Is it a unique mix of psychological traits?
Or is it more to do with luck?
By Tim Harford
The spirit of "entrepreneurialism" — that ineffable mix of ambition, restlessness, confidence, determination and fearlessness — is the subject of a thousand airport bookshop bestsellers. But does it actually exist?
Perhaps not, if you listen to the economists. We have a problem dealing with the very concept of a "personality type" of course, but even economists who dabble in psychology have found less evidence than you might think that entrepreneurship is all in the mind.
Take Andrew Oswald of Warwick University, and David Blanchflower, who is an outspoken former member of the UK's monetary policy committee. These two long-standing collaborators have, bit by bit, assembled a more objective picture of entrepreneurialism. It seems to be less a matter of character and more a matter of opportunity.
For one thing, there are many people who say that they want to be entrepreneurs, and they aren't. The humblest form of entrepreneurship is self-employment and, across Europe, 30-60 per cent of people say they'd like to be self-employed. Only one third of that number actually is. Nor is this empty talk: Oswald and Blanchflower also looked at evidence on happiness. (They are world authorities on the subject.) The pair discovered that self-employed people are far happier with their lives than people with jobs. We say we want to be our own bosses, we're happier when we are our own bosses, but most of us never take the plunge.
Perhaps we lack the nerve, the imagination, the patience or the sheer arrogance to be entrepreneurs. Perhaps. This was what Oswald and Blanchflower originally hoped to find. They were looking for some psychological component that went hand in hand with budding Lord Sugar types. That work went nowhere for a very good reason. It seems that there is nothing distinctive about the psychological make-up of entrepreneurs.
The only discernible pattern is that children who are "anxious for acceptance" are very slightly less likely to be self-employed when they grow up. This is hardly the stuff of a powerful psychological profile, not to mention the fact that it contradicts some of the folk wisdom about bruised entrepreneurial egos.
If personality doesn't matter, then what does? The answer is access to start-up capital. We know this partly because it's what entrepreneurs complain about. But Oswald and Blanchflower also have a statistically sophisticated take on the question. They compared people who had recently received a substantial bequest against those who had not (adjusting for other observable differences between them). These bequests are twists of fate, yet they are good predictors of whether people become entrepreneurs, especially for people who start young.
The entrepreneurial spirit? Forget it. New businesses are all about access to cash.
Tim Harford's new book, Dear Undercover Economist, is out in paperback
Source. babusinesslife.com - August 2010
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