Self-confidence Predicts Entrepreneurship and Entrepreneurial Success

Maczulskij TerhiViinikainen Jutta


Entrepreneurship promotes employment, productivity growth, innovation activity, and the commercialization of innovations (e.g., Van Praag and Versloot, 2007). However, only a small number of firms in Finland (6%) create a significant portion of new jobs, and a large share of firms experience limited or decreasing growth. While new jobs are typically created in new firms, only a small proportion of these firms survive the “valley of death” during the first years after their market entry (Vanhala and Virén, 2016). Because of the economic benefits of successful entrepreneurship, the questions of who becomes and what makes a successful entrepreneur are of interest to both academics and policymakers.

Entrepreneurship differs from paid employment in several ways. First, entrepreneurs bear substantial risk, which is typically poorly diversified (Vereshchagina and Hopenhayn, 2009). Second, entrepreneurs are characterized as “jacks-of-all-trades” who must be competent in many skills (Lazear, 2005). Third, concerning job tasks, an entrepreneur needs to detect and exploit opportunities and make rapid decisions in uncertain conditions (Rauch and Frese, 2007). Due to these characteristics, entrepreneurship, particularly when successful, frequently requires “entrepreneurial capital,” consisting of financial, social, and human capital dimensions (Blumberg and Pfann, 2016).

Personality traits can be considered part of human capital. Previous research has found that entrepreneurship is related to personality traits such as high openness to experiences (in the Big Five sense), need for achievement, self-efficacy, internal locus of control, and risk tolerance (for reviews, see Zhao and Seibert, 2006; Kerr et al., 2018; Kritikos, 2022). However, the personality traits that drive people to open new businesses are not always the same ones that make entrepreneurs successful (Caliendo et al., 2014; Bennett et al., 2016; Hamilton et al., 2019). For example, founder CEOs are not necessarily best suited for management (Bennett et al., 2016), and traits such as openness to experience, which are related to entry into entrepreneurship, may not predict firm survival (Caliendo et al., 2014). There is evidence that family background and genetics may also explain entrepreneurial outcomes (Cardella et al., 2020, Nicolaou et al., 2008). However, as family background and genetics may also affect personality traits (Krueger and Johnson, 2008), it remains unclear whether personality traits are related to entrepreneurship after accounting for these potential confounding factors. Acquiring a better understanding of the mechanisms behind the different stages of the entrepreneurial process can offer useful guidance in developing more effective policy interventions.

In this study, we examine how personality traits (neuroticism, extraversion, sociability, hostility, self-confidence, and conscientiousness) are related to the propensity to become and succeed as an entrepreneur. We go beyond the existing literature by providing two important contributions. First, we use survey data on personality traits linked with long-term administrative register data, which enables us to track entrepreneurial activity and success over a 20-year period (1990–2009). Second, we utilize twin data methods to control for unobserved family background and genetic effects. Our results show that self-confidence is an important predictor of both entry into entrepreneurship and better subsequent entrepreneurial performance.

Journal of Business Venturing Insights, Volume 19, June 2023, e00382.

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Personality, Entrepreneurship, Entrepreneurial success, Unobserved heterogeneity
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Journal of Business Venturing Insights, Volume 19, June 2023
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