Characteristics of successful

PEKSONNEL PSYCHOLOGY1971, 24, 141-153.

CHARACTERISTICS OF SUCCESSFULENTREPRENEURS'

JOHN A. HOENADAY AND JOHN ABOUD

Babson College^

Introduction

IN an earlier article in Personnel Psychology, Hornaday and Bun-ker (1970) discuss the importance of achieving a better understand-ing of the psychological nature of the successful entrepreneur througha research program designed to identify and measure the personalcharacteristics of those persons who have successfully started a newbusiness. Such knowledge would be of much interest to lending orga-nizations such as banks, to enfranchising organizations such as oilcompanies and restaurant chains, and to federal government pro-grams, both domestic (in loans to small businesses and in such effortsas the poverty programs) and international (as in using foreign aidmore effectively to help strengthen the economy of underdevelopedcountries). Further, colleges of business administration can makesignificant contributions in entrepreneurial education if it is possibleto understand the nature of entrepreneurship and if workable pro-grams can be developed from the results of the research.

The earlier research led to the development of a structured in-terview guide sheet as well as the selection of three standardized,objective tests that appeared promising in differentiating successfulentrepreneurs from men in general. Although McClelland (Mc-Clelland, Atkinson, Clark and Lowell, 1953) has reported successin using both the Thematic Apperception Test (Murray, 1943) andin using his own test for this purpose, these tests are projective innature and can be administered and interpreted only by a highly-

^ TMs study was supported by a grant from the Babson College Board ofResearch.

2 The authors wish to express their appreciation to Margaret CourtnayStone who aided in the data collection.

141

142 PERSONNEL PSYCHOLOGY

trained psychologist. The goal of this study was to develop objectivetests which will be valid and will have the advantage of a simpleformat and ease of administration and interpretation.

Further, McClelland approaches the problem of predicting entre-preneurial success by measuring, specifically, individuals' need forachievement (n Ach) and he emphasizes tha t this characteristic isto be considered even to the exclusion of other factors. In a recentinterview for Forbes (McClelland, 1969), he stated, "We've spenttwenty years studying just this [why one businessman succeeds andanother fails], twenty years in the laboratory doing very carefulresearch, and we've isolated the specific thing. We know the exacttype of motivation that makes a better entrepreneur. [Italics ours.]Not necessarily a better head of General Motors; I 'm talking aboutthe man who starts a business." H e went on to say that the specificcharacteristic is the individual's need for achievement.

Need for Objective Approach

The earlier research by Hornaday and Bunker and the presentstudy of entrepreneurs are predicated on two assumptions: (1) tha tthere would be great value in a system of selection that is objectiveand structured so that non-psychologists could administer it, and(2) tha t in addition to the admittedly important n Ach there maybe other factors which should be measured. The latter point is tha tour prediction of success would have higher validity if measure-ment were made of several factors, each of which makes some in-dependent contribution to the ultimate success of the entrepreneur.

The need for objectivity in measuring need for achievement isemphasized by Hermans (1970). He says, "During the past twentyyears, there have been a great many studies in the area of achieve-ment motivation. These vary from psychometric investigations totheoretical discussions. One of the most difficult problems in thisarea is tha t of measurement. Projective techniques have been theprincipal devices used to quantify the strength of the achievementmotive. . . . With regard to the projective needs for achievementmeasures, several critical problems arise. Klinger (1966) pointed totheir lack of internal consistency, lack of test-retest reliability,their deficient validity against performance criteria, and the lowintercorrelation among several projective n Ach measures. . . . Theneed for a new measure for n Ach still exists."

The pilot study indicated tha t three objective tests held promiseof differentiating entrepreneurs from men-in-general. For the pres-ent study, therefore, these tests, along with the structured inter-

HORNADAY AND ABOUD 143

view, were administered to successful entrepreneurs. As in the pilotstudy, the "successful entrepreneur" was defined as a man or womanwho started a business where there was none before, who had atleast eight employees and who had been established for at least fiveyears. These criteria were selected because it was desired to eliminatethe "Mom and Pop" stores and because the first five years are themost difficult. The criteria are similar to those established by Collinset al. (1964) in their entrepreneurial studies. The three tests appliedto the entrepreneurs were: Kuder Occupational Interest Survey,Form DD (Kuder, 1970), Gordon's Survey of Interpersonal Values(Gordon, 1960), and a questionnaire composed of three scales drawnfrom the Edwards Personal Preference Scale (Edwards, 1959).Throughout this paper the abbreviations for these tests will be, re-spectively, OIS, SIV, and EPPB.

Forty "successful entrepreneurs," as defined above, were inter-viewed and tested in the summer of 1970. The sample was selectedwithout regard for geographic location (all were located in eitherNorth Carolina, Rhode Island, or Massachusetts), but care was takento obtain twenty black and twenty white entrepreneurs. That racialselection made possible a tentative investigation of the null hypothe-sis relative to racial differences.

In addition to these forty entrepreneurs, use was made of thetwenty entrepreneurs who were interviewed and tested in the pilotstudy (Homaday and Bunker, 1970) since they were given essen-tially the same interview and the same tests. The number of casesused for the several analyses varied because some entrepreneurscompleted only a part of the forms. For all sixty, however, inter-view responses are available; most of the questions in the interviewwere the same in the two studies.

Hypotheses

Specifically, the hypotheses investigated in this study were:1. A number of personal characteristics differentiate successful

entrepreneurs from men in general and these characteristics can bemeasured by objective, standardized tests. Entrepreneurs are signifi-cantly higher on scales on the EPPS that measure need for achieve-ment, need for autonomy, and need for aggression. On the SIV, theexaminees are expected to score higher on scales measuring the im-portance attached to recognition, independence, and leadership.

2. Because of the nature of scoring the OIS, the scores of entre-preneurs could not be compared to men-in-general. The Form DDscores of OIS are lambdas (Clemans, 1968; Kuder, 1963), and the nft-

M4 PERSONNEL PSYCHOLOGY

ture of those scores does not permit comparison of an individual to agroup. The hypothesis for the OIB, therefore, must relate to thescales on which entrepreneurs are higher relative to their otherscales. Entrepreneurs should score high on scales relating to busi-ness occupations and business college majors. The greatest valuefrom the Kuder Occupational Interest Survey, however, would begained from an entrepreneurial key for the OIS, and development oftha t key must await the gathering of considerably more data.

3. In answering the questions covered by the interviewers, entre-preneurs are expected to indicate that they work long hours, that thework interferes with their family relationships, that they rebel againstregimentation, and it was felt that their family background might re-flect, generally, a rebellion against an attitude in the father that theyperceived with distaste. A number of additional areas were investi-gated in the interviews as a further exploration into characteristicswhich might be significant. On these, no specific hypothesis could beformed nor is there any control group of the general population toserve as a basis of comparison. Thus, the interview was largely ex-ploratory.

4. On a self-rating form in which entrepreneurs subjectively com-pared themselves to the general population, it was hypothesized thatthe subjects would be above the general population in all of the sig-nificant items (a few items were "fillers"). Those are such items as:need for power over people, self-reliance, innovative tendencies, andother characteristics as listed in Table 3.

5. Relative to race, the null hypothesis is to be tested for all scalesof the tests and items of the interview. Our hypotheses are that noracial differences will be found between black and white entrepre-neurs. Data , therefore, are presented for the races separately and,where no difference is found, combined.

Procedure

The subjects of this study consisted of a total of sixty entrepre-neurs. The distribution of the sixty by race and sex is as follows:

34 white males22 black males2 white females2 black females

During the early work of this study, which began in the summerof 1969, a total of twenty entrepreneurs were interviewed. It was in


the process of these interviews tha t the Interview Schedule was de-veloped. Development consisted primarily of devising items, reorder-ing most of them, and, subsequently, deleting or adding a very fewitems. Also during this early phase of the work, the three tests usedto assess the personality traits of the entrepreneurs were selected. Be-cause some experimentation with the formats and content of thesemeasurement devices was necessary, not all of the entrepreneurswere subjected to identical items. As will be seen later, this, plus thefailure of some entrepreneurs to complete all of the forms, resultedin the sample's containing somewhat less than sixty for the variousforms employed. Early experimenting with procedures of testing andinterview also yielded unequal numbers of completed forms for thevarious questionnaires employed.

The forms which held the most promise in the pilot study andwere used in this study are:

The Standardized Interview ScheduleThe Kuder Occupational Interest Survey (Form D D )The Gordon Survey of Interpersonal ValuesA modified form of the Edwards Personal Preference ScheduleA five-point scale of personal self-estimates called The Self-Evalu-

ation Scale

Results

Analyses were made separately and in combination for tbe whitemales (34) and black males (22). Because of the small number ofcases for women (two white and two black), no meaningful compar-ative analyses could be made by sex. Inspection of the data indicateddifferences between the female and the male entrepreneurs, and itcould not be established that the sexes could be reasonably combined:;therefore, only the male entrepreneurs were used in subsequent anal-yses.

The structured interview was used with the full group of sixty en-trepreneurs. Many of the items were administered to the total ofsixty, but a few items were introduced or revised at some time dur-ing the first twenty contacts. For the last forty the interview schedulewas kept constant. The sample size for interview items, thus, mayvary between 40 and 56 (since the four female entrepreneurs werenot included).

Table 1 presents data for black males and white males on all of theinterview items tha t lend themselves to quantification. The items onwhich significant differences occurred were:


TABLE 1

Analyses of Quantifiable Items of the Structural Interviews

Time required for interviewNumber of employeesYears ia this businessHrs. work/week at startHrs. work/week nowAge of entrepreneurAge started businessPrevious ent. effort?Special person import, ia getting

startedSpecial idea import, getting startedNever marriedDivorced or separated?Graduated high school?Graduate coUege?Level of school achievementSerious in schoolConsider dropping outActive in extra-curricular activities

in schoolFinanced coll. primarily through

own effortAccepts regimentation?

Statistic

Mdn.Mdn.Mdn.Mdn.Mdn.Mdn.Mdn.%yes

%yes%yes%yes%yes%yes%yesMdn. eval.% serious%yes

%yes%yes(of coU. group)

%yes

WhiteMale

(N < 34)

9024136860463320

255806

9482

Above Av.7936

7545

77

BlackMale

(N < 22)

75158

7060423427

9180

328232

Average2538

6284

68

(1) Length of time in business. White males averaged 13 yearsand black males averaged eight years. This perhaps is areflection of the more recent encouragement given blacks togo into business for themselves.

(2) Frequency of separation and divorce from wives. In thisstudy 6% whites and 32% blacks were divorced or separated.This may reflect a general cultural difference rather than acharacteristic of entrepreneurship. (Divorce and separationis considerably higher among the blacks in the U. S. accordingto the Statistical Abstract of the United States, 1970.) In fact,the per cent of divorce and separation among all entrepreneursis below that of the general population (16% among allentrepreneurs combined; approximately 33% in the generalpopulation).

(3) The frequency of a special idea as the basis of the develop-ment of the enterprise was much greater for white entre-preneurs than for blacks. This may have been a reflection ofthe types of entrepreneurs in the two groups. A much higher


percentage of the whites were in manufacturing, where aspecific original idea might have been particularly important.Almost all of the blacks were in sales and services; of thethree blacks who were in manufacturing, all had moved intothe field because of their having an innovative idea.

(4) Differences in per cent graduating from coRege and "serious-ness" in school, as well as differences in self-support in college.Again these may reflect cultural differences and differencesin socio-economic background.

On all other characteristics investigated in the interview, insignifi-cant differences between races were found. It appears that each of theobtained differences resulted from socio-economic differences orfrom special considerations in sample selection, as in (3) above, andit does not appear that any racial differences for entrepreneurs assuch were evident. The null hypothesis, therefore, cannot be rejectedon the basis of interview results.

Table 2 presents the objective scales of the EPPS and the SIV forthe two racial groups, separately and combined. Inspection of the rawdata indicated no justification for combining the sexes in this study.In comparing black and white males, however, we find that on adlscales except Benevolence there are no significant differences. Theonly exception was a t of 2.48 produced by the very low score ofwhites on the Benevolence scale. Because of the ipsative nature ofthe BIV, and because of the very high scores by whites on Indepen-dence and Leadership, the low Benevolence scores are interpreted asrelatively low for the entrepreneurs, not necessarily low compared tothe general population. Since the SIV is not normative, only interpre-tation of relative values is appropriate. The f-tests were applied forthis survey only to point to direction and relative magnitude of dif-ferences. Because of the small differences between blacks and whitesfotmd in Table 2, the results of the two races are combined in thelast column.

Compared to men in general, entrepreneurs are significantly higheron scales reflecting need for achievement, independence, and effec-tiveness of their leadership, and are low on scales refiecting emphasison need for support. Again the low need for support score may re-sult from the high scores on other scales of this ipsative survey.

Note that only three of the EPPS scales were investigated in thisstudy. Only those three scales were investigated since it was assumedthat they were the most likely to relate to entrepreneurship. It isrecommended that, in later research, the full fifteen scales of the


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EPPS be included in the investigation if cooperating entrepreneurswould be agreeable to answering the full 225 items of that test.

Discussion

It is surprising that the EPPS Autonomy scale yielded no signifi-cant t value (t = 1.34) since interest in independence is a character-istic of successful entrepreneurs and since the SIV Independencescale is highly significant {t — 2.76) and is correlated with the Auton-omy scale .49 (Gordon, 1963).

On the OIS, the numbers cannot be treated as raw scores since thefigures are not quantitatively comparable from one person to another.It is the relative standing that is significant. The highest 10' occupa-tional scales and highest 10 college major scales were examined forblacks and whites separately, and striking differences were evident.Both college and occupational scales related generally to the occupa-tions and a,vocations of the entrepreneurs. Since there were moremanufacturers (particularly in electronics and related areas) amongthe whites, engineering scales were frequently high; for blacks theywere infrequently in the top five scales. The interviews (Table 1) in-dicated that education level was significantly higher for the whites,and the kinds of occupations ranking toward the top for them re-flected higher educational requirements. For example, whites fre-quently ranked high on computer programmer, engineer, psycholo-gist, and travel agent. Blacks frequently ranked high on televisionrepairmen, plumbing contractor, automobile salesman, and florist.Both rank high on manager, architect, and buyer.

It is of interest to note that lambdas greater than .60 were attainedon one or more scales by 40 per cent of the white entrepreneurs butby none of the black entrepreneurs. Lambdas above .50 were at-tained by 80 per cent of the whites and only 30 per cent of the blacks.That difference is interpreted to mean that the interests of the blackentrepreneurs are not as highly developed and are more diverse; in-terests of white entrepreneurs tend to be more sharply developed.This again is probably the result in a large measure of the differencein educational background.

Over-all, the OIS was not significant in selecting entrepreneurs orin differentiating blacks and whites of comparable educational level,but it still may prove to be fruitful if a scale for entrepreneurs canbe developed. This aspiration is reinforced by the fact that for manyblacks Business was a first or second preference as a college major.The OIS was also useful in the present study in that the V scale, ameasure of accuracy of the test-taking by examinees, was checked


TABLE 3

of Self-Ratings on The Self-Evalvation Scale for White and BlackEntrepreneurs, and Their Combined Scores, in Per Cent

Selecting Each Position.

1. Energy level

2. Physical health

3. Need Achievement

4. Willing to take lisks

5. Watch T.V.»

6. Creative

7. Need for affiliation

8. Desire for money

9. Tolerate Uncertainty

10. Desire for candy*

11. Authoritarian in Business

12. Liking for sports'

13. Get along with employees

WhiteBlackCombined

WhiteBlackCombiaed

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

6

674763

796864

706665

605668

000

474346

61911

216533

304335

904

383524

064

644751

4

272627

152521

182822

272827

91110

374339

91413

351026

272928

000

383035

271922

363535

3

172620

51915

121413

91411

301724

101412

102920

352532

201016

000

191227

276

16

8129

2

000

000

000

304

472236

704

162424

9109

131414

967

6126

182622

000

1

000

000

000

000

135029

000

201432

000

1058

819489

0129

274437

465

HORNADAY AND ABOUD

TABLE 3 (continued)

151

14. Organized

15. Self-Relian.t

16. Likes to Collect Things"

17. Singleness of Purpose

18. Need for Power

19. Patience

20. Competitiveness

21. Take Initiative

22. Confidence

23. Versatility

24. Perseverance

25. Resilience

26. Innovation in Business

27. Leadership Effectiveness

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

WhiteBlackCombined

5

122431

725566

904

121815

151013

353032

335366

697070

537765

395346

637770

596562

457841

323835

4

415230

214028

91311

311824

91411

183024

282420

273028

472435

503040

312427

293029

391641

393337

3

411019

354

967

182421

271422

61812

22126

000

000

1169

to o ro

1269

120

15

261923

2

01413

000

0137

311221

213326

241218

11126

000

000

o to ro

000

000

304

3106

1

607

302

726970

63018

272928

181215

CO O

O

S402

000

063

000

000

060

000

» Indicate "filler" items which were inserted so that eBtrepreueurs would have the opportunity touse the entire range of the scale.


to determine if the answers were valid. In only one case was the Vscale out of the acceptable range and for t h a t individual all of theforms were returned to the entrepreneur with the request t h a t het ake them a second t ime more carefully. Since they were notreturned, he was not used in the test analyses.

T h e Self-Evaluation Scale is so highly subjective t h a t it is of littlevalue. T o be interpreted meaningfully, it would have to be given t oa standardization group for comparison. As a mat te r of informationonly, the distribution of answers for the 34 whites and 22 black en-trepreneurs is presented separately and combined. Inspection ofTab le 3 reveals a very high similarity of self-ratings by the two racesso tha t combination is most meaningful. Both races ra te themselvessignificantly above average on need for achievement, self-reliance,competitiveness, initiative, confidence, versatil i ty, perseverance,resilience, innovation, and physical health.

In addition, as pa r t of the structured interview each entrepreneurwas asked what qualities were necessary for success in business. Thecharacteristics listed by both blacks and whites are similar, but therewas some difference in emphasis.

T h e blacks mentioned naost often the need to have "Knowledge ofthe Business." Also frequently mentioned was either skill in manage-ment of finances or a source of financial advice. Frequent ly men-tioned, but not as often as Knowledge of Business, was : honesty,having a good character, possession of inner drive, willingness towork hard, and pleasing personality. This latter list corresponds verywell with the characteristics most frequently mentioned by whiteentrepreneurs: willingness to work hard, perseverance, single-mind-dedness of purpose, and the ability to work with people.

Conclusions

Both the E P P S and the SIV yielded scales t h a t significantly differ-entiated entrepreneurs from men in the standardization groups forthose tests. These scales were achievement, support, independenceand leadership (Table 2 ) . I t is recommended, therefore, t ha t thesetwo forms be used in further s tudy of the entrepreneur. I t is alsorecommended t ha t continued use of the OIS m a y be fruitful in orderto gather sufficient da ta for developing an entrepreneurial scale.

The interview items have not been analyzed for their effectivenessin differentiating entrepreneurs from men in general, but the i temshave been sharpened for clarity, and the authors ' experience withthese sixty entrepreneurs indicates t ha t the items as given elicit mean-ingful responses from entrepreneurs. Compared to the laborious


procedures and technical training necessary for interpreting projec-tive tests, the administration and scoring of the objective tests iseasy and accurate. Furthermore, not only does this procedure yieldn Ach scores but also other information, obtained by structureddevices and objectively evaluated, which further sharpens the dif-ferentiation of the successful entrepreneur. It is yet to be deter-mined whether these scales will differentiate between the successfulentrepreneur and the individual who has made an unsuccessfulattemp to be an entrepreneur but this study establishes (inso-far as judgment can be made on a small number of cases) that thestructured interview and tests used here are objective indicators ofentr epreneurship.

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Science Research Associates, 1960.Gordon, Leonard V. Research Briefs on Survey of Interpersonal Values

(Manual Supplement). Chicago: Science Research Associates, 1963.Hermans, Huber, J. M. A questionnaire measure of achievement motivation.

Journal of Applied Psychology, 1970, 54, 353-363.Homaday, John A. and Bunker, Charles S. The nature of the entrepreneur.

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Klinger, E. Fantasy need achievement as a motivational construct. Psycholog-ical Bulletin, 1966, 66, 291-308.

Kuder, Freded.c. A rationale for evaluating interests. Educational and Psycho-logical Measurement, 1963, 23, 3-10.

Kuder, Frederic. Manual for the Kuder Preference Record: Form DD. CM-cago: Science Research Associates, Inc., 1970.

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Achievement Motive. New York: Appleton-Century-Crofts, 1953.Murray, Henrjr A. Manual for the Thematic Apperception Test. Cambridge:

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