Advertisement

DECISION

, Volume 45, Issue 4, pp 287–300 | Cite as

Personality characteristics and the process of start-up: the moderating role of institutional environment

  • M. KannadhasanEmail author
  • Pankaj Singh
  • Parikshit Charan
  • Pavan Kumar Balivada
Research Article
  • 45 Downloads

Abstract

The study investigates the relationship between entrepreneur’s personality characteristics, i.e. need for achievement and internal locus of control, with the process of start-up. Besides, this study examines the role of risk propensity as a mediator in the relationship between personality characteristics and the process of start-up. Also, this study assesses the interaction effects of institutional environment on the relationship between risk propensity and the process of start-ups. Data were collected through a single cross-sectional survey from 478 entrepreneurs in India. The study used partial least squares approach to path modelling to examine the proposed relationship in the research model. After controlling the effects of risk propensity, the results reveal internal locus of control and need for achievement are significantly related to start-up process. Furthermore, the relationship between risk propensity and start-up was moderated by institutional environment. Findings of the study indicate the importance of personal characteristics in the process of start-up. The study also emphasizes how the institutional environment enhances the level of the process of start-up. Moreover, this study is useful in differentiating personality characteristics from non-entrepreneurs.

Keywords

Needs for achievement Internal locus of control Institutional environment Risk propensity Start-up 

JEL Classification

M130 

Notes

Acknowledgement

Authors thank Mrs Bharathi and Mr Chanti Babu Ravupalli for their support during data collection.

References

  1. Antoncic B, Bratkovic Kregar T, Singh G, DeNoble AF (2015) The big five personality–entrepreneurship relationship: evidence from S lovenia. J Small Bus Manag 53(3):819–841Google Scholar
  2. Audretsch DB (1991) New-firm survival and the technological regime. Rev Econ Stat 73(3):441–450Google Scholar
  3. Bakotić D, Kružić D (2010) Students’ perceptions and intentions towards entrepreneurship: the empirical findings from Croatia. Bus Rev Camb 14(2):209Google Scholar
  4. Baron RM, Kenny DA (1986) J Person Soc Psychol 51:1173–1182. Retrieved from http://www.ncbi.nlm.nih.gov/pubmed/3806354
  5. Baum JR, Locke EA (2004) The relationship of entrepreneurial traits, skill, and motivation to subsequent venture growth. J Appl Psychol 89(4):587Google Scholar
  6. Baum JR, Locke EA, Smith KG (2001) A multidimensional model of venture growth. Acad Manag J 44(2):292–303Google Scholar
  7. Bearse PJ (1982) A study of entrepreneurship by region and SMSA size. Front Entrep Res 2(1):78–112Google Scholar
  8. Begley TM (1995) Using founder status, age of firm, and company growth rate as the basis for distinguishing entrepreneurs from managers of smaller businesses. J Bus Ventur 10(3):249–263Google Scholar
  9. Begley TM, Boyd DP (1987) Psychological characteristics associated with performance in entrepreneurial firms and smaller businesses. J Bus Ventur 2:79–93.  https://doi.org/10.1016/0883-9026(87)90020-6 Google Scholar
  10. Borland CM (1975) Locus of control, need for achievement and entrepreneurship. Doctoral dissertation, ProQuest Information & LearningGoogle Scholar
  11. Bouchikhi H (1993) A constructivist framework for understanding entrepreneurship performance. Organ Stud 14(4):549–570Google Scholar
  12. Brockhaus RH, Horwitz PS (1986) The psychology of the entrepreneur. In: Sexton D, Smilor RW (eds) The art and science of entrepreneurship. Ballinger, CambridgeGoogle Scholar
  13. Brockhaus RH, Nord WR (1979) An exploration of factors affecting the entrepreneurial decision: personal characteristic versus environmental conditions. In: Academy of management proceedings, vol 1979. Academy of Management Briarcliff Manor, New York, pp 364–368Google Scholar
  14. Bromiley P, Curley SP (1992) Individual differences in risk taking. In: Yates JF (ed) Wiley series in human performance and cognition. Risk-taking behavior. John Wiley & Sons, Oxford, pp 87–132Google Scholar
  15. Busenitz LW, Gomez C, Spencer JW (2000) Country institutional profiles: unlocking entrepreneurial phenomena. Acad Manag J 43(5):994–1003Google Scholar
  16. Cameron B, Myers JL (1966) Some personality correlates of risk taking. J Gen Psychol 74(1):51–60Google Scholar
  17. Cavusgil ST (1984) Organizational characteristics associated with export activity. J Manag Stud 21(1):3–22.  https://doi.org/10.1111/j.1467-6486.1984.tb00222.x Google Scholar
  18. Chandler GN, Hanks SH (1993) Measuring the performance of emerging businesses: a validation study. J Bus Ventur 8(5):391–408Google Scholar
  19. Chell E (1985) The entrepreneurial personality: A few ghosts laid to rest? Int Small Bus J 3(3):43–54Google Scholar
  20. Chiles TH, Bluedorn AC, Gupta VK (2007) Beyond creative destruction and entrepreneurial discovery: a radical Austrian approach to entrepreneurship. Organ Stud 28(4):467–493.  https://doi.org/10.1177/0170840606067996 Google Scholar
  21. Chin W (1998) The partial least squares approach to structural equation modeling. Mod Methods Bus Res 295(2):295–336.  https://doi.org/10.1016/j.aap.2008.12.010 Google Scholar
  22. Chin WW, Newsted PR (1999) Structural equation modeling analysis with small samples using partial least squares. Stat Strateg Small Sample Res 1(1):307–341Google Scholar
  23. Chin WW, Marcolin BL, Newsted PR (2003) A partial least squares latent variable modeling approach for measuring interaction effects: results from a Monte Carlo simulation study and an electronic-mail emotion/adoption study. Inf Syst Res 14(2):189–217Google Scholar
  24. Chye Koh H (1996) Testing hypotheses of entrepreneurial characteristics: a study of Hong Kong MBA students. J Manag Psychol 11(3):12–25Google Scholar
  25. Cohen J (1988) Statistical power analysis for the behavioral sciences, 2nd edn. Erlbaum, HillsdaleGoogle Scholar
  26. Cohen JF (2001) Environmental uncertainty and managerial attitude: effects on strategic planning, non-strategic decision-making and organisational performance. S Afr J Bus Manag 32(3):17–31Google Scholar
  27. Collins CJ, Hanges PJ, Locke EA (2004) The relationship of achievement motivation to entrepreneurial behavior: a meta-analysis. Human Perform 17(1):95–117Google Scholar
  28. Colton RM, Udell GG (1976) The national science foundation’s innovation centers—an experiment in training potential entrepreneurs and innovators (Pre-1986). J Small Bus Manag 14(000002):11Google Scholar
  29. De Carolis DM, Litzky BE, Eddleston KA (2009) Why networks enhance the progress of new venture creation: the influence of social capital and cognition. Entrep Theory Pract 33(2):527–545.  https://doi.org/10.1111/j.1540-6520.2009.00302.x Google Scholar
  30. Di Zhang D, Bruning E (2011) Personal characteristics and strategic orientation: entrepreneurs in Canadian manufacturing companies. Int J Entrep Behav Res 17(1):82–103Google Scholar
  31. Dubini P (1989) The influence of motivations and environment on business start-ups: some hints for public policies. J Bus Ventur 4(1):11–26Google Scholar
  32. Ecosystem G. ranking of startup (2018) India ranks 37th in global startup ecosystem in 2017Google Scholar
  33. Efron B, Gong G (1983) A leisurely look at the bootstrap, the jackknife, and cross-validation. Am Stat 37(1):36–48.  https://doi.org/10.1080/00031305.1983.10483087 Google Scholar
  34. Fassott G, Henseler J, Coelho PS (2016) Testing moderating effects in PLS path models with composite variables. Ind Manag Data Syst 116(9):1887–1900Google Scholar
  35. Forlani D, Mullins JW (2000) Perceived risks and choices in entrepreneurs’ new venture decisions. J Bus Ventur 15(4):305–322.  https://doi.org/10.1016/S0883-9026(98)00017-2 Google Scholar
  36. Fornell C, Larcker DF (1981) Evaluating structural equation models with unobservable variables and measurement error. J Market 18(1):39–50.  https://doi.org/10.2307/3151312 Google Scholar
  37. Gartner WB (1985) A conceptual framework for describing the phenomenon of new venture creation. Acad Manag Rev 10(4):696–706.  https://doi.org/10.5465/AMR.1985.4279094 Google Scholar
  38. Gasse Y (1982) Elaborations on the psychology of the entrepreneur. In: Encyclopedia of entrepreneurship, 5771Google Scholar
  39. Ghozali I, Latan H (2015) Partial least squares, Konsep, Teknik Dan Aplikasi Menggunakan program Smartpls 3.0 Untuk Penelitian Empiris. Semarang: Badan Penerbit UNDIPGoogle Scholar
  40. Gnyawali DR, Fogel DS (1994) Environments for entrepreneurship development: key dimensions and research implications. Entrep Theory Pract 18:43–62Google Scholar
  41. Gupta VK, Guo C, Canever M, Yim HR, Sraw GK, Liu M (2014) Institutional environment for entrepreneurship in rapidly emerging major economies: the case of Brazil, China, India, and Korea. Int Entrep Manag J 10(2):367–384Google Scholar
  42. Hair JF, Ringle CM, Sarstedt M (2012a) Partial least squares: The better approach to structural equation modeling? Long Range Plan 45(5–6):312–319.  https://doi.org/10.1016/j.lrp.2012.09.011 Google Scholar
  43. Hair JF, Sarstedt M, Ringle CM, Mena JA (2012b) An assessment of the use of partial least squares structural equation modeling in marketing research. J Acad Mark Sci 40(3):414–433.  https://doi.org/10.1007/s11747-011-0261-6 Google Scholar
  44. Hansemark OC (2003) Need for achievement, locus of control and the prediction of business start-ups: a longitudinal study. J Econ Psychol 24(3):301–319Google Scholar
  45. Heckert TM, Cuneio G, Hannah AP, Adams PJ, Droste HE, Mueller MA, Roberts LL (2000) Creation of a new needs assessment questionnaire. J Soc Behav Person 15(1):121Google Scholar
  46. Helm S, Eggert A, Garnefeld I (2010) Modeling the impact of corporate reputation on customer satisfaction and loyalty using partial least squares. In: Handbook of partial least squares, pp 515–534Google Scholar
  47. Henseler J, Hubona G, Ray PA (2016) Using PLS path modeling in new technology research: updated guidelines. Ind Manag Data Syst 116(1):2–20Google Scholar
  48. Herron L, Robinson RB Jr (1993) A structural model of the effects of entrepreneurial characteristics on venture performance. J Bus Ventur 8(3):281–294Google Scholar
  49. Hulland J (1999) Use of partial least squares (PLS) in strategic management research: a review of four recent studies. Strateg Manag J 20(2):195–204.  https://doi.org/10.1002/(SICI)1097-0266(199902)20:2%3c195:AID-SMJ13%3e3.3.CO;2-Z Google Scholar
  50. Iacobucci D, Duhachek A (2003) Advancing alpha: measuring reliability with confidence. J Consum Psychol 13(4):478–487.  https://doi.org/10.1207/S15327663JCP1304_14 Google Scholar
  51. Jain R, Ali SW (2012) Personal characteristics of Indian entrepreneurs and intrapreneurs: an empirical study. Manag Labour Stud 37(4):295–322Google Scholar
  52. Johnson BR (1990) Toward a multidimensional model of entrepreneurship: the case of achievement motivation and the entrepreneur. Entrep Theory Pract 14(3):39–54Google Scholar
  53. Kannadhasan M, Nandagopal R (2010) Influence of decision makers’ characteristics on risk analysis in strategic investment decisions. J Mod Account Audit 6(4):38Google Scholar
  54. Kannadhasan M, Aramvalarthan S, Pavan Kumar B (2014) Relationship among cognitive biases, risk perceptions and individual’s decision to start a venture. Decision 41(1):87–98.  https://doi.org/10.1007/s40622-014-0029-1 Google Scholar
  55. Keh HT, Foo M Der, Lim BC (2002) Opportunity evaluation under risky conditions: the cognitive processes of entrepreneurs. Entrep Theory Pract 27(2):125–148.  https://doi.org/10.1111/1540-8520.00003 Google Scholar
  56. Korunka C, Frank H, Lueger M, Mugler J (2003) The entrepreneurial personality in the context of resources, environment, and the startup process—a configurational approach. Entrep Theory Pract 28(1):23–42Google Scholar
  57. Kostova T (1997) Country institutional profiles: concept and measurement. In: Academy of management proceedings, vol 1997 Academy of Management Briarcliff Manor, New York, pp 180–184Google Scholar
  58. Krueger N (1993) The impact of prior entrepreneurial exposure on perceptions of new venture feasibility and desirability. Entrep Theory Pract 18(1):5–21Google Scholar
  59. Langan-Fox J, Roth S (1995) Achievement motivation and female entrepreneurs. J Occup Organ Psychol 68(3):209–218Google Scholar
  60. Lau C-M, Busenitz LW (2001) Growth intentions of entrepreneurs in a transitional economy: the People’s Republic of China. Entrep Theory Pract 26(1):5–20Google Scholar
  61. Lefcourt H (1976) Locus of control: current trends in theory and research. Lawrence, HillsdaleGoogle Scholar
  62. Low MB, Macmillan IC (1988) Entrepreneurship: past research and future challenges. J Manag 14(2):139–161.  https://doi.org/10.1177/014920638801400202 Google Scholar
  63. Matricardi LR (2006) Locus of control and risk behavior among college students. Retrieved from https://rdw.rowan.edu/etd/905
  64. McClelland DC (1961) The achievement society. Von Nostrand, PrincentonGoogle Scholar
  65. McClelland DC (1965) N achievement and entrepreneurship: a longitudinal study. J Pers Soc Psychol 1(4):389Google Scholar
  66. McClelland DC (1987a) Characteristics of successful entrepreneurs. J Creat Behav 21(3):219–233Google Scholar
  67. McClelland DC (1987b) Human motivation. CUP Archive, CambridgeGoogle Scholar
  68. Miner JB, Smith NR, Bracker JS (1989) Role of entrepreneurial task motivation in the growth of technologically innovative firms. J Appl Psychol 74(4):554Google Scholar
  69. Mitchell RK, Smith B, Seawright KW, Morse EA (2000) Cross-cultural cognitions and the venture creation decision. Acad Manag J 43(5):974–993Google Scholar
  70. Mitchell RK, Busenitz LW, Bird B, Marie Gaglio C, McMullen JS, Morse EA, Smith JB (2007) The central question in entrepreneurial cognition research 2007. Entrep Theory Pract 31(1):1–27Google Scholar
  71. Mullins JW, Forlani D, Cardozo RN (2002) Seeing differently, acting differently? New venture perceptions and decisions of managers and successful entrepreneurs. J Res Market Entrep 4(3):163–190Google Scholar
  72. Naffziger DW, Hornsby JS, Kuratko DF (1994) A proposed research model of entrepreneurial motivation. Entrep Theory Pract 18(3):29–42Google Scholar
  73. North DC (1991) Institutions. J Econ Perspect 5(1):97–112Google Scholar
  74. Nunnally JC, Bernstein IH (1994) Psychometric theory, 3rd edn. McGraw-Hill, New YorkGoogle Scholar
  75. Olson SF, Currie HM (1992) Female entrepreneurs: personal value systems and business strategies in a male-dominated industry. J Small Bus Manag 30(1):49Google Scholar
  76. Peng MW, Zhou JQ (2005) How network strategies and institutional transitions evolve in Asia. Asia Pac J Manag 22(4):321–336Google Scholar
  77. Phares EJ (1976) Locus of control in personality. General Learning Press, New YorkGoogle Scholar
  78. Plax TG, Rosenfeld LB (1976) Correlates of risky decision-making. J Pers Assess 40(4):413–418Google Scholar
  79. Porter ME, Teisberg EO (2006) Redefining health care: creating value-based competition on results. Harvard Business Press, CambridgeGoogle Scholar
  80. Rauch A, Frese M (2007) Let’s put the person back into entrepreneurship research: a meta-analysis on the relationship between business owners’ personality traits, business creation, and success. Eur J Work Organ Psychol 16(4):353–385Google Scholar
  81. Reimers-Hild CI (2005) Locus of control, need for achievement and risk taking propensity: a framework for the “entrepreneurial” learner of the 21st century. ETD collection for University of Nebraska - Lincoln. http://digitalcommons.unl.edu/dissertations/AAI3180813
  82. Rotter JB (1966) Generalized expectancies for internal versus external control of reinforcement. Psychol Monogr Gen Appl 80(1):1Google Scholar
  83. Sagie A, Elizur D (1999) Achievement motive and entrepreneurial orientation: a structural analysis. J Organ Behav Int J Ind Occup Organ Psychol Behav 20(3):375–387Google Scholar
  84. Sarasvathy DK, Simon HA, Lave L (1998) Perceiving and managing business risks: differences between entrepreneurs and bankers. J Econ Behav Organ 33(2):207–225.  https://doi.org/10.1016/S0167-2681(97)00092-9 Google Scholar
  85. Schere JL (1982) Tolerance of ambiguity as a discriminating variable between entrepreneurs and managers. In: Academy of management proceedings, vol 1982. Academy of Management Briarcliff Manor, New York, pp 404–408Google Scholar
  86. Schneider J (2009) A rational expectations equilibrium with informative trading volume. J Finance 64(6):2783–2805Google Scholar
  87. Schwer RK, Yucelt U (1984) A study of risk-taking propensities among small business entrepreneurs and managers: an empirical evaluation. Am J Small Bus 8(3):31–40Google Scholar
  88. Shane S (2000) Prior knowledge and the discovery of entrepreneurial opportunities. Organ Sci 11(4):448–469.  https://doi.org/10.1287/orsc.11.4.448.14602 Google Scholar
  89. Shane S, Venkataraman S (2000) The promise of entrepreneurship as a field of research. Acad Manag Rev 25(1):217–226Google Scholar
  90. Shaver KG, Scott LR (1991) Person, process, choice: the psychology of new venture creation Kelly G. Shaver. Entrep Theory Pract 16(2):23–45Google Scholar
  91. Shepherd DA, Krueger N (2002) Cognition, entrepreneurship and teams: an intentions-based perspective. Entrep Theory Pract 27(2):167–185Google Scholar
  92. Sherman R (1968) Personality and strategic choice. J Psychol 70(2):191–197Google Scholar
  93. Simon M, Houghton SM (2002) The relationship among biases, misperceptions, and the introduction of pioneering products: examining differences in venture decision contexts. Entrep Theory Pract 27(2):105–124Google Scholar
  94. Simon M, Houghton SM, Aquino K (2000) Cognitive biases, risk perception, and venture formation: how individuals decide to start companies. J Bus Ventur 15(98):113–134.  https://doi.org/10.1016/S0883-9026(98)00003-2 Google Scholar
  95. Singh R, Hills GE, Hybels RC, Lumpkin GT (1999) Opportunity recognition through social network characteristics of entrepreneurs. In: Frontiers of entrepreneurship research, 228241Google Scholar
  96. Sobel ME (1982) Asymptotic confidence intervals for indirect effects in structural equation models. Soc Methodol 13:290–312Google Scholar
  97. Staples DS, Hulland JS, Higgins CA (1998) A self-efficacy theory explanation for the management of remote workers in virtual organizations. J Comput Med Commun.  https://doi.org/10.1111/j.1083-6101.1998.tb00085.x Google Scholar
  98. Stewart WH Jr, Roth PL (2001) Risk propensity differences between entrepreneurs and managers: a meta-analytic review. J Appl Psychol 86(1):145Google Scholar
  99. Tang J, Tang Z (2007) The relationship of achievement motivation and risk-taking propensity to new venture performance: a test of the moderating effect of entrepreneurial munificence. Int J Entrep Small Bus 4(4):450–472Google Scholar
  100. The World Bank Group Flagship Report (2018) Doing business reforming to create jobs, 15th ednGoogle Scholar
  101. Tsang EWK, Kwan K-M (1999) Replication and theory development in organizational science: a critical realist perspective. Acad Manag Rev 24(4):759–780.  https://doi.org/10.5465/AMR.1999.2553252 Google Scholar
  102. Urban B (2006) Entrepreneurship in the rainbow nation: effect of cultural values and ESE on intentions. J Dev Entrep 11(03):171–186Google Scholar
  103. Venkatapathy R (1984) Locus of control among entrepreneurs: a review. Psychol Stud 29(1):97–100Google Scholar
  104. Westhead P, Wright M (1998) Novice, portfolio, and serial founders: Are they different? J Bus Ventur 13(3):173–204Google Scholar
  105. Wu S, Matthews, Dagher GK (2007) Need for achievement, business goals, and entrepreneurial persistence. Manag Res News 30(12):928–941Google Scholar
  106. Yadav A (2016) How startup culture in India differs from the U.S. Forbes. Retrieved from https://www.forbes.com/sites/ajayyadav/2016/08/18/how-startup-culture-in-india-differs-from-the-u-s/#1e711fcbedb6. Retrieved August 27, 2018

Copyright information

© Indian Institute of Management Calcutta 2018

Authors and Affiliations

  1. 1.Indian Institute of Management RaipurRaipurIndia
  2. 2.Institute of Management TechonologyHyderabadIndia

Personalised recommendations