There are four major factors that affect entrepreneurial investment decision making:
- Personality traits
- Opportunity
- Skills
- Capital
In this article, we are going to give insight on how personality traits can affect one's entrepreneurial investment decision making.
Personality Traits
I have read some materials even empirical research theses on effect of personality traits on entrepreneurial decision, they are all complex for every day person to understand. That necessitated this article. We're going to dive deep in to personality and psychology around it. We will only lay basis to broach the subject matter — its effects on entrepreneurial investment decisions. You can read more on personality traits here.
Anytime we look at people, one of the things we observe is how different they are from one another, how different they react to issues and broach subject matters. Some are talkative, while some are quiet, active or anxious. Some are organized and meticulous, while others are care free. Personality traits reflect how people think, feel, and behave. Jun Yan in his research found out that personality traits are strong predictors of entrepreneurial spirit.
According to personality psychologists, there are Five Factor Model used to measure personality traits known as OCEAN.
- Openness
- Conscientiousness
- Extraversion
- Agreeableness, and
- Neuroticism
Openness to Experience
People who score high on openness personality trait enjoy adventure. They are curious about new experiences. They are usually original, imaginative (think out of the box), daring, enjoy variety. Studies have shown that openness is a good indicator of a good leader and entrepreneur.
Conscientiousness
It measures how organized, meticulous and committed one is. People with this trait are good planners. They are very careful and good in craft. They factor in every scenario in their decision making process. They have a good conscience, therefore are dependable, disciplined and focused.
Extroversion
People who are high in extroversion are called extroverts, while people who are low in extroversion are known as introverts. The extroverts are very social, talkative. They tend to be assertive and cheerful in social interactions. Studies have also shown that they prefer entrepreneurship and make good entrepreneurs especially in the areas of sales and marketing. But the negative aspects of extroversion is that extrovert are considered to be unorganized and carefree.
On the other hand, introverts are not social, they prefer small group of social interactions mainly with people they are familiar with. Good things about them is that they are good in brain-storming and in bringing new ideas and designs but they find it difficult to communicate their ideas. They would rather choose to work their ideas with their hands. The introverts usually prefer to work backstage. Because of their lack of good communication skill, they don’t really dare entrepreneurial ventures. To succeed in entrepreneurship, you need to engage in lots of communication and socialization to sell your goods and services, although, it’s not always then case especially if you can hire people who can do the public relations and marketing, and it depends on the nature of your business. For instance, I didn’t talk to you before you came to read this on my blog. My personality trait is not the reason why you’re here but then, my personality trait contributed to my decision to start blogging.
Agreeableness
It measures the level of one's cooperation and kindness. Agreeable people are more trusted, compassionate. They easily get along with others; like to maintain norm and status quo. They tend to avoid negative experiences, as such tend to avoid entrepreneurial investment owing to the fact that there are risked involved in entrepreneurship.
While disagreeable people tend to succeed both at workplace and business because the like to bring their own ideas and their voices heard. They like disrupt the system, bring new ideas to change the status quo.
Neurotricism
People who score high on neuroticism worry a lot and are anxious. They can easily enter into depression. Most of their characteristics include feeling of insecure, temperamental, self-consciousness.
How Do Personality Traits Affect Entrepreneurial Investment Decisions?
- It can be a driving force to venture into entrepreneurship or discouraging factor. One who is emotional and is afraid of the unknown will not dare entrepreneurial investment. Emotional people are much concerned about the consequences of failure than benefits of success. Entrepreneurial venture involves risks. The entrepreneurship risk can be classified into three: finance, career and personality.
Financial Risk: The risk here arises from losing the investment capital
Career Risk: The risk arises from the possibility of being able to return to one’s former job after resigning to start a new enterprise.
Personal Risk: The level of personal risk is high and to difficult capture. Personal risk involves one’s personal life, family, friends and associates. The reactions of the friends, family and associates may be more draining than financial and career risks. Starting a new enterprise requires the commitment of one’s energy, time, it takes a lot of sacrifice from the entrepreneur, his family and friends. These people involved may not be willing to make the required sacrifice.
- It makes one decide to venture into business that is compatible with his personality. An introvert is not much likely to consider marketing enterprise due to his quiet nature and marketing requires someone who is talkative, sociable and active. On the other hand, extrovert may have flay for businesses that involve meeting people and talking, and may not like enterprise that will requires thinking critically, sitting one place, planning and arrangement.
- Risk Personality: It is the perceived probability of receiving the reward associated with success of a proposed situation, which required by an individual and before subjecting oneself to the consequences associated with failure, the alternative situation provided less rewards and well as less severe consequences than the proposed situation. Risk personality represents an individual orientation, behavior towards taking chances in a decision making. We know that entrepreneurship involves risk taking, so individuals who have personality traits with high risk propensity are more likely to venture into entrepreneurial business enterprises and with higher risks. Entrepreneurs tolerate risks more than anyone else. One who is more concerned about consequences of failure than benefits of success may decide not to take risk. Read factors responsible for gender differences in entrepreneurship development in Nigeria
- Proactivity: Proactive personality is one of entrepreneurial competence that are more characteristic of successful entrepreneurs. Proactivity is influenced by one personality trait.
- Entrepreneurial Alertness: Like I said from the beginning, there are four major factors that affect entrepreneurial investment decision making, which opportunity is one of them. Entrepreneurs identify business opportunities, mobilise and organise skills and resources to tap the opportunities. Entrepreneurial alertness drives entrepreneurs to identify, explore and take advantages of new opportunities. Once they discover a business opportunity, they set out to mobilise men, money, material and machine to exploit the opportunity. This involves careful planning and Strengths, Weaknesses, Opportunities, Threats (SWOT) Analysis. You may also read my articles on Things To Consider When Choosing A Location For Your Business and Things A Small Business Owner Must Expect. One whose entrepreneurial alertness is very low can't make good entrepreneurial investment decisions.
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