Are Entrepreneurs "Made or "Born"?

(this blog post is closely adapted from a response I left for both Mark Suster's great blog and Vivek Wadhwa's provocative post on TechCrunch.

http://www.bothsidesofthetable.com/2010/02/27/entrepreneurship-nature-vs-nurture-a-religious-debate/

http://techcrunch.com/2010/02/27/can-entrepreneurs-be-made/

Let me ask an easy question: Do entrepreneurs have an above-average propensity to take risks? As it turns out… Uh, no. On average, they do not differ from the rest of us. That study was 30 years ago, at a time where entrepreneurship research assumed, quite naturally, that there was something called the “entrepreneurial personality.” We got over it. So should everyone. (But it is more complicated than merely “nature” vs. “nurture”. And, taking a scientific approach has already paid dividends –I suspect very few of you are current with existing science on this –and approaching the complexities will continue to bear fruit of practical value to entrepreneurs, educators, even VCs. Mark , Vivek– up for a study?)

This is definitely a “theological” discussion so how about we add in some cutting edge social science? Mark Suster & Fred Wilson’s gut reaction that “nature” is critical is understandable. Entrepreneurship experts fell for that same gut reaction decades ago & it took forever to get past it. (It made us a joke in scholarly circles, a hole we’re still digging out of.) Mark – you asked for data – well, decades of work found essentially zero data that supported a distinctive “entrepreneurial personality” & what little we found offered no practical value (eg, Kelly Shaver’s great article nailed it way back in 1991). But…

Who doesn’t want to think of Entrepreneurs as Special, even Magical People?

They do such wondrous things that often seem far beyond what mere mortals can do. Look at Mark’s own list of 12 “traits” that he looks for in entrepreneurs. A person with those characteristics should be able to move mountains. (As an entrepreneur myself, I’d sure love to think I was one of them but… LOL)

What are we really measuring?

Of course, that’s the first fly in the ointment – we are often describing what any great performer might reflect. So are we not identifying great humans? (Not a bad basis for choosing people to help but…)

Dynamic processes & predicting vs explaining:

And do we care more about entrepreneurial people or about the decision to pursue an opportunity (intention) and to implement that decision (action). The second ‘fly’ is that if we care about people starting businesses (effectively) we are dealing with dynamic processes where people and situations evolve, often quickly & discontinuously. That means being able to explain brilliantly need not allow us to predict anything. Right now we explain great entrepreneurs much, much better than we can predict them. (And isn’t *predicting* more valuable to VCs?)

DNA or Human Capital?

The third 'fly' is if my parents were entrepreneurial, how do we know if my entrepreneurial mojo is from shared DNA or from a transfer of human capital?? Lots of MDs have doctor kids… and we know that it’s a matter of human capital far more than genetic capital (look up Lentz & Laband who studied doctors and… entrepreneurs.)

Occam's Razor?

Fourth, is simply parsimony –we can explain –and predict!- better with cognitive models such as simple models of entrepreneurial intentions. Human intentions are basically grounded on perceptions that the behavior is (a) desirable and is (b) feasible, all we need then is a trigger (bit.ly/a39PzE)

My own research area focuses on how entrepreneurs think, applying cognitive & cognitive developmental psychology to how we learn to see opportunities. This has taken me into a deep dive into neuroscience, looking for biological underpinnings of entrepreneurial behavior. Are entrepreneurs wired differently? Again, that evidence is sorely lacking. Let me suggest a look at two interesting volumes published by Springer that bring together the best minds on this topic, Zoltan Acs & Dave Audretsch’s “International Handbook of Entrepreneurship Research” (bit.ly/cE2qp5 for sample chapter**) and Alan Carsrud & Malin Brannback’s new “Understanding the Entrepreneurial Mind” (bit.ly/a39PzE is from that **)

If you buy Howard Stevenson’s great classic definition of entrepreneurship as “pursuing opportunity without regard to resources controlled”… that is saying (in Stevenson’s own words) that *heart* of entrepreneurship is seeing & acting on opportunities. We don’t find opportunities, we construct them. We can be more alert (Israel Kirzner’s clever term) to certain cues/signals but there is still a set of cognitive processes involved. And like most human phenomena, those processes vary across both persons & situations (see Rick Bagozzi’s recent work). Models that only look at person-level characteristics are worse at explaining and far worse at predicting.

Is there evidence to support “nature”-Sure.

Take a careful look at the growing field of behavioral genetics. Did you know that there is a significant heritability coefficient for job satisfaction? Genetic influences are much more widespread than most realize (& it’s not terribly PC, of course) Scott Shane argues that self-employment really does have a heritability coefficient that is clearly non-zero. However, in most studies we find that nurture trumps nature and the interaction of nature & nurture often dominates.

Neuroentrepreneurship?

However, the deeper I look at neuroscience shows how remarkably malleable our biological systems are. Life experiences can and do mold our wiring. What we do see is that entrepreneurs engage in cognitive processes that are available to all of us, choosing mindfully or not to do so. An example: Barbara Sahakian’s lab at Cambridge found that successful (serial) entrepreneurs and a matched set of top managers were equally great at ‘cold’ cognition (emotion-independent) however, on emotion-dependent “hot” cognition, the entrepreneurs were consistently superior (bit.ly/a2fAWR). Abilities at ‘hot’ cognition are clearly learned but there’s also the choice to engage in it.

Neuroplasticity. Returning to my first question about risk-taking propensity, we do know that people with more dopamine receptors in their brains tend to take more risks, prefer novelty, etc. (eg, Zald’s work at Vandy). However, we also know that people who take more risks… grow more dopamine receptors Neuroplasticity is very real. So why don’t we look at how we grow great entrepreneurial thinking?

“Experience is not what happens to you, it’s what you do with what happens to you.” Epictetus was right. Life experiences also change how we structure knowledge. Think about how novices evolve into experts- they typically gain more knowledge content but they are even more likely to have very different knowledge structures (sometimes even simpler than novices’).

“Growing Up Entrepreneurial” might thus be better thought of as going through critical developmental experiences that mold how we think in ways that support, reinforce & grow the entrepreneurial mindset (bit.ly/9VyUJm). Everyone of Mark’s great list of 12 key characteristics can arise from the right kinds of developmental experiences. [Mark & Vivek, if you’ve read this far-again, would you be interested in a serious research project? It’s very fundable!] In fact, it’s a far simpler explanation to argue for the cognitive developmental model than to torture the data to find a “nature” explanation.

Anyway, isn’t the real question: “Do we want to explain great entrepreneurs or predict them?”

Or put another, better way” “Don’t we want to know how we grow into great entrepreneurs?”

Anyone interested in pursuing this, give me a holler – at worst, I can probably connect you with a great scholar in your own backyard. Thanks for indulging me here!

Entrepreneur Up!

Norris Krueger, RE*, PhD

@entrep_thinking ; norris.krueger@@gmail.com

* RE = Recovering Entrepreneur (LOL)

** Sorry to be self-referencing – the only chapters I had handy were my own, but they address issues relevant here. But I urge anyone interested to look at both of these volumes. I have wonderful colleagues globally who could argue this better with their own great work.