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Founder Personality and Scaling Decisions in Entrepreneurial Firms

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  • Becker, Annette
  • Hottenrott, Hanna
  • Mukherjee, Anwesha

Abstract

Personality drives human decision-making. Research on corporate research and development(R&D), however, typically considers strategic decision-making to be independent of the decisionmaker's personality traits. This study investigates the impact of CEO personality on scaling activities in young firms. In particular, we focus on R&D and investment decisions building on an entrepreneurial decision model that illustrates the different roles of major personality trait (ROCEAN: risk tolerance, openness to experience, conscientiousness, extraversion, neuroticism) in taking both R&D and investment decisions. Results based on detailed data from founders in 4,732 startups founded between 2011 and 2017 in Germany, show that scaling decisions in entrepreneurial firms are strongly imprinted by the CEO's personality. We find that higher risk tolerance and openness to experience result in a higher likelihood that the firm engages in R&D but only the former matters for levels of R&D expenditures. Comparing R&D decisions to tangible investments, we find that risk tolerance plays a more prominent role in the former but higher scores for openness also drive tangible investments. Founders with higher scores for agreeability and neuroticism are less likely to invest in growth in terms of R&D and tangible investments. More conscientious founders show lower R&D engagement but invest more in tangible assets. We discuss implications for entrepreneurship research and policy.
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Suggested Citation

  • Becker, Annette & Hottenrott, Hanna & Mukherjee, Anwesha, 2025. "Founder Personality and Scaling Decisions in Entrepreneurial Firms," VfS Annual Conference 2025 (Cologne): Revival of Industrial Policy 325401, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc25:325401
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    References listed on IDEAS

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    1. Arnaldo Camuffo & Alessandro Cordova & Alfonso Gambardella & Chiara Spina, 2020. "A Scientific Approach to Entrepreneurial Decision Making: Evidence from a Randomized Control Trial," Management Science, INFORMS, vol. 66(2), pages 564-586, February.
    2. C. Praag & Peter Versloot, 2007. "What is the value of entrepreneurship? A review of recent research," Small Business Economics, Springer, vol. 29(4), pages 351-382, December.
    3. Michael Fritsch & Martin Obschonka & Michael Wyrwich, 2019. "Historical roots of entrepreneurship-facilitating culture and innovation activity: an analysis for German regions," Regional Studies, Taylor & Francis Journals, vol. 53(9), pages 1296-1307, September.
    4. Chapman, Gary & Hottenrott, Hanna, 2022. "Green start-ups and the role of founder personality," Journal of Business Venturing Insights, Elsevier, vol. 17(C).
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    More about this item

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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