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Personality Traits of Entrepreneurs and the Size of Their Firms

Author

Listed:
  • Berfin Kardaslar
  • Alexander S. Kritikos
  • Lukas Menkhoff

Abstract

In this study, we examine the relationship between personality traits, captured by risk tolerance and the Big Five traits, and firm size, as measured by the number of employees. We show that the personality of entrepreneurs matters for the size of their firm they operate. We use a novel add-on to the German Socio-Economic Panel that includes a sub-sample of owner-managers running larger firms. High levels of risk tolerance – associated with an increased likelihood of firm exit in existing research – is positively associated with firm size for entrepreneurs in the market. High scores in extraversion are also associated with larger firms. However, a high level of openness for experience, a main driver of founding ventures, is negatively related to firm size. Overall, we show that running larger firms is associated with traits that are partially different from those that increase the likelihood of entrepreneurial entry or survival.

Suggested Citation

  • Berfin Kardaslar & Alexander S. Kritikos & Lukas Menkhoff, 2026. "Personality Traits of Entrepreneurs and the Size of Their Firms," Discussion Papers of DIW Berlin 2173, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp2173
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    Keywords

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    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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