‘If you’re not a risk taker, you should get the hell out of business’, according to McDonald’s founder Ray Kroc. Certain personality traits—ambition, the need for achievement, an internal locus of control, and, most commonly, a tendency toward risk-taking—are frequently associated with success in entrepreneurship, mostly because successful entrepreneurs like Ray Kroc say so. These perceived relationships are typically based on anecdotal evidence from founders’ or investors’ personal experience.
As a result, prospective founders will often mirror risk-taking behaviors, and venture capitalists will look for these personality traits when they allocate investments. In reality, as a prominent psychological study found more than a decade ago, personality traits have a more indirect impact on entrepreneurial success: some traits, such as a passion for work and tenacity (but not risk-taking), are associated with skills like resourcefulness or the ability to communicate a vision, which, in turn, directly affect venture growth. This is good news for both founders and VCs, because skills, unlike personality traits, can be taught and developed over time.
The authors followed venture growth for a period of six years, and found that there was one skill in particular that significantly impacted growth in a business: the ability to acquire and organize new resources, or the new resource skill. This is a skill that will make someone successful in setting up a new business, hiring the right people, and finding capital. This skill was likely to translate into other important founder skills, such as self-efficacy, the ability to communicate a vision, and the ability to set the right goals.
And so, given the importance of tenacity as a typical personality trait of successful founders, it seems that entrepreneurs should, instead, listen to Winston Churchill, and “Never give in –never, never, never, never, in nothing great or small, large or petty, never give in except to convictions of honour and good sense.”
To access the original study by Robert Baum and Edwin Locke, please click here.
Contributed by Lili Torok.