Five personality traits, social capital and entrepreneurial motivation

Entrepreneurship is receiving more attention now than ever. Entrepreneurship leads to value creation which has positive impact on economic growth and employment (Tang and Koveos, 2004). That is the reason why so many education programmes have been designed to encourage entrepreneurship (Vesper and Gartner, 1997). Research has shown that entrepreneurial intentions could be developed through well designed educational programmes. The premiere B schools of the country such as IIM’s and XLRI are having their own entrepreneurial cell to cultivate entrepreneurship.

Identifying beneficial personality traits that can influence entrepreneurial behaviour can help us cultivate entrepreneurs in our country. Linking personality characteristics with that of entrepreneurial motivation is quite old. (McClelland, 1961; Wortman, 1987). However, there has been not much empirical evidence as to how the personality traits affect entrepreneurial motivations.

Research has also shown that social capital significantly influences entrepreneurial intentions. Anderson and Miller( 2003) found out that social capital of the individual entrepreneurs directly affect the success of the start ups. The top education institutions with their strong network are likely to influence entrepreneurial motivation. Social capital by providing access to important resources affects the decisions of individuals to become entrepreneurs. To begin with social capital leads to the betterment of the opportunity identification process and recognition capabilities. It provides access to ‘loci of resources’ and also gives timing advantage in the competitive environment (Nicolaou and Birley, 2003) However, personality traits also affect the social capital a person accumulates. This project attempts to answer the question as to how the social capital is developed and to test whether ‘social capital’ acts as a mediator of the relationship between personality and entrepreneurial motivation.

Research background and hypotheses
Entrepreneurial motivation

The big five model provides a general framework for examining the effects of personality traits on the motivation to become an entrepreneur. The big five model of personality is probably one of the most comprehensive and parsimonious personality taxonomies (Costa and McCrae, 1992). Meta-analytic evidences have shown that the big five personality traits affect the odds of getting motivated to become an entrepreneur (Zhao and Seibert, 2006; Rauch and Frese, 2007).

The five factors of big-five personality traits are extraversion, openness to experience agreeableness, conscientiousness and emotional stability (Barrick and Mount, 1991).

Present researches have focused on the relationship between five factors of big-five personality traits and entrepreneurial motivation.

Extraversion

Extraversion is an aspect of personality which includes characteristics such as sociability, talkativeness, assertiveness, and ambition (Barrick and Mount, 1991). It is a valuable trait for entrepreneurs because they need to spend a lot of time interacting with investors, employees, and customers, and have to sell all of them on the value of the business (Shane, 2003). Extraversion is positively related to motivation in enterprising occupations (Costa, McCrae, & Holland, 1984).

This is reaffirmed by empirical research that is indicating people who score high on extraversion are more likely than others to become entrepreneurs (Shane, 2003).

Openness to experience

Openness to experience characterizes someone who is open to novel experiences and ideas and who is imaginative, innovative and reflective (McCrae, 1987; Costa and McCrae, 1992). Such attributes are important for entrepreneurs as they need to explore new ideas and take innovative approaches to the development of products and the organization of businesses (Zhao and Seibert, 2006). Empirical research confirms the positive association between openness to experience and the odds of being an entrepreneur (Zhao and Seibert, 2006).

Agreeableness

Agreeableness characterizes someone who is cooperative, trusting, forgiving, tolerant, courteous and soft-hearted (Barrick and Mount, 1991). Agreeable people are less likely to start businesses because people with this trait are less likely to pursue their own self-interest, drive difficult bargains, or use others to achieve their objectives (Zhao and Siebert, 2006). Less agreeable people also are more skeptical than others (Costa and McCrae, 1992) which makes them more likely to have a critical approach to assessing business information (Shane, 2003).

Empirical research confirms the negative association between agreeableness and the odds of being an entrepreneur (Zhao and Seibert, 2006).

Conscientiousness

This trait is associated with dependability, hard work and perseverance (Barrick and Mount, 1991). Entrepreneurs need to be high on conscientiousness since they need to be organized and deliberate to achieve their goals. They also need to be persistent and put in the hard work necessary to overcome obstacles, like the failure to obtain financing or cost overruns, associated with the venturing process (Locke and Baum, 2007; MacMillan et al., 1985; Timmons, 1989). Empirical research confirms the positive association between conscientiousness and the tendency to be an entrepreneur (Zhao and Siebert, 2006).

Emotional stability (Low Neuroticism)

The common characteristics associated with people scoring low on this factor include being anxious, worried, insecure, embarrassed and emotional (Barrick and Mount, 1991). People who are emotionally stable are more likely to start their own businesses than people who are neurotic because entrepreneurs need a high tolerance to stress to cope with the hard work (Rauch and Freese, 2007). A variety of studies show that people high on emotional stability are more likely than others to engage in entrepreneurship (Zhao and Seibert, 2006).

Social capital as a mediator
Social Capital definition:

Social capital has various definitions focussing on social capital both as a cause and effect (Williams, 2006). Bourdieu and Wacquant (1992) define social capital as “the sum of resources, actual or virtual, that accrue to individual by virtue of possessing a durable network of more or less institutionalized relationship of mutual acquaintance and recognition. An alternative definition is provided by Huysman and Wulf (2004). According to them, social capital refers to network ties of goodwill, mutual support, shared language, social norms, social trust and a sense of mutual obligation people can drive their value from.

Putnam (2000) has talked about two kinds of social capital: bridging social capital and bonding social capital. Bridging social capital refers to the week ties between the people. They may use these ties to gain some favour but definitely not emotional support. Granovetter (1973) says that social networks outside one’s close circle helps one to access non-redundant information which may prove to be beneficial for employment connections. Another form of social capital is bonding social capital which is in form of close ties and also provides emotional support. Another kind of social capital considered over here is that of high school social capital which is especially relevant for people moving to the universities. The people who would be high on social capital would forge new links while keeping the links formed in the past. The sum total of these three social capitals would give the overall social capital of the person (Angela M. Adkins, 2009)

Putnam (2000) also states that people who are ready to accommodate the viewpoint of others are supposed to have high bridging capital. This could be directly linked to openness dimension of personality which means openness to other’s ideas. Also, extroverts are likely to be high on social capital as many researchers suggest that. Thus, by facilitating access to resources, social capital tends to mediate between personality and entrepreneurial motivation. For example, individual scoring high on openness would build strong bridging capital which would make the access to resources easier for him and this would boost his entrepreneurial motivation.

The existing link between Social capital and personality traits: In literature linkage between social capital and big five personality traits: Extraversion, Agreeableness, and Conscientiousness

Openness to Experience, Neuroticism has been studied and various researches have given different results, the review of the same is as follows:

Extraversion

Extraversion is associated with higher levels of contacting friends, acquaintances, and referrals for job leads and use of traditional job-search methods (Wanberg et al.,2000). It is also associated with relationship building, a behavior that refers to initiating social interaction by organizational newcomers. (Wanberg andKammeyer-Mueller,2000). Extraversion is a predictor of performance for occupations that achieve a high level of support from society and increased social capital (Barrick and Mount 1991). Extraverts tend to have better social skills than introverts (Riggio 1986) and attract higher social capital in social groups (Anderson, John, Keltner, and Kring 2001). Extraverts also find social situations more rewarding than introverts because they are more sensitive to the rewards inherent in most social situations hence increase their social capital (Lucas, Diener, Grob, Suh, and Shao 2000).

Agreeableness

Individuals with high levels of Agreeableness tend to be courteous, flexible, trusting, good-natured, cooperative, forgiving, empathetic, soft-hearted and tolerant. They tend to be eager to cooperate and to avoid conflict. Individuals low in Agreeableness tend to be hardheaded, direct, skeptical, proud, and competitive (Costa and McCrae 1992). Agreeableness is associated with positive relations with others (Schmutte and Ryff 1997) In contrast to individuals low in Agreeableness, individuals high in Agreeableness see less conflict in their interactions with others, like others more, and rate others higher in terms of global social desirability these people bring more social capital (Graziano et al. 1996).Though, there has not been much empirical evidence available for the agreeableness and the degree to which it is related to social capital of an individual.

Conscientiousness

Conscientiousness refers to the extent that an individual is dependable, careful, thorough, responsible, organized, and efficient, disciplined, good at planning, and has a high will to achieve. Individuals high in Conscientiousness tend to be well-organized, have high standards, and strive to achieve their goals. Individuals low on this dimension tends to be easygoing, not very well organized, and sometimes careless (Costa and McCrae 1992). Some people’s ability to accrue beneficial social capital because of their low level of Conscientiousness (Vodosek, 1999)

Openness to Experience: Individuals with high levels of Openness to Experience typically display imagination, curiosity, originality, and open-mindedness. In contrast, individuals low in

Personality and the Formation of Social Networks Openness to Experience tend to be down-to-earth, practical, traditional, and set in their ways (Costa and McCrae 1992). McCrae (1996) suggested that Openness may have the most central influence on social and interpersonal phenomena among the five personality factors, since people who are curious and open-minded have an interest in getting to know others. Despite McCrae’s (1996) proposal, the literature does not offer much empirical evidence for Openness’ relation to interpersonal phenomena such as social capital. One exception is (Vodosek, 1999) which shows small negative relationship of openness to experience with Social capital.

Neuroticism:

Neuroticism refers to the extent to which an individual experiences and displays negative effects such as anxiety, sadness, embarrassment, vulnerability, depression, anger, hostility, guilt, and disgust and is prone to have irrational ideas, is able to control his or her impulses, and copes with stress (Costa and McCrae 1992). Neuroticism has been associated with a number of phenomena related to interpersonal interaction and close relationships. For example, Neuroticism has been shown to be associated with the negative qualities of social networks (Henderson, Byrne, and Duncan-Jones 1981) The relationship between neuroticism and social capital has not been clearly established by literature till now, according to some researches the link does not exist (Vodosek, 1999).

Social capital as Mediator: Hypothesises

Although each of the above personality traits has been found to affect the entrepreneurial motivation, there has been little empirical evidence for the same. The study by Henderson and Robertson (2000) found most of the respondents believing that entrepreneurial traits should be nurtured by external factors. The study of Veciana et al. (2005) tested the desirability, feasibility, and intentionality for entrepreneurship according to gender and entrepreneurial history of students in Catalonia and Puerto Rico. Although the participants had a favourable perception of desirability towards entrepreneurship, their perceptions of feasibility were not positive and so their intentions were relatively low. The study of Begley et al. (1997) compared the role of socio-cultural factors in a four-dimensional model. The study indicated that only social capital of entrepreneurs might be predicted as a factor to start a business (Begley et al., 1997). Under these observations it could be convincingly said that though personality traits influence entrepreneurial motivation, alone their effect is not significant and its relationship with that of entrepreneurial motivation is mediated by an intervening factor. It is hypothesized over here that social capital is a likely mediator of the relationship.

From the discussion above, the following Hypotheses are proposed:

H1a. Students having higher extraversion would have stronger entrepreneurial motivation mediated by social capital.

H1b. Students having higher conscientiousness would have stronger entrepreneurial motivation mediated by social capital.

H1c. Students having higher openness to ideas would have stronger entrepreneurial motivation mediated by social capital.

H1d. Students having higher emotional stability would have stronger entrepreneurial motivation mediated by social capital.

H1e. Students having higher agreeableness would have lower entrepreneurial motivation mediated by social capital.

Figure 1
Theoretical relationship
Gender as a moderating variable

The research has suggested significant difference in entrepreneurial motivation of males and females. A study found that male African and American students have higher motivation as compared to their female counterparts (Ede, 1998). Carter(2000) and Thomas (2001) have shown that females and minorities are faced with more obstacles in entrepreneurship and correspondingly have lower entrepreneurial motivation. Kourilsky and Walstad (1998) suggested that females have less interest in business creation and are more likely to fail when they start their new enterprises. Hakim (2000) came up with preference theory which suggests that gender differences emerge because of structural as well as attitudinal factors. The attitudinal factor is of importance to us and directly arises out of type of personality. Several other theories also exist that point to gender differences like Social Role Theory ( Eagly, 1987) and the revolving door theory(Jackobs, 1989).

A gender split in terms of motivating factor and individual characteristics provides divergent views on entrepreneurship. The motivation for women and men to start their own business differs on the basis of personal economic aspiration. Men are more likely than women to build empire or enter new market (Still & Timms, 2000). Female who displaying the behavior of aggressiveness, emphasis on business growth and making profit can be classified as entrepreneurs (Stevenson et al., 1991).

A number of investigations have explored the hypothesis that males and females differ on dimensions related to entrepreneurial activity. Most of these researches are based on differences in personality traits to account for different entrepreneurial motivation (Welsch and Young 1984, DeCarlo and Lyons 1979, Waddel 1983, Sexton and Bowman 1983, Brockhaus and Horwitz 1986). However, still the data regarding difference between male and female entrepreneurs based on personality traits is limited because of which some researchers have tended to ignore these differences. Chaganti 1986, Birley 1989 have also argued that differences in entrepreneurial motivation between males and females are not based on personality traits.

Based on the above research, we suggest that genders act as the moderating variable between personality type and entrepreneurial motivation and the following hypotheses are proposed

H2a. Gender acts as a moderator between extraversion and entrepreneurial motivation.

H2b. Gender acts as a moderator between conscientiousness and entrepreneurial motivation.

H2c. Gender acts as a moderator between emotional stability and entrepreneurial motivation.

H2d. Gender acts as a moderator between openness to experience and entrepreneurial motivation.

H2e. Gender acts as a moderator between agreeableness and entrepreneurial motivation.

Figure 2
Theoretical relationship (Moderator)
Methodology
Sample

Participants were 190 individuals enrolled in undergraduate or post-graduate colleges of India. The institutions included in the study consist of top academic institutions such as IIMs, XLRI, IITs and NITs which represent variety of geographical regions of the country. The previous studies in the literature also indicate a connection between education and entrepreneurship (Galloway and Brown, 2002; Gorman and Hanlon, 1997; Henderson and Robertson, 2000; Kolvereid and Moen, 1997). Therefore, we have focussed only on the top institutes. Approximately 30% of the participants were females. Participants were aged mainly between 21 and 25 years with an average age of 22 years. Since people are likely to start a business within the age range of 25 to 44 (Liles, 1974), it is critical to focus on people who are slightly younger than 25 and understand which factors affect their intentions to start-up a business in the future. Engineering majors formed majority of the sample population. This helped us to control the effect of academic discipline on our study. All the participants were sent a questionnaire through emails asking questions related to personality type, social capital and entrepreneurial motivation. Their responses were directly recorded in the spreadsheet made for this purpose.

Measures All the constructs were measured using Likert Scales with responses ranging from 1(“Strongly Disagree”) to 5(“Strongly Agree”).

Personality Type: The type of personality was measured using a ten item short scale of Big Five Inventory-10 (BFI-10). The sample item is “I see myself as someone who is reserved”.

Social Capital: A 19 item scale was used to measure social capital which is summation of three subscales measuring bridging social capital, bonding social capital and high school social capital. The scale was developed by Nicole Ellison and Charles Steinfield (2006). A sample item of bridging subscale is “I feel I am a part of my college”. A sample item of bonding social capital subscale is “There is someone at my college I can turn to for advice about making important decisions”. A sample item of high school social capital subscale is “If I needed to, I can ask a high school acquaintance to do a small favour for me”.

Entrepreneurial motivation: The motivation to start a new business was measured using 8 items scale developed by Robert J. Taormina and Sammi Kin-Mei-Lao (2006). A sample item of the scale is “I want to be business owner”.

Results:
Analysis for Mediation:

In this study the four-step method developed by Kenny etal.(1998) and Baronand Kenny(1986) for mediation analysis. The first step is the regression of Personality Types (Extraversion, Agreeableness, Conscientiousness, Neuroticism and Openness) on Social Capital. The second step is the regression of Social Capital on Entrepreneurial Motivation. The third step is the regression of Personality Types (Extraversion, Agreeableness, Conscientiousness, Neuroticism and Openness) on Entrepreneurial Motivation. And in fourth step regression of Personality Types (Extraversion, Agreeableness, Conscientiousness, Neuroticism and Openness) & Social Capital on Entrepreneurial Motivation

In step 1 The effect of predictor variable i.e Personality types on Criterion variable i.e. Social capital (R­2=.156, p<.10) Extraversion, Neuroticism and Openness were the three personality types that were showing significant effect on Criterion variable i.e. Social Capital. Agreeableness and Conscientiousness do not show significant impact on Social Capital. In step 2 there was significant impact of predictor variable i.e. Social Capital on Criterion variable i.e. Entrepreneurial Motivation .( R­2=.039*, p<.10). In step 3 significant relation between predictor variables i.e. Personality types and Criterion variable i.e. Entrepreneurial Motivation (R­2=.142*, p<.10). Further it is found that Extraversion, Agreeableness and Conscientiousness have significant impact on Entrepreneurial Motivation. Neuroticism and Openness has not shown significant impact on Entrepreneurial Motivation in this step. In step 4 on regression of predictor variables i.e. Personality Types and Social Capital on Entrepreneurial Motivation. The regression was significant as (R­2=.149*, p<.10). Further Extraversion has shown significant impact on Entrepreneurial Motivation when social capital used as mediator.

Hence in this case out of all personality types only Extraversion has the significant impact on Entrepreneurial Motivation when Social Capital used as mediator. This is the case of partial mediation as level of significance in step 1 is greater than level of significance in step 4 for Extraversion(Z=2.02 ,mediation effect=-.092,p<.05)

Step
Variables
I?
R­2
Significance
1.)

Regression 1: Personality Types on Social Capital

.156*

Extraversion

.223*

.002

Agreeableness

-.087

.218

Conscientiousness

.037

.584

Neuroticism

-1.71*

.014

Openness

.225*

.002

2.)

Regression 2: Social Capital on Entrepreneurial Motivation

.039*

Social Capital

.199*

.006

3.)

Regression 3: Personality Types on Entrepreneurial Motivation

.142*

Extraversion

.335*

.000

Agreeableness

-.148*

.040

Conscientiousness

.121*

.081

Neuroticism

-.070

.311

Openness

.059`

.412

4.)

Regression 4: Personality Types and Social Capital on Entrepreneurial Motivation

.149*

Extraversion

.315*

.000

Agreeableness

-.14

.052

Conscientiousness

.118

.089

Neuroticism

-0.55

.436

Openness

.039

.598

Social Capital

.090

.225

*p<.10

Tab le 1

Table 1
Mediation analysis results
Figure 3
Mediation Analysis
Reliability:

From Cronbach’s Alpha Social Capital , Entreprenuerial Motivation scale comes out to be significant. However personality fails the reason may be using short big-5 scale in case of original scale.

No. of items
Cronbach’s Alpha
Verdict
Social Capital

19

0.885

Reliable

E. Motivation

8

0.732

Reliable

Personality

10

0.424

Not Reliable

Table 2

Table 2
Reliability

Results taking gender as a moderator: Gender (Male /Female) has been taken as moderator in establishing the mediating relationship by social capital.

In the analysis for male Step 1 in Table shows the results of a regression analysis using SC the criterion variable and personality traits as a predictor. This step revealed that extraversion was significantly related to male student’s SC. (R2 =0.174, p < 0.10). This result establishes that there is an effect that may be mediated. Looking at individual independent variables in the Step 1 (Table II), Extraversion, Neuroticism and Openness were significantly related to SC, whereas agreeableness and Conscientiousness was not found to be related with SC.

In Step 2, Entrepreneurial motivation served as the criterion variable and social capital as the predictors. Here there was no significantly relationship (R2=0.16, p > 0.10).

Looking at each independent variable in Step 3, Table, only extraversion was significantly related with EM (R2=0.124*, p< 0.10)

At step 4 significant relations (R2=0.124*, P<.10) between personality types and SC on EM is observed and the significant relation is with Extraversion.

Male:
Step
Variables
I’
R­2
Significance

1.)

Regression 1: Personality Types on Social Capital

.174*

Extraversion

.248*

.005

Agreeableness

.008

.924

Conscientiousness

-.044

.600

Neuroticism

-.231*

.006

Openness

.177*

.043

2.)

Regression 2: Social Capital on Entrepreneurial Motivation

.016

Social Capital

.129

.149

3.)

Regression 3: Personality Types on Entrepreneurial Motivation

.124*

Extraversion

.330*

.014

Agreeableness

-.127

.341

Conscientiousness

.199

.130

Neuroticism

-.005

.969

Openness

.194

.162

4.)

Regression 4: Personality Types and Social Capital on Entrepreneurial Motivation

.124*

Extraversion

.336*

.015

Agreeableness

-.130

.336

Conscientiousness

.202

.130

Neuroticism

-.008

.954

Openness

.206

.174

Social Capital

-.031

.831

Table 2

Table 3
Moderation analysis results (Male)
Female:

In the analysis for female Step 1 in Table shows the results of a regression analysis using SC the criterion variable and personality traits as a predictor. This step revealed that openness was significantly related to female student’s SC. (R2 =0.242*, p < 0.10). This result establishes that there is an effect that may be mediated. Looking at individual independent variables in the Step 1 (Table II), Openness was significantly related to SC, whereas agreeableness and Extraversion, Neuroticism and Conscientiousness were not found to be related with SC.

In Step 2, Entrepreneurial motivation served as the criterion variable and social capital as the predictors. Here there was no significantly relationship (R2=0.026, p > 0.10).

Looking at each independent variable in Step 3, Table, only extraversion was significantly related with EM (R2=0.197*, p< 0.10)

At step 4 significant relations (R2=0.197*, P<.10) between personality types and SC on EM is observed and the significant relation is with Extraversion.

Step

Variables

I?

R­2

Significance

1.)

Regression 1: Personality Types on Social Capital

.242*

Extraversion

.189

.140

Agreeableness

-.115

.373

Conscientiousness

.091

.474

Neuroticism

-.082

.519

Openness

.401*

.004

2.)

Regression 2: Social Capital on Entrepreneurial Motivation

.026

Social Capital

.160

.230

3.)

Regression 3: Personality Types on Entrepreneurial Motivation

.197*

Extraversion

.330*

.000

Agreeableness

-.105

.237

Conscientiousness

.071

.416

Neuroticism

-.091

.287

Openness

.026

.772

4.)

Regression 4: Personality Types and Social Capital on Entrepreneurial Motivation

.197*

Extraversion

.328*

.001

Agreeableness

-.105

.239

Conscientiousness

.071

.416

Neuroticism

-.089

.315

Openness

.024

.790

Social Capital

.009

.919

Table 3

Table 3
Moderation analysis results (female)

No. of items

Cronbach’s Alpha

Verdict

Social Capital

19

0.885

Reliable

E. Motivation

8

0.732

Reliable

Personality types

10

0.424

Not Reliable

Table 5
Reliability
Moderation analysis results:

Significant relationships in case of male:

Regression 1

Personality Types on Social Capital

Standardised Coefficient

(Beta)

Significance

Extraversion

.248*

.005

Neuroticism

-.231*

.006

Openness

.177*

.043

Regression 2: SC on EM (Non significant)

Regression 3

Personality Types on Entrepreneurial Motivation

Standardised Coefficient

(Beta)

Significance

Extraversion

.330*

.000

Regression 4

Personality Types and Social Capital on Entrepreneurial Motivation

Standardised Coefficient

(Beta)

Significance

Extraversion

.328*

.001

Table 6
Significant relationships results (male)

Similarly in case of female:

Regression 1

Personality Types on Social Capital

Standardised Coefficient

(Beta)

Significance

Openness

.401*

.004

Regression 2: SC on EM (Non significant)

Regression 3

Personality Types on Entrepreneurial Motivation

Standardised Coefficient

(Beta)

Significance