The relationship between personality structure and entrepreneurial activity appears to be rather robust.
As I've noted many times before, entrepreneurship is a key driver of innovation and economic growth. But we also know that entrepreneurship is spiky — not everyone becomes an entrepreneur, and not all places foster this kind of growth.
Economists, mayors, and economic development officials as well as venture capitalists, technologists, and business leaders have long sought to track the key characteristics of successful entrepreneurs, who are at the core of game-changing companies like Apple, Google, and Facebook. These same groups of people have also been working to identify the factors that drive the success of certain entrepreneurial regions, such as Silicon Valley.
While we know that the Steve Jobs of the world have distinctive psychological traits and personality profiles, most coverage of the factors behind places with strong entrepreneurial ecosystems focuses on economic factors, such as the presence of venture capital, research universities like Stanford in Silicon Valley or MIT in Cambridge and Boston, plus other successful companies that breed entrepreneurs. We've also found a connection between metros that have high levels of entrepreneurship and concentrations of the creative class.
A recent study examines the role of personality in spurring entrepreneurship across states and regions. The study, titled "The Regional Distribution and Correlates of an Entrepreneurship-Prone Personality Profile in the United States, Germany, and the United Kingdom: A Socioecological Perspective," was carried out by a team of U.S. and German psychologists, including Sam Gosling of the University of Texas at Austin, and published in the Journal of Personality and Social Psychology in April.
Entrepreneurs, according to a wide range of psychological studies, tend to have risk-taking, achievement-oriented personalities. They also fit a particular set of Big Five personality traits, as the study notes, and score high on three key traits — extraversion, conscientiousness, and openness-to-experience — and low on agreeableness and neuroticism.
The study examines the effects of this entrepreneurship-prone personality profile on entrepreneurship in the U.S., U.K., and Germany. The U.S. analysis compares the geographic variation in this entrepreneurship-prone profile for more than 600,000 individuals. It also takes into account measures such as the self-employment rate, business foundation rate, and the Kauffman Index of Entrepreneurial Activity, as well as control variables for economic output and unemployment and demographic factors including race, age, and gender.
The map below, from the study, charts the distribution of entrepreneurship-prone personalities across the 50 states and the District of Columbia. Darker shades reflect higher concentrations of entrepreneurial personalities.
Overall, the study finds that "the entrepreneurship-prone personality profile is geographically clustered. This regional pattern corresponds nicely to the documented regional variation in entrepreneurial activity in the United States." Using partial correlations to control for the effects of economic and demographic factors, the study finds statistical associations between entrepreneurship-prone personalities and the rate of business establishment entry (.49), the Kauffman Index of Entrepreneurial Activity (.30), and the self-employment rate (.16). Based on this, the authors note that:
Together, these analyses indicate that the state-level relationship between personality structure and entrepreneurial activity (the two founding rates) is robust to state-level difference in these sociodemographic factors. Self-employment showed smaller (partial) correlations, which may be due to the fact that that founding rates are better indicators of entrepreneurial activity than are self-employment rates (because starting a business is the prototypical entrepreneurial behavior).
The study also looks at the connection between personalty and actual entrepreneurship across metros. The authors rightly point out that states are a "very coarse level of analysis because a state captures a broad range of areas often including both densely populated cosmopolitan cities and rural areas."
The table below, based on the study's findings, shows variation in entrepreneurship-prone personalities for the 15 largest U.S. metros. These data cover more than 300,000 people.
|State Rankings for the Entrepreneurship-Prone Personality Profile Across the 15 Largest U.S. MSAs|
|1||Miami–Fort Lauderdale–Pompano Beach|
|5||Los Angeles–Long Beach–Santa Ana|
|14||New York–Northern New Jersey–Long Island|
Table data from Table 2 in the report
Miami is first, Seattle second, and Atlanta ranks third. While Miami's first-place finish and Boston's last-place finish may seem counterintuitive, recall that this is a measure of entrepreneurially inclined personalities, not actual entrepreneurship. It's also worth remembering that resort, tourist, and service-based economies like Miami have high overall levels of self-employment and entrepreneurship, while high-tech entrepreneurship of the sort found in Boston makes up only a small share of overall entrepreneurship. The study finds a positive association between entrepreneurial personality and the Kauffman Index of Entrepreneurial Activity, though it is not statistically significant, likely due to the small sample size of 15 metros.
The study also considers the role of entrepreneurial personality in Germany and the U.K. The German results largely follow the U.S. pattern. The entrepreneurship-prone personality profile is associated with actual entrepreneurial activity. For the U.K., however, they find a statistically significant relationship between entrepreneurial personality and total early stage entrepreneurial rate, but no correlation to self-employment. Separating out Northern Ireland from the analysis (they argue that its agriculturally based economy skews the results), they find a positive association between entrepreneurial personality and self-employment.
The study examines the connections between each of the Big Five personality traits themselves (as opposed to the combined entrepreneurship-prone personality profile) and entrepreneurship across all three countries. This turns up a mixed and varied pattern, leading the authors to conclude that the entrepreneurial personality of places as well as individuals reflects a combined cluster of traits, as opposed to any specific or dominant trait. As the authors put it: "entrepreneurship requires a specific constellation or set of traits, a line of reasoning that is consistent with the theoretical considerations on the entrepreneurial personality," and that "this process also plays out at a regional level."
In other words, entrepreneurial places, like individual entrepreneurs, reflect a combination of three key personality traits: openness to new ideas and experiences, diligence and conscientiousness, and the extrovert's ability to connect with and motivate people. This idea holds for America as well as the U.K. and Germany.
Or, as Brad Feld put it nicely in an interview a few months back, "Startup communities are networks — glorious in all their messiness and chaos. However, they aren't simply organic phenomena. You have to have leaders who are entrepreneurs. They have to have a long-term view. They have to be inclusive of anyone who wants to engage."
Top image: Apple CEO Steve Jobs poses with the new iPhone 4 during the Apple Worldwide Developers Conference in San Francisco, California, June 7, 2010. (Robert Galbraith/Reuters)