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Is Entrepreneurial Success Predictable? An Ex-Ante Analysis of the Character-Based Approach

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  • Caliendo, Marco

    (University of Potsdam)

  • Kritikos, Alexander S.

    (DIW Berlin)

Abstract

This paper empirically analyzes whether the character-based approach, which is based on the personality structure and the human capital of business founders, allows prediction of entrepreneurial success. A unique data set is used consisting of 414 previously unemployed persons whose personal characteristics were screened by different methods, namely a one-day assessment center (AC) and a standardized questionnaire, before they launched their business. Results are partly unexpected: first, there is almost no correlation between the AC data and the questionnaire. Second, the predictive power of the AC data is slightly better than that of the questionnaire, but lower than expected in theory. Interestingly, for those subgroups where the AC data have low predictive power, the questionnaire does better. Third, when success is measured in terms of employees hired, the character-based approach is a poor predictor.

Suggested Citation

  • Caliendo, Marco & Kritikos, Alexander S., 2007. "Is Entrepreneurial Success Predictable? An Ex-Ante Analysis of the Character-Based Approach," IZA Discussion Papers 2687, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp2687
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    Cited by:

    1. Joanna Tyrowicz & Magdalena Smyk & Barbara Liberda, 2017. "Talent workers as entrepreneurs: a new approach to aspirational self-employment," Bank i Kredyt, Narodowy Bank Polski, vol. 48(6), pages 571-592.
    2. Marco Caliendo & Frank Fossen & Alexander Kritikos, 2014. "Personality characteristics and the decisions to become and stay self-employed," Small Business Economics, Springer, vol. 42(4), pages 787-814, April.
    3. Rotger, Gabriel Pons & Gørtz, Mette & Storey, David J., 2012. "Assessing the effectiveness of guided preparation for new venture creation and performance: Theory and practice," Journal of Business Venturing, Elsevier, vol. 27(4), pages 506-521.
    4. Lindblom, Arto & Lindblom, Taru & Wechtler, Heidi, 2020. "Dispositional optimism, entrepreneurial success and exit intentions: The mediating effects of life satisfaction," Journal of Business Research, Elsevier, vol. 120(C), pages 230-240.
    5. Staniewski, Marcin W., 2016. "The contribution of business experience and knowledge to successful entrepreneurship," Journal of Business Research, Elsevier, vol. 69(11), pages 5147-5152.
    6. Ajay K Garg & Phillip NT Phaahla, 2018. "Factors Affecting the Business Performance of Small Businesses in Sekhukhune," Journal of Economics and Behavioral Studies, AMH International, vol. 10(4), pages 54-67.
    7. Nadia Simoes & Nuno Crespo & Sandrina B. Moreira, 2016. "Individual Determinants Of Self-Employment Entry: What Do We Really Know?," Journal of Economic Surveys, Wiley Blackwell, vol. 30(4), pages 783-806, September.
    8. Caliendo, Marco & Fossen, Frank & Kritikos, Alexander, 2012. "Trust, positive reciprocity, and negative reciprocity: Do these traits impact entrepreneurial dynamics?," Journal of Economic Psychology, Elsevier, vol. 33(2), pages 394-409.
    9. Hongyu Ma & Federico Topolansky Barbe & Yongmei Carol Zhang, 2018. "Can Social Capital and Psychological Capital Improve the Entrepreneurial Performance of the New Generation of Migrant Workers in China?," Sustainability, MDPI, vol. 10(11), pages 1-16, October.
    10. Man Zhang & Patriya Tansuhaj & James McCullough, 2009. "International entrepreneurial capability: The measurement and a comparison between born global firms and traditional exporters in China," Journal of International Entrepreneurship, Springer, vol. 7(4), pages 292-322, December.
    11. Joanna Tyrowicz & Joanna Nestorowicz, 2010. "Cynicism Starts Young: Age and Entrepreneurship over Transition," Working Papers 2010-02, Faculty of Economic Sciences, University of Warsaw.
    12. Elli Diakanastasi & Angeliki Karagiannaki & Katerina Pramatari, 2018. "Entrepreneurial Team Dynamics and New Venture Creation Process: An Exploratory Study Within a Start-Up Incubator," SAGE Open, , vol. 8(2), pages 21582440187, June.
    13. Haddoud, Mohamed Yacine & Onjewu, Adah-Kole Emmanuel & Al-Azab, Mahmoud Ramadan & Elbaz, Ahmed Mohamed, 2022. "The psychological drivers of entrepreneurial resilience in the tourism sector," Journal of Business Research, Elsevier, vol. 141(C), pages 702-712.
    14. Mateusz Piwowarski & Danuta Miłaszewicz & Małgorzata Łatuszyńska & Kesra Nermend, 2019. "Multi-Criteria Assessment of the Company's Location Selection: A Dynamic Approach," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 215-230.
    15. Willebrands, Daan & Lammers, Judith & Hartog, Joop, 2012. "A successful businessman is not a gambler. Risk attitude and business performance among small enterprises in Nigeria," Journal of Economic Psychology, Elsevier, vol. 33(2), pages 342-354.
    16. Joyce Koe Hwee Nga & Gomathi Shamuganathan, 2010. "The Influence of Personality Traits and Demographic Factors on Social Entrepreneurship Start Up Intentions," Journal of Business Ethics, Springer, vol. 95(2), pages 259-282, August.
    17. Elena-Loreni Baciu & Delia Vîrgă & Theofild-Andrei Lazăr, 2020. "What Characteristics Help Entrepreneurs ‘Make It’ Early on in Their Entrepreneurial Careers? Findings of a Regional Study from Romania," Sustainability, MDPI, vol. 12(12), pages 1-27, June.
    18. Martin Koning & Marie-Estelle Binet & François Facchini, 2010. "Les déterminants de la dynamique entrepreneuriale dans les régions françaises (1994-2003)," Working Papers halshs-00467900, HAL.
    19. Xianhuan Chen & Yiming Ma & Yuguang Xie, 2024. "The Influence Mechanism of Online Social Network Relationships on Sustainable Entrepreneurial Success," Sustainability, MDPI, vol. 16(9), pages 1-18, April.
    20. Tyrowicz, Joanna, 2011. "What distinguishes entrepreneurs? Evidence on the motives for self-employment," Economics Letters, Elsevier, vol. 112(3), pages 226-229, September.
    21. R. Murugesan & R. Jayavelu, 2017. "The Influence of Big Five Personality Traits and Self-efficacy on Entrepreneurial Intention: The Role of Gender," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 3(1), pages 41-61, January.

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    More about this item

    Keywords

    entrepreneurship; psychological assessment; character-based approach; success prediction;
    All these keywords.

    JEL classification:

    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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