The Moderating Role of Cross-Functional Diversity in the Relationship Between
the Big Five Personality Traits and Entrepreneurial Success
Anne Wemmenhove - S2572923
Master’s Thesis MSc HRM
Abstract
The relationship between personality traits and entrepreneurial success has been extensively studied, but there is still a need for investigation of moderators (Zhao & Seibert, 2006, Rauch & Frese, 2007 and Frese & Gielnik, 2014). Prior research focused mainly on contextual moderators, but I argue that it might be the internal skills and experiences of entrepreneurs that may complement their personality in reaching success. On the basis of skill
complementarity theory I created a conceptual model in which cross-functional diversity interacts with personality traits in creating entrepreneurial success. To test the hypotheses a sample of 311 self-employed from the National Survey of Midlife Development in the United States II (MIDUS II, Ryff et al., 2004-2006) was used. The results were not completely in line with the expectations, however, some interesting main effects with regard to extraversion and cross-functional experience extend our knowledge on critical factors for entrepreneurial success. Furthermore, several streams of research in organizational behaviour, psychology, entrepreneurship, and economics were integrated for the first time and this resulted in valuable insights concerning the role of traits and skills in entrepreneurial success. Potential theoretical and practical implications and directions for future research are discussed.
Keywords: personality traits, cross-functional diversity, entrepreneurial success, skill
The Moderating Role of Cross-Functional Diversity in the Relationship Between the Big Five Personality Traits and Entrepreneurial Success
Entrepreneurs are vital to economic prosperity throughout the world. In 2013, in the USA nearly 13% of the US working age population was in the process of starting or running a new business (measured as TEA: Total early-stage Entrepreneurial Activity). This is the highest entrepreneurship rate reported among the 25 developed countries that participated in Global Entrepreneurship Monitor 2013 from North-America, Europe and Asia (GEM 2013, United States Report). The western European countries have a TEA ranging from 3.4% (Italy) to 9.3% (The Netherlands). Next to this high entrepreneurship rates in the US, the GEM reports that these entrepreneurs have high impact as well. Some 37% of entrepreneurs expect to employ six or more employees in the next five years (GEM 2013, United States Report). Entrepreneurs are also critical to job growth in Western Europe: the World Economic Forum report suggest that as many as 50% of all new jobs are created by new ventures (Machado & Wilson, 2014).
These figures make clear that entrepreneurs contribute enormously to the growth of a healthy economy, but also to the lives of fellow citizens by creating jobs and innovate products and services. This contribution is only possible if these entrepreneurs succeed in what they do. In order for new firms to grow the firms must be successful and their
owners/founders must be financially successful as well and able to make a living income from their business. To deepen the understanding of what makes a successful entrepreneur
(measured by entrepreneurial income) could provide the field of research as well as the entrepreneurs themselves with valuable insights and strengthen the contribution of entrepreneurship to the socio-economic development.
entrepreneurial behaviour, human capital and personality characteristics. With regard to this last factor past research has for a long time dismissed personality traits as predictors of entrepreneurial performance. In his well-known paper Gartner (1988) argues that the trait view alone is inadequate to explain the phenomenon of entrepreneurship. Lack of agreement about ‘who an entrepreneur is’ resulted in the fact that variance among entrepreneurs was greater than variance between entrepreneurs and non-entrepreneurial managers in this research. He claims that entrepreneurship is a role that individuals undertake to create organizations (Gartner, 1988). With that he advocates for a behavioural approach to
entrepreneurship. More recently, Zhao & Seibert (2006) state that the emergence of the Five Factor Model (Big Five personality traits) in the early 1990s is one of the reasons that now more meaningful conclusions about the relationship between personality and entrepreneurial success can be drawn (Zhao & Seibert, 2006). Meta-analytic results of Zhao & Seibert (2006) and others like the one of Rauch & Frese (2007) using the FFM have changed the initial perceptions and lead to a resurgence of interest in trait approaches to entrepreneurship. Based on these meta-analyses FFM traits are now generally considered reliable and moderate to strong predictors of entrepreneurial intentions and outcomes, along with constructs like need for achievement (McClelland, 1961) and risk propensity (Stewart & Roth, 2004).
the literature on human capital and entrepreneurship. Unger, Rauch, Frese and Rosenbusch (2011) claim in their meta-analysis that whether human capital investments (education and experience) lead to knowledge and skills and eventually to entrepreneurial success could depend on the characteristics of the individual. If there is a substitution or interaction effect for these characteristics - in this case personality traits – and important vocational experience for entrepreneurs, that could give the field some interesting ideas about how traits relate to entrepreneurship outcomes.
The idea that personality traits can interact with an individual’s skills or experiences is a realistic one which is well-grounded in skill complementarity theory. This theory provides a framework for when personality traits might interact with career experiences to predict entrepreneurial success. Skill complementarity is a model in which skills moderate the
relationship between personality constructs and performance (Witt & Ferris, 2003), drawn for Maier’s (1955) interactionist model, which states that job performance results from the interaction between motivation and ability. Looking at how career experiences moderate the effect of personality traits would enhance our knowledge of when personality traits influence entrepreneurial success, which would have implications for theories about individual
differences, theories about entrepreneurship, and practical implications for organizations interested in promoting and developing entrepreneurship as a form of economic growth.
traits and entrepreneurial success. With that I challenge the important assumption in
entrepreneurship literature about the FFM traits that it is contextual moderators that explain when traits predict entrepreneurial outcomes. This will contribute to current knowledge in several ways. First of all, in this paper I link the FFM traits to cross-functional
diversity/generalist skill sets, which for the first time integrates several streams of research in organizational behaviour, psychology, entrepreneurship, and economics about the role of traits and skills in outcomes. Furthermore, this research adds a deeper understanding to the need for moderating factors that link FFM traits to entrepreneurial outcomes. Although situational contingencies are suggested as potential interesting moderators for future research more than once (Zhao & Seibert, 2006, Rauch & Frese, 2007 and Frese & Gielnik, 2014), the integration of skill complementarity theory and the knowledge on the value of
cross-functional experience provides the argument that instead of having the right person/situation alignment, it might be the combination of having the right skills and the right motivational drivers that makes someone a successful entrepreneur.
The above described assumptions are going to be tested with this conceptual model: Figure 1 Conceptual Model
Literature Review and Hypotheses FFM Traits and Entrepreneurship
As explained in the introduction FFM traits are now generally considered reliable and moderate to strong predictors of entrepreneurial outcomes. Improvement in meta-analytic techniques like the ones used by Zhao & Seibert (2006) and Rauch & Frese (2007)
contributed to this consensus. In their meta-analysis Zhao & Seibert (2006) build on previous work of researchers like Costa & McCrae (1980, 1986, 1987), who worked on validation of the FFM traits, when defining them. These definitions will be used in this paper and explained below.
To understand the value of the various traits for entrepreneurs it is important to know what they entail. Openness to experience is a personality dimension that characterizes someone who is intellectually curious and tends to seek new experiences and explore novel ideas. Someone high on openness can be described as creative, innovative, imaginative, reflective, and untraditional and someone low on openness can be characterized as
conventional, narrow in interests, and unanalytical (Zhao & Seibert, 2006). Conscientiousness indicates an individual’s degree of organization, persistence, hard work, and motivation in the pursuit of goal accomplishment, Zhao & Seibert (2006) state. They go on to say that many scholars regard conscientiousness as a broad personality dimension that is composed of two primary facets: achievement motivation and dependability and refer to Mount & Barrick (1995) as an example of this view. Neuroticism represents individual differences in
interpersonal orientation. They claim that individuals high on agreeableness can be characterized as trusting, forgiving, caring, altruistic, and gullible and that the high end of agreeableness represents someone who has cooperative values and a preference for positive interpersonal relationships. The refer to Costa & McCrae (1992) and Digman (1990) when stating that someone at the low end of the dimension can be characterized as manipulative, self-centred, suspicious, and ruthless.
In a later meta-analysis Zhao, Seibert & Lumpkin (2010) conclude that of the FFM openness to experience and conscientiousness appeared to be the personality constructs most strongly and consistently associated with entrepreneurial intentions and performance.
Emotional stability and extraversion are also related to these outcomes, but the effect size is smaller. Agreeableness is the only construct which seems to be unrelated to entrepreneurial intentions and performance, although some small but statistically significant results in the negative direction were found for this construct (Zhao et al., 2010). For these reasons this study will focus on the traits openness to experience, conscientiousness, extraversion and emotional stability with regard to outcomes of entrepreneurial success. Agreeableness will be included as a control variable in the study.
Cross-Functional Diversity
This paper extends the knowledge on potential moderators of the relationship between the FFM traits and entrepreneurial success by looking at the influence of cross-functional diversity. Cross-functional experience is one type of intrapersonal functional diversity, which is a construct used to describe different ways in which people have skill or experience sets that might differ from those of a narrow functional specialist.I believe that individuals with greater intrapersonal functional diversity - in this case, cross-functional experience - will have a great breadth of skills and experiences to draw from that will benefit the relationship
open to experience may benefit greatly from having cross-functional experience because he/she will have access to more different ideas and perspectives that he/she will be more predisposed to use in his/her new venture.
The effects of cross-functional diversity have been studied in the field of
organizational behaviour research. These effects are found to be meaningful, because they are hypothesized to be a skill set that enables individuals to solve novel, difficult problems (Cannella et al.,2008 and Bunderson & Sutcliffe, 2002). Bunderson & Sutcliffe (2002) introduced the concept of intrapersonal functional diversity in their study about functional diversity in management teams. They claimed that the diversity represented in the functional backgrounds of the individual team members had been given surprisingly little attention with regard to team outcomes. In their study they found positive and significant implications of intrapersonal functional diversity for team process and performance. Looking at the
significance of the construct for individual managers they refer to Campion, Cheraskin, and Stevens (1994) who found that experience in a range of functional domains was positively associated with salary level, promotion opportunities, overall positive affect, and perceptions of skill acquisition (Bunderson & Sutcliffe, 2002). They also recall McCall, Lombardo & Morrisson (1988) with their study on development strategies of managers, who found that experience and the associated functional breadth is beneficial for careers.
In entrepreneurship research the role of experience and a variety of it in different functional areas is often being referred to as the entrepreneur being a generalist. It enables individuals to solve novel, difficult problems, which is uniquely valuable for entrepreneurs (Hsieh, Nickerson & Zenger, 2007). Two theoretical approaches have dominated in this area. On the one hand the view that entrepreneurs are generalists (Lazear, 2004), which is
Astebro & Thompson (2011). On the other hand the Taste for variety approach, which entails that individuals become entrepreneurs because doing so provides utility (Astebro &
Thompson, 2011). The Jack of all Trades approach predicts that a positive association between prior occupational variety and entrepreneurial earnings exists, because these
entrepreneurs would have more balanced skills and better problem-solving ability. The Taste for variety approach implies a negative association, reasoning that these entrepreneurs are willing to forego income in order to gain some non-pecuniary benefits from variety (Astebro & Thompson, 2011). In this view the generalist skill set is more a function of job hopping and does not necessarily give someone better problem-solving ability. In their research, Astebro & Thompson conclude that the Taste for variety approach dominates.
Next to these two dominant approaches a lot of other researchers paid attention to cross-functional experience in entrepreneurship. Politis & Gabrielsson (2005) build upon a broad research base when investigating the role of experience in entrepreneurship and when concluding that previous start-up experience and cross-functional experience seem to improve the ability to recognize business opportunities. They refer, amongst others, to Vesper who in 1980 found that a variety of experience in different functional areas was an indicator of better new venture performance. Friar & Meyer (2003) investigated the differentiating factors between the formation of high-growth ventures and low-growth micro-businesses in the Boston region in the USA. They concluded that the founders of the high-growth ventures had significant work experience and/or advanced training in their industries/technologies and that the winners had cross-functional experience within the founding team.
Skill Complementarity Theory
To develop specific hypotheses regarding my interactions, I turn to skill
complementarity theory. This is a theoretical model in which skills moderate the relationship between personality constructs and performance (Witt & Ferris, 2003). Whereas personality traits are relatively stable and enduring dispositions, skills can be learned and could influence the way traits are demonstrated. More specifically, the learned ability of skills allows
personality dispositions to demonstrate their positive effects (Witt & Ferris, 2003).
Skill complementarity theory provides a framework for when personality traits might interact with career experiences to predict entrepreneurial success. It is a theoretical
descendant of Maier’s (1955) interactionist model of how performance and behavioural outcomes are the product of combinations of motivation and ability. In this formula
motivation and ability do not only have main effects on performance, rather, motivation has stronger effects at higher levels of ability, and ability has stronger effects at higher levels of motivation (Witt & Ferris, 2003). This principle has been applied effectively in settings for employed workers, from which we know that traits can be influenced by skills or abilities in their relationship with performance outcomes. For example, Ferris and colleagues (2001) used this principle to study the interaction between social skill and general mental ability (Ferris, Witt & Hochwarter, 2001). Other studies have assessed how skills moderate the relationship between a trait and employee job performance (Witt & Ferris, 2003). Although the results were mixed for some of the papers using personality as a measure of motivation in Maier’s (1955) interaction model, Witt & Ferris (2003) conducted 4 studies and found their
hypotheses of the positive relationship between conscientiousness and employee job
of various skills in reaching success are also well-grounded in entrepreneurship literature. For example Baron & Markman (2000) explain the positive influence of social skills on
entrepreneurial success. I expect that these factors interact in a positive way for entrepreneurs, like we know they do for traditional employees.
This theoretical background is used for my assumption that the positive relationship between some traits of the FFM and entrepreneurial outcomes is influenced by a moderator reflecting skill or experience. In applying skill complementarity to my study, I model personality traits as the motivational constructs and cross-functional diversity as the experience construct. This modelling is meaningful, because FFM traits are strongly associated with proximal work motivations (Judge & Illies, 2002). Furthermore, cross-functional experience is one type of intrapersonal cross-functional diversity, which implies that individuals have a unique skill and ability set (Bunderson & Sutcliffe, 2002 and Cannella, Park & Lee, 2008). To my knowledge, using skill complementarity theory to assess
experience as opposed to skills is a novelty in this field of literature. However, because this specific type of experience is so closely related to individuals having a unique skill and ability set, I assume this modelling makes sense.
Hypotheses
As discussed above, personality traits are strongly associated with motivational drivers related to achievement and performance motivations. Cross-functional experience is
associated with a skill set that enables individuals to perform. Together, the motivation and skills should combine and create better performance. This interaction between personality traits and cross-functional experience should lead to entrepreneurial success. I propose a set of three hypotheses to test this assumption.
and this outcome is a positive one. The motivational drivers of this trait are the need to engage in novel experiences and settings and walk nonconventional paths (Zhao & Seibert, 2006), which are helpful drivers for someone engaging in the creation of or running a (new) business. From a study of LePine, Colquitt & Erez (2000) we also know that openness is a predictor of adaptability prior to unforeseen changes. So in the running of a business, which inherently comes with lots of unforeseen changes, individuals high on openness are better able to adapt to these changes. This will help them become successful entrepreneurs. George & Zhou (2001) studied the mechanisms that relate openness to creative behaviour and found that individuals high on openness showed the highest creative behaviour when they received positive feedback and they have unclear ends and means on their jobs. When ends are unclear there is uncertainty concerning what exactly should be accomplished and when means are unclear it is ambiguous how to perform tasks and reach goals and objectives (George & Zhou, 2001). These job characteristics are typical for entrepreneurship. So entrepreneurs high on openness are probably working in the right context to show creative behaviour, which is beneficial in the process of becoming a successful entrepreneur. These mechanisms could explain the positive relationship between openness and entrepreneurial success. Next to this, a breadth of functional experience will probably help an entrepreneur high on openness to understand the different functions and market segments in which his/her novel and creative ideas could work and see opportunities within several functional groups. This experience could also provide him/her with some realism and prevent him/her from pursuing unrealistic ideas. In this sense cross-functional experience could interact with openness in a positive way to make the entrepreneur even more successful. This results in the hypothesis:
The relationship between conscientiousness and entrepreneurial success is proven to be positive. Achievement motivation is one of the primary facets of conscientiousness (Zhao & Seibert, 2006), individuals high on conscientiousness are determined to complete things they start, they are highly focused. They value work-related success and are very goal-oriented in achieving this success. However, because of their determination to complete things they started it is important - for entrepreneurs especially - to distinguish goals that help them reach success from goals that are not helpful. If they score high on cross-functional diversity this might imply that they have the experience and knowledge about added value and successful processes and objectives in organizations. This cross-functional experience may help highly conscientious entrepreneurs identify goals that are essential in their pursuit of entrepreneurial success. Without this experience they may lack a framework to help them judge which goals and objectives are worth their hard work and persistence. In this case they could become less successful by directing all of their efforts towards the wrong goals. So entrepreneurs high on conscientiousness and with high cross-functional diversity should be even more successful than when cross-functional diversity is low. This results in the hypothesis:
H2: The positive relationship between the personality trait conscientiousness and entrepreneurial success is stronger when cross-functional diversity is high rather than low.
Extraversion is related to entrepreneurial success, although the effect size is smaller than with the previous 2 traits (Zhao & Seibert, 2006). The motivational drivers of this trait are a need for stimulation, excitement and social interactions. Highly extraverted individuals like to develop networks and connect with people. Cross-functional experience may help them to channel those behaviours in the sense that the experience will help to make the right
goals. For example connections with potential employees, venture capitalists, suppliers etc. If they lack this experience they might be spending their time and energy socialising with everyone they encounter in doing business, because that it what they like to do. In that case they may miss the experience to judge which connections will be helpful for them in becoming successful and which contacts will not result in added value for the business. Concluding, highly extraverted entrepreneurs high on cross-functional diversity should be even more successful than entrepreneurs who lack this experience. From this I construe the hypothesis:
H3: The positive relationship between the personality trait extraversion and
entrepreneurial success is stronger when cross-functional diversity is high rather than low.
As with extraversion the relationship between emotional stability and entrepreneurial success is shown to exist, but is less strong than with the first 2 traits (Zhao & Seibert, 2006). The motivational drivers of this trait are looking for facts and pressing ahead, unaffected by fluctuations in their mood. Whether a broad vocational experience interacts positively with entrepreneurs high on emotional stability is unclear to me. These entrepreneurs are calm, even-tempered and self-confident in any case and will be able to judge the situation and problems they encounter based on this emotionally stable nature. Their experience probably will not add anything to this quality and will not make them more successful than when they lack this cross-functional diversity, so I did not test a hypothesis concerning this interaction effect.
Method Sample and Procedure
This research was executed as part of the master’s study ‘Human Resource
hypotheses described in the previous section were tested using a sample of 311 self-employed from the National Survey of Midlife Development in the United States II (MIDUS II, Ryff et al, 2004-2006). The researchers from the MIDUS report the following procedure for
collecting data. Respondents to the MIDUS II study were first interviewed as part of the National Survey of Midlife Development in the United States (MIDUS), 1995-1996 (ICPSR 2760). MIDUS was based on a nationally representative random-digit-dial (RDD) sample of noninstitutionalized, English-speaking adults, aged 25 to 74, selected from working telephone banks in the United States. Predesignated households were selected in random replicates, one-fourth of which included a special non-respondent incentive component. Contact persons were informed that the survey was being carried out through the Harvard Medical School and that it was designed to study health and well-being during the middle years of life. After explaining the study to the informant, a household listing was generated of people in the age range of 25 to 74, and a random respondent was selected (Ryff et al. 2004-2006). To identify entrepreneurs from this study, I took the original sample of all individuals and selected individuals who stated that they were self-employed and individuals whose primary source of income was derived from a business they owned and operated. The characteristics of the respondents are distributed as follows: the mean age of the respondents is 54 years (SD = 10.07.), 34% of the respondents is female and 66% is male. The level of education is
distributed in the following way: 3.2% does not have a high school degree, 24.1% has a high school degree, 22.8% has 1 or more years of college, but no degree yet, 8.7% graduated from 2-year college, vocational school or associated degree, 22.5% graduated from a 4- or 5-year college, or bachelor’s degree, 3% did some graduate school and 15.2% has a master’s degree or higher.
FFM traits. In the MIDUS the personality traits were assessed with 31
self-descriptive items. Every trait was measured with 4-point Likert scale items, four to seven for each trait. The scores on Cronbach’s alpha for the different traits, measured in the MIDUS, were α = .77 for Openness to Experience, α = .74 for Neuroticism, α = .76 for Extraversion, α = .80 for Agreeableness, and α = .58 for Conscientiousness. I centered and standardized the variables and with that created Z-scores.
Cross-functional diversity. This was assessed by using the occupation and industry codes and the previous occupation and industry codes of the respondents. They were asked to state their current occupation and industry experience and previous occupation and industry experience by answering open-ended questions. Census classification codes were used in the survey to create 501 occupation categories. If the two codes for occupation were different, the respondent was scored a 1, if the two codes were the same the score was a 0. The same goes for the industry codes.
Measure of entrepreneurial success: Total income. This measure looks at the income of the entrepreneur in $ and is a measure of entrepreneurial success, this was assessed with an open-ended question. I did a log transformation to create a normal distribution for this variable and then created a Z-score.
as a control variable. Furthermore, I controlled for education. Politis & Gabrielsson (2005) refer to Storey (1994) and Reynolds (1997) when saying that prior research has shown that higher educational experience, such as university education, can assist individuals in the accumulation of existing knowledge that may provide skills useful to entrepreneurs.
Agreeableness is a control variable in the tests to exclude a potential (based on the literature probably small) effect of this variable. I added classifications for high-growth occupations (based on the Browse Bright Outlook Occupations from O*NET) and high-tech industries (based on the classifications in Hecker, 2005) to check whether these distinctions give different results for entrepreneurial success. Lastly, I controlled for the size of the business. This size will probably have its effect on the income of the entrepreneur, controlling for it enabled me to make a more just comparison between the income of the respondents. Statistical Analyses
Correlations between the variables were determined and hierarchical multiple regression analysis was used to test my hypotheses. I tested 5 models to determine simple main and interaction effects. The three interaction models (H1, H2 and H3) tested the interaction effects of the traits openness to experience, conscientiousness and extraversion with cross-functional diversity in relation to entrepreneurial success.
Results Descriptive statistics and Study Variable Intercorrelations
the meta-analysis of Zhao et al. (2010) the effect size for the relationship of conscientiousness with entrepreneurial performance was .19 and for extraversion .09, so my results show a much stronger effect for extraversion. Openness and agreeableness do not show a significant
Table 1 Correlation matrix 1 2 3 4 5 6 7 8 9 10 11 12 1. Income -- 2. Business Size .23*** -- 3. Ratio .22** -.83*** -- 4. Openness .13 .11 -.06 -- 5. Conscientiousness .20** .06 .01 .37*** -- 6. Extraversion .28*** .08 .02 .54*** .39*** -- 7. Agreeableness .11 .06 -.04 .42*** .25*** .44*** -- 8. Age .00 .06 -.05 -.02 -.06 .02 .11 -- 9. Gender -.33*** -.10 -.03 -.07 -.09 .02 .08 .11 -- 10. Education .23*** .11 .00 .19** .05 .03 -.00 .06 -.12 -- 11. CIE .33*** .07 .05 .00 .08 .03 .05 .06 -.23*** .04 -- 12. CFE .31*** .11 .05 -.03 .06 .02 .02 -.02 -.24*** .07 .24*** -- M 10.64 11.73 0.93 2.97 3.45 3.17 3.35 53.76 0.33 7.37 0.36 0.34 SD 1.08 2.08 0.21 0.48 0.40 0.55 0.50 9.57 0.47 2.39 0.48 0.47 Note. N = 311 respondents, *p < .05, **p <.01, ***p <.001,
Hypothesis tests
To test the hypotheses, regression analysis was carried out. Results of the model with income as the dependent variable are presented in Table 2.
According to the first hypothesis, the positive relationship between the personality trait openness to experience and entrepreneurial success is stronger when cross-functional
diversity is high rather than low. The results of the regression analysis are not consistent with this expectation, as the positive relationship in model 2 is not shown in the analysis. The coefficient for this relationship was not significant (β = -.12), Therefore, hypothesis 1 was not
supported.
The second hypothesis states that the positive relationship between the personality trait conscientiousness and entrepreneurial success is stronger when cross-functional diversity is high rather than low. Again, the results do not confirm this expectation in model 2, the main effect was not visible, the coefficient was not significant (β = .10), so this hypothesis is not
supported by my research.
In the third hypothesis it was expected that the positive relationship between the personality trait extraversion and entrepreneurial success is stronger when cross-functional diversity is high rather than low. Looking at the results of the regression analysis in model 3 this hypothesis is also not supported by the results, as the interaction effect of cross-functional diversity was not significant (β = -.19 for CFE and -.23 for CIE). In this case the main effect
of extraversion in model 2 was significant at p <.01 (β = .26).
The 3 hypotheses were not supported, but some other relationships became clear from this analysis. In model 2 it shows that gender (p <.001, β = -.50), education (p <.01, β = .19),
Overall, when looking at the results, the hypotheses were not supported, but some significant correlations were found and certain main effects became visible. The meaning and implications of some of these interesting relationships will be discussed in the next section. Table 2 Main effects and interactions for entrepreneurial success
Model 1 Model 2 Model 3 Model 4 Model 5
β β β β β Gender -.71*** -.50*** -.50*** -.48** -.49** Age -.08 -.08 -.08 -.07 -.08 Race -.27 -.07 -.09 -.09 -.11 Education .14* .19** .18* .19** .18* Business size .19 .13 .11 .12 .11 High-tech .02 -.03 -.04 -.01 -.03 High-growth .46 .34 .27 .29 .24 Main effects: Openness (O) -.12 -.06 -.13 -.08 Conscientiousness (C) .10 .11 .11 .10 Extraversion (E) .26** .32*** .33** .37*** Agreeableness .05 .06 .05 .05 Emotional stability -.00 -.00 -.01 -.01 Cross-functional experience (CFE) .38** .41** .37* .41** Cross-industry experience (CIE) .40** .38* .42** .39* Interaction effects: O x CFE -.08 -.11 C x CFE -.05 -.08 E x CFE -.25 -.19 O x CIE .05 .07 C x CIE -.01 .07 E x CIE -.26 -.23 F 6.61 6.51 5.74 5.5 4.91 R2 .17*** .30*** .31*** .30*** .30*** ΔR2 .13 .01 -.01 .00 Note: N = 311 respondents. *p < .05, **p <.01, ***p <.001 Discussion
drew upon skill complementarity theory to combine and connect ideas in entrepreneurial research concerning FFM traits, human capital and cross-functional experience. I did not find statistically significant effects for the hypothesized interaction between the personality traits openness, conscientiousness and extraversion with cross-functional expertise. Nonetheless, some simple main effects turned out to be quite strong, so I can draw valuable conclusions with implications for theory and practice.
Theoretical Contributions
The theory on the FFM traits and entrepreneurship left me with the expectation that a positive relationship between the traits openness, conscientiousness, emotional stability and extraversion with entrepreneurial success would manifest from this research. The results tell otherwise for openness, conscientiousness and emotional stability. I will explain how these results add to our knowledge about the theory on FFM traits and entrepreneurship.
Extraversion did show a strong significant positive relationship with entrepreneurial income. This strong effect of extraversion is not in line with the expectations based on theory, from which we know that openness and conscientiousness often show the strongest effects. As defined above, extraversion describes the extent to which people are assertive, dominant, energetic, active, talkative, and enthusiastic (Costa & McCrae, 1992). Furthermore,
extraversion is often associated with greater risk tolerance. The motivational drivers of this trait are a need for stimulation, excitement and social interactions. Besides this, there is also quite some evidence that extraversion is related to achievement orientation. Ross, Rausch & Canada (2003), in their study on individual differences in achievement orientation, emphasize the importance of extraversion (next to agreeableness) as interpersonal factors describing different ways in which individuals approach situations involving opportunities for
energetic, active and the need for stimulation and achievement are essential for them in reaching their goals. These characteristics might be strong predictors of entrepreneurial success. My results show that this indeed seem to be valuable indicators of success, in this case entrepreneurial income. Looking at the available theory on personality traits and career success of traditional employees it shows that extraversion is often related to extrinsic career success (Seibert & Kraimer, 2001). In their study on the FFM and career success Seibert & Kraimer (2001) claim that extraversion was related most consistently to career success, they report that employees who were higher on extraversion received higher salaries and more promotions than did those lower on extraversion. One of the possible explanations they propose is that perhaps the higher levels of dominance and activity characteristic of
extraverted individuals are useful in accomplishing goals in any organizational environment (Seibert & Kraimer, 2001). I expect this mechanisms of extraversion to work in the same way with entrepreneurs and might explain my results for this trait. So when using the income of an entrepreneur as measure of entrepreneurial success the relationship might be stronger than was expected till now in theory on FFM traits and entrepreneurship. This big role of extraversion for entrepreneurs deserves more attention in future research in this area.
My findings show, when I assessed personal income as the measure of entrepreneurial success in relation to the FFM traits, that the results look somewhat different than what I expected based on prior meta-analytic evidence and my hypothesized predictions. From the meta-analysis of Zhao, Seibert and Lumpkin (2010), it shows that often firm performance is used as one of the outcomes. Firm performance is related to entrepreneurial income, but it is not the exact same measure. Zhao et al. (2010) discuss that typical measures used to assess firm performance include financial indicators such as sales revenue, profit, liquidity, return on investment and return on assets. Other indicators of performance examined in previous
performance (Zhao et al., 2010). As discussed above extraversion turns out to play a big role in predicting entrepreneurial income. This insight is worthwhile, as income is an
unambiguous measure of entrepreneurial success. It is a less ambiguous measure than firm performance, which could be measured with a wide range of indicators. Furthermore, a firm could be making a lot of sales, but in the meanwhile not actually making a lot of money or a firm could be making a lot of profit, but not actually grow very much. When an entrepreneur is able to pay himself more income, this is a less ambiguous sign of success. Besides, in some ways, income is a conservative measure of success, because the type of entrepreneur could influence the result in income versus firm performance. Carland, Hoy, Boulton & Carland (1984) describe a distinction between entrepreneurs who manage their business with a focus on profit and growth and entrepreneurs who manage their business in order to further
personal, value-driven goals. The second type is more income-oriented and the first type more growth-oriented. Both types of entrepreneurs are included in this study, so is not possible to differentiate and use firm performance as an outcome for the growth-oriented types and entrepreneurial income for the income-oriented type. It can be assumed that growth-oriented types extract less personal income from the business as their focus is on profit and growth of the firm. In that sense my outcome could be a conservative measure of entrepreneurial success when comparing it to firm performance, which strengthens my significant results. This adds to the knowledge about the theory on FFM traits and entrepreneurial success in showing that income could be a valuable unambiguous measure for entrepreneurial success and could be a more conservative measure than firm performance.
research I modelled the traits as the motivational constructs and cross-functional diversity as the ability/experience construct. With the application of this model, the results were supposed to show the hypothesized interactions between the traits and cross-functional diversity. This was not the case and there are several reasons to think of with respect to this difference, of which I will discuss one. In the first place, in skill complementarity theory relatively specific motivational drivers matter. Personality traits as measures of motivation are relatively broad. For example conscientiousness is a broad personality dimension, which is composed of two primary facets: achievement motivation and dependability (Mount & Barrick, 1995). These facets may work at cross-purposes when combined with cross-functional experience,
dampening the effect of the interaction. Based on prior research I expected that modelling the personality traits as my motivational constructs would work in this interaction model, but it seems that the application of skill complementarity theory needs more specific motivational drivers to work in the proposed way. This insight adds knowledge about the mechanisms of skill complementarity theory to that field, but also provides a valuable extension to the theory on FFM traits and entrepreneurship. This extension is in line with the paper of Barrick, Mount & Judge (2001) in which they summarize the results of 15 meta-analyses on the relationship between the FFM traits and performance. One of their suggestions for future research is to focus on the lower-level facets of the FFM constructs. Linking these facets to specific criterion measures could result in increased correlations and enhance understanding (Barrick et al., 2001).
out that this relationship is higher for outcomes of human capital investments (these are knowledge and skills) than for human capital investments (which are education and experience). My results show that both cross-functional experience and cross-industry
experience show a significant relationship with entrepreneurial income. Within human capital research this experience could be typically classified as human capital investments, so based on this I would not have expected the strong results my study shows. However, the
classification of outcomes versus investments is somewhat more nuanced, in my opinion. Cross-functional experience is not just experience. It is a collection of vocational experiences in a variety of functions which enables the entrepreneur to make use of a balanced skill set to solve novel problems. In that way this cross-functional diversity could be more meaningfully categorized as outcome of human capital investments. This outcome has a positive,
statistically significant relationship with entrepreneurial income in my study. Looking at the mechanisms of the relationship between human capital and performance my research implies that outcomes of human capital investments influence it in a positive way, by translating vocational experience in skills that enhance performance and in my case with that entrepreneurial income.
The results from my study about the importance and effects of human capital outcomes in entrepreneurship relate to the article of Marvel, Davis & Sproul (2014). They reviewed human capital entrepreneurship research systematically and proposed a research agenda to enhance and guide the development of this stream. In their opinion there is a clear need for finer grained approaches that reflect more precise variance among aspects of human capital. They refer to Hayton & Zahra (2005) when they go on to say that there is a clear need for greater exploration of outcome-based measures of human capital. As explained above, my research does in fact deal with human capital outcomes. This proved to be valuable in
of human capital and detail what they find promising dimensions of human capital outcomes- specifically knowledge, skills and ability. My research deals with diverse experience which translates into problem-solving skills and also deals with ability (which are in this paper defined as enduring trait-like characteristics), measured by the FFM traits. My approach fits well in the dimensions they propose and offers indeed more insight in the value of KSA’s as human capital outcomes, which turn out to be predictors of entrepreneurial success.
that for the interaction to give the expected results it is plausible that more specific
motivational constructs are needed, instead of the relatively broad personality traits. These motivational constructs might interact with human capital (specifically skills) in influencing performance. I do hope this idea of skill complementarity and motivational constructs of the FFM traits inspires future human capital research to unpack these mechanisms further.
My results furthermore contribute to the literature on the effect of varied vocational experience for entrepreneurs (Lazear, 2004). Recalling the extensive work of Lazear and others concerning entrepreneurs and prior occupational variety I expected that this varied experience would lead to more income for the entrepreneur. The theory predicts that
entrepreneurs should be generalists, they need not be expert in any single skill, they must be sufficiently good at a wide variety to make sure that the business does not fail (Lazear, 2004). This Jack of all Trades approach has been criticized. The basic contrast in literature here is that skill variety enhances success (Jack of all Trades) versus a taste for variety creates opportunity costs and reduces success. This Taste for variety approach reasons that
entrepreneurs are willing to forego income in order to gain some non-pecuniary benefits from variety (Astebro & Thompson, 2011). These researchers concluded in their study that a negative association between these variables was apparent. However, my results confirm my expectations and support the Jack of all Trades approach; cross-functional experience does indeed lead to higher entrepreneurial income. I can conclude that entrepreneurs with a more diverse vocational experience seem more suitable for this position and this results in a higher income for them. Moreover, my results are a valuable contribution to the Jack of all Trades approach. I find strong effects for both cross-functional experience and cross-industry
Practical Implications
A practical implication for this study is that entrepreneurs (and also managers) need to consider the cross-functionality of the experience of themselves and of the employees
working for them or applying for a job. As the presence of this cross-functional diversity had a positive direct effect on entrepreneurial success, someone wanting to become an
entrepreneur once should look for possibilities to gain this broad wealth of experience before starting his or her own business. On the other hand, for managers it could be wise to look for this cross-functional experience in their employees, especially when the organization they work in promotes intrapreneurship. Intrapreneurship is viewed as being beneficial for revitalization and performance of corporations, as well as for small and medium-sized enterprises (Antoncic & Hisrich, 2001). One could think of a lot of different positions in which entrepreneurial qualities are essential. For example an employee who is responsible for regional or international expansion, the launch of a new product or service, targeting another group of customers etc. If a manager wants to hire an intrapreneur, he/she should consider the prior occupational variety or the intrapersonal functional diversity, like defined by Bunderson et al. (2002).
diversity. Chambers of Commerce who advise entrepreneurs should acknowledge the
importance of this varied experience for the businesses and could think of these last examples as ways to develop it.
Limitations and Future Research Directions
This research provided the field with insight in the value of cross-functional diversity for entrepreneurs. Furthermore, in combining literature and several theories in the field of entrepreneurship research it created a new perspective and opened pathways for further research in the field. The key strengths of this research can be summarized as follows. First of all, I used a broad sample. As mentioned before, distinguishing between several types of entrepreneurs could give different results and may help in finding the proposed interactions, but with this broad sample I already find strong main effects, which clearly are apparent in all kinds of entrepreneurs. Secondly, sound measures of the FFM traits and entrepreneurial success were used. Furthermore, the controls I selected were useful in making stronger claims regarding the robustness of my analysis.
However, some limitations need consideration. In the first place, a binary measure was used for cross-functional diversity in my research. Respondents were scored with an 1 or a 0 when their experience in functions and industries respectively was varied or was not. This means I was not able to say anything about the difference in strength of the effect when an entrepreneur has only 2 or has more varied experiences. Usage of a continuous scale for this measure in future research could be insightful. However, cross-functional diversity is a broad concept which can be viewed from different angles. I looked at the differences in vocational experience between jobs and industries, but there are several ways to define and measure it. Bunderson for example talks about intrapersonal functional diversity as the aggregate
valuable way of defining the construct. I encourage future research to consider some of the different ways in which this idea could be captured and measured.
Furthermore, an important theoretical distinction that scholars make is the difference between necessity-motivated and opportunity-motivated entrepreneurs. The first group are individuals who start a business when they perceive a business opportunity, the second group initiates entrepreneurship as a last resort (McMullen, Bagby & Palich, 2008). Entrepreneurs out of necessity are a sizeable group in all countries, these entrepreneurs have lower
education, run smaller firms, and expect their firms to grow less (Poschke, 2013).
Distinguishing between these groups might have altered the findings as both types probably score differently on the various traits. One could for example expect that opportunity-motivated entrepreneurs score higher on the personality trait openness to experience than necessity-motivated entrepreneurs, as the first group is probably more willing to explore novel ideas and be creative and innovative, characteristics for someone high on openness.
A final limitation concerns functional diversity. When examining cross-functional and cross-industry experience some refinements could be made, which are not made in this study. Looking at the relatedness of the industries someone worked in could give some useful information about how beneficial the experience is for being an entrepreneur in the current industry. This was beyond the scope of this paper. We know from human capital research that also the task-relatedness could be important; within this view human capital leads to higher performance only if it is applied and successfully transferred to the specific tasks that need to be performed. This transfer process should be easier if human capital is related to the current tasks of the business owner (Unger et al., 2011). However, I am not looking at human capital that is related to some specific tasks. It is in fact the breadth of experience which makes the human capital valuable for the entrepreneur, as it provides him/her with a wide variety of skills for executing and understanding a lot of tasks. Cross-functional experience may increase the cognitive complexity of the entrepreneur, making him/her more suitable for the job. There might be a trade-off between the easiness of task-relatedness and the cognitive complexity of varied experience, which is harder, but also increases breadth and with that the suitability for entrepreneurship. Future research could consider this industry- an task-relatedness when determining the value of it in this field.
Lastly, I want to discuss one more interesting avenue for future research. This
concerns gender and entrepreneurship. Looking at the different models it shows that income is negatively associated with being female. When cross-functional diversity is added to the model this turns out to have a significant relationship with income as well and in the
cross-functional diversity, as this is beyond the scope of this paper, but this could be an interesting direction for future research. Women’s entrepreneurship research is an area in itself, Jennings & Brush (2013) give an overview and assess the contributions of this specific field in their paper of 2013. They discuss a lot of findings with regard to the gender difference in entrepreneurship (like financing, representation in specific sectors, size of the business), but cross-functional diversity is not one of them. My results evoke interesting research questions for this field and I do hope these will get more attention in the future.
Conclusion
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