
There are several different approaches in describing the entrepreneur: trait,
motivational, human capital, and typological approaches. Early approaches typically focused
on personality characteristics of the entrepreneur. It is necessary to separate two issues in the
following discussion: The emergence and the success of entrepreneurs. There should be
different processes by which a person decides to become an entrepreneur and by which a
person achieves entrepreneurial success (Utsch, Rauch, Rothfuss & Frese, in press). It makes
sense that personality characteristics may be more important for the decision to become a
founder than for success (Begley & Boyd, 1987; Heron & Robinson, 1983). Leadership
research has shown that leadership emergence is greatly affected by personality traits (Lord,
DeVader & Alliger, 1986) while leadership success is less clearly related to personality
factors (Landy, 1989). Thus, in the following, we shall differentiate between emergence of
entrepreneurship and success of small-scale enterprises even though this differentiation is not
always made in the literature our review is based on.
3.1 Personality and emergence of entrepreneurship
Studies on the emergence of entrepreneurship often study differences in personality
characteristics between entrepreneurs and other populations, most notably managers.
McClelland's (1961) early work on need for achievement initiated many studies on
characteristics of the entrepreneur. A high need for achievement leads to prefer challenging
tasks of moderate difficulty rather than routine or very difficult tasks, to take personnel
responsibility for one's performance, to seek feedback on performance, and to look for new
and better ways to improve one's performance. As described in the introduction, we would
like to provide a first quantitative review even though the literature does not really allow a
proper meta-analysis. Whenever there were a minimum of five studies that provide the
necessary data, we present the results quantitatively. Since studies in entrepreneurship
research frequently use different operationalizations of dependent as well as independent
variables, such a quantitative review always carries the risk of comparing apples with
oranges. However, compared to a pure verbal review, this approach provides additional
information to the reader. Table 1 presents a quantitative comparison of business owners with
other groups, mostly managers. We converted all data into one correlation. A high correlation
means that there is a close relationship between entrepreneurs' personality characteristics and
being an entrepreneur.
Table 1
Need for achievement of business owners compared to other samples.
Study N r comments
Begeley & Boyed, 1987 239 .15* Founders vs. non-founders
Cromie & Johns, 1983 83 .01 Entrepreneurs versus managers
Utsch, Rauch, Rothfuss Business owners vs.
& Frese, in press 177 .50** managers
Bonnett & Furnham, 1991 190 .09 Founders vs. non-founders
Green, David & Dent, 1996 207 .22** Entrepreneurs vs. managers
Weighted mean correlation 896 .21**
Note. *P
Small and medium sized enterprises are important for toady's economy. Small and medium sized enterprises are the major agents of economic growth and employment (ECSB newsletter, 1997). Drucker (1985) described this as a shift from a managerial to an entrepreneurial economy.
Psychological approaches to entrepreneurial success: A general model and an
overview of findings
Andreas Rauch & Michael Frese
Published in:
Rauch, A., & Frese, M. (2000). Psychological approaches to entrepreneurial success. A
general model and an overview of findings. In C.L. Cooper & I.T. Robertson (Eds.),
International Review of Industrial and Organizational Psychology (pp. 101-142). Chichester:
Wiley.
Small and medium sized enterprises are important for toady's economy. Small and
medium sized enterprises are the major agents of economic growth and employment (ECSB
newsletter, 1997). Drucker (1985) described this as a shift from a managerial to an
entrepreneurial economy. About 99% of the European companies are small or medium sized
and they provide 66% of the working places (ECSB newsletter, 1997). Twenty-five years
ago, the field of entrepreneurship research was in its infancy. The number of small-scale
enterprises decreased until 1979 (Bruederl, Preisendoerfer & Ziegler, 1992) and
consequently, research focused on bigger companies. Since 1979 the founding rate of small
and medium sized enterprises has grown and particularly smaller firms showed a
disproportionate rate of increase. At the same time, there has been an increase in research in
this area (Low & McMillan 1988).
Although there are some good reviews on psychological entrepreneurship research
(cf. Chell, Haworth, & Brearly, 1991; Cooper & Gimeno-Gascon, 1992; Furnham, 1992), our
approach is different. First, we are looking at a much larger data base; we do not just
concentrate on one area (e.g. personality), but include all variables of psychological
importance. Second, we start out with a general model of entrepreneurial success and attempt
to give a certain coherence to the literature. Third, our contribution is a start in the direction
of a quantitative review. Unfortunately, it is not possible to do a proper meta-analysis in this
area (and with the exception of Schwenk and Shrader, 1993, there has not been any meta-
analysis), because there are too few studies and the quality of the studies is often not
sufficient (e.g., standard deviations, exact t- or F-value, or exact correlations are often not
reported). However, we think it is time to get away from purely verbal reviews and at least to
start with a quantitative approach in this area. Fourth, this review concerns itself with a
psychological approach to entrepreneurship research. This approach is clearly controversial
in the general entrepreneurship literature and, therefore, it is necessary to show that this
approach is useful; we hope that the reader will be convinced of the usefulness of such an
approach after looking at the evidence without biases. Finally, our conclusions should make it
possible to see, which areas are still under-researched and which methodological approaches
should be favored in future entrepreneurship research.
Entrepreneurship research studies small firms. Compared to bigger companies, small-
scale enterprises have certain strengths and weaknesses. Over the last decade, enterprises
with less than 10 employees provided more new working places than bigger companies
(Mulhern, 1995). On the other hand, small-scale enterprises do not only add jobs faster than
bigger companies but they also eliminate them faster because of a higher failure rate (Ripsas,
1998). However, in all small enterprises to contribute heavily to a net growth in jobs both in
the developed as well as in the underdeveloped world (Birch, 1987; Bruederl et al. 1992,
Mead & Liedholm, 1998). Compared to bigger companies, small-scale firms are more
adaptable, they act more quickly and more flexibly in the face of changing market conditions,
they are more innovative and contribute to a closer contact to customers. On the other hand,
small-scale enterprises often have a weak financial capital basis, lower-than-average wages,
lower labor productivity, lack of strategic marketing approaches, less international orientation
and are restricted to serve highly segmented markets (Mulhern, 1995). While these
weaknesses exist in most areas, the are amazing counter examples, in which small and
medium sized firms actually achieve 100% of a nice world market (e.g., in the production of
theater curtains, cf. Simon, 1996).
In summary, research on small-scale enterprises was an almost neglected field in
organization research. The field can be described as young, at a formative stage and still in its
infancy (Cunningham & Lischeron, 1991). It is multi- disciplinary as various approaches
(e.g., psychology, sociology, economics, management, anthropology, and regional sciences)
provide different insights to entrepreneurship. For psychologists it provides an interesting
area in which individual psychology of the owner/ manager mesh with organizational
conditions and which allows to study predictors and effects of economic success. Thus, the
field of entrepreneurship is a challenging area for academic research.
Unfortunately, it is a difficult field to get a complete overview on. Relevant literature
in this area is distributed in many outlets and can be found in such diverse journals as Journal
of Applied Psychology, Academy of Management Journal and Review, Administrative
Science Quarterly, Journal of Small Business Management, Journal of Business Venturing,
Entrepreneurship Theory and Practice, Journal of Management, Small Business Economics,
World Development, Strategic Management Journal, Organization Studies, and there are
many articles in conference procedures as Frontiers of Entrepreneurship Research,
International Council of Small Business Conference Proceedings, and Academy of
Management Conference Proceedings. Our search has been guided by looking into PsychLit,
SCCI, and EconLit. Unfortunately, not all psychological articles in this area are referenced in
these data bases which makes it well possible that we have overlooked contributions to the
field.
1. A General Model of Entrepreneurial Success
Figure 1 presents the general model that we have worked from (the Giessen-
Amsterdam model of entrepreneurial success). It is a interdisciplinary model, as it takes into
consideration most areas that have been studied in entrepreneurship research. As such, it
helps us to organize this chapter as we describe the literature referring to every box. However
it is a model that clearly has controversial implications if one looks at the arrows. For
example, we do not have direct arrows from personality, human capital, or environment to
success although such relationships have often been studied. The reasoning behind is rather
simple: We assume that there is no success without actions. Actions are mainly determined
by the goals and by the strategies. Thus, the concept of action is central to this model and the
strategies and tactics of actions is the bottleneck through which all of entrepreneurial success
is accomplished or not accomplished. All strategies and tactics are goal oriented and,
therefore, all entrepreneurial success has to start to look at these variables (obviously, most
studies do not do that and, therefore, show less power to predict success than is possible).
Obviously, both goals and strategies may turn out to be wrong, inefficient, or misplaced in a
certain environment. Consequently, prior success and failure has an effect on modifying goals
and strategies. However, we think that the market is made up of actors who have goals, at
least rudimentary strategies, and ideas about how to proceed with their business. For this
reason, all of the influences of personality, human capital, and environment on success have
to be mediated by strategies and tactics of actions. This concept is in stark contrast to the
theoretical stance of the ecological approach which assumes that essentially a random process
of actions is shaped and selected by the environment, including the function of the
environment to produce certain failure and success rates. We shall discuss this theory later
under environment and look at its contribution in more detail.
Our point of view will be taken up again in the conclusions in the end of this chapter.
At the moment, the Giessen-Amsterdam model of entrepreneurial success will be used simply
as a convenient way of guiding the subchapters of this article. In principle the Giessen-
Amsterdam model can be used on different levels of analysis - the organizational level and
the individual level of the firm owner. The level of analysis issue (cf. Klein & Sorra, 1996)
has a slightly different function in the area of entrepreneurship because company size
determines which level is the adequate one. While in large companies, the right level of
analysis of variables that determine organizational success is the organizational level (an
owner may have very different ideas of where this company should go than it actually does),
in small firms, the firm owner is typically the source of action of this firm. When there are
only four or five employees in a firm, the owner usually has a much stronger impact on
company policy, company culture and the company's actions than in larger firms. Thus, the
potential differences between individual and organizational level variables are larger in
bigger organizations and become increasingly smaller with small organizations.
Consequently, an individual level of analysis - using personality, human capital, goals,
strategies and environment of the individual owner - can be used profitably to study success
in these firms (Frese, van Gelderen & Ombach, 1998). In mid-sized companies, the level of
analysis issue is of major importance and it really needs to be empirically determined to
which extent data from the owner/manager are useful as predictors of success or not.
Figure 1: "The Giessen-Amsterdam Model" of small business owners success
2. Definition issues: Entrepreneurs, business owners and other concepts.
As in any new field, there is no agreed upon definition of entrepreneurship,
entrepreneurs, business owners, etc. (Cunningham & Lischeron, 1991, Gartner, 1985).
Moreover, founders and owner/managers are a highly heterogeneous group that defies a
common definition (Gartner, 1985).
The focus of this review is on small-scale enterprises, the founders and the owners
who manage these firms. Some authors differentiate between entrepreneurs, small business
Personality
Goals
Human capital
Strategies
Environment
Success
owner, founders, and CEO's. Carland, Hoy, Boulton, and Carland (1984) distinguished
entrepreneurs from small business owners. An entrepreneur is innovative, employs strategic
management practices, and manages his business for the purpose of profit and growth (p.
358). A business owner establishes the enterprise to follow personal goals. In focusing on
innovative behavior, this definition follows Schumpeter (1935) who emphasized the creative
activities of the innovator. Some other writers use risk- bearing as the key factor to define
entrepreneurs (Mill, 1984; Palmer, 1971; Liles, 1974).
However, if one restricts the concept of entrepreneur to showing innovative behavior
(or risk taking), one needs a clear definition of innovation. Since innovation research is also
an area with fuzzy boundaries and difficult conceptual arguments (cf. West & Farr, 1990),
one does not really gain a lot conceptual clarity with Carland et al.'s approach (Gartner, 88,
p.60). Moreover, it restricts the definition to a very small group of people (e.g., is Bill Gates
an innovator or is it only the person who developed the first direct manipulation approach in
software?).
For all of the definition problems, we agree with Gartner (1988) who used a
descriptive and behavioral definition: Entrepreneurship is the creation of new organizations.
Thus, entrepreneurs are the founders of new firms. This definition may again be too
restrictive because it implies that once the company is established entrepreneurship ends.
Thus, founding, owning, and managing a firm are the important aspects of entrepreneurship.
This comes close to Hisrich's (1990) definition of entrepreneurship: "Entrepreneurship is the
process of creating something different with value by devoting the necessary time and effort,
assuming the accompanying financial, psychic, and social risks, and receiving the resulting
rewards of monetary and personal satisfaction" (p. 209). In contrast to Hisrich, one can argue
that numerous non-profit organizations are created by entrepreneurs as well.
Often articles do not clearly describe their samples and even combine different groups
into one sample without differentiating them. Consequently, it is difficult to compare results
of different studies. Research projects should carefully select the sample appropriate to
answer their research question. Thus, we can differentiate the following groups:
1) Entrepreneurs are founders, owners, and managers of organizations. Thus, to be simply an
owner/manager is not enough to be included in this group (e.g., after taking over the business
from one's parents).
2) Managers may be entrepreneurial to a certain extent but they typically work with other
people's money and not with their own. Thus, they can leave the organization and
organizational death does not carry the same implications for them as it does for
entrepreneurs. However, there is a discussion about corporate entrepreneurship in existing
organizations (cf. Hisrich 1990) and which looks at managers from an entrepreneurial
viewpoint.
3) Size matters and should be taken into consideration. Firm owners without any employees
have a very different psychological situation than owners who have at least one employee.
Closing down is obviously much more difficult if one has to fire employees than if one just
packs up and takes a job somewhere else. One should have at least one employee to be
included in the group of entrepreneurs. Size also matters in other ways: Is the organization
still easy to lead and with only a few employees (e.g. up to 10), the psychological
prerequisites are different than if one has to deal with a small scale firm up to 50 employees
(1-50 employees constitutes the European Union definition of small scale firms). More
delegation and management is needed in a firm above 10 employees. Starting with 50
employees, we should talk about mid-size firms.
4) Finally, one needs to differentiate between studies which are based on representative
samples of small scale enterprises from those with selected business samples, for example
high tech firms, innovative firms, fast growing firms.
3 Characteristics of the entrepreneur
There are several different approaches in describing the entrepreneur: trait,
motivational, human capital, and typological approaches. Early approaches typically focused
on personality characteristics of the entrepreneur. It is necessary to separate two issues in the
following discussion: The emergence and the success of entrepreneurs. There should be
different processes by which a person decides to become an entrepreneur and by which a
person achieves entrepreneurial success (Utsch, Rauch, Rothfuss & Frese, in press). It makes
sense that personality characteristics may be more important for the decision to become a
founder than for success (Begley & Boyd, 1987; Heron & Robinson, 1983). Leadership
research has shown that leadership emergence is greatly affected by personality traits (Lord,
DeVader & Alliger, 1986) while leadership success is less clearly related to personality
factors (Landy, 1989). Thus, in the following, we shall differentiate between emergence of
entrepreneurship and success of small-scale enterprises even though this differentiation is not
always made in the literature our review is based on.
3.1 Personality and emergence of entrepreneurship
Studies on the emergence of entrepreneurship often study differences in personality
characteristics between entrepreneurs and other populations, most notably managers.
McClelland's (1961) early work on need for achievement initiated many studies on
characteristics of the entrepreneur. A high need for achievement leads to prefer challenging
tasks of moderate difficulty rather than routine or very difficult tasks, to take personnel
responsibility for one's performance, to seek feedback on performance, and to look for new
and better ways to improve one's performance. As described in the introduction, we would
like to provide a first quantitative review even though the literature does not really allow a
proper meta-analysis. Whenever there were a minimum of five studies that provide the
necessary data, we present the results quantitatively. Since studies in entrepreneurship
research frequently use different operationalizations of dependent as well as independent
variables, such a quantitative review always carries the risk of comparing apples with
oranges. However, compared to a pure verbal review, this approach provides additional
information to the reader. Table 1 presents a quantitative comparison of business owners with
other groups, mostly managers. We converted all data into one correlation. A high correlation
means that there is a close relationship between entrepreneurs' personality characteristics and
being an entrepreneur.
Table 1
Need for achievement of business owners compared to other samples.
Study N r comments
Begeley & Boyed, 1987 239 .15* Founders vs. non-founders
Cromie & Johns, 1983 83 .01 Entrepreneurs versus managers
Utsch, Rauch, Rothfuss Business owners vs.
& Frese, in press 177 .50** managers
Bonnett & Furnham, 1991 190 .09 Founders vs. non-founders
Green, David & Dent, 1996 207 .22** Entrepreneurs vs. managers
Weighted mean correlation 896 .21**
Note. *P