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How Entrepreneurial Talent Drives Business Success

How Entrepreneurial Talent Drives Business Success

by Sangeeta Bharadwaj Badal

Story Highlights

  • Key talents link to positive business outcomes
  • Talented entrepreneurs more likely to create jobs
  • Talented entrepreneurs more likely to exceed profit goals

As far back as the 1930s, economists like Irving Fisher and John Maynard Keynes have studied the link between personality characteristics and economic behavior. Since then, research has clearly established positive significant relationships between different personality characteristics or talents -- need for achievement, risk propensity, passion, creativity, autonomy and self-efficacy -- and entrepreneurial outcomes such as sales and profit.

Let me share some examples. Researchers at the department of psychology at the University of Giessen, Germany, found that self-efficacy -- belief in one's ability to do a task well -- has a high correlation to business creation and success. In fact, they found that the correlation between self-efficacy and business success was as high as the correlation between the weight and height of adults in the U.S. -- one of the highest medical correlations. High self-efficacy motivates an individual to take initiative, persevere in the face of resistance and have self-confidence and a hopeful outlook for the future -- behaviors that lead to venture success.

Similarly, other researchers have found a strong correlation between achievement orientation (a personal desire for achievement) and business success. Entrepreneurs with a strong desire for achievement set high standards for themselves and others around them. They constantly look for better ways to accomplish a task. They anticipate problems and are willing to take risks to achieve their goals. These talents trigger behaviors that ultimately lead to business success.

Researchers have also extensively studied the relationship between risk taking and business success. Risk-takers are likely to try something adventurous or to take a gamble. They thrive in high-stakes environments and have a higher propensity to engage in risky ventures. In entrepreneurship, this translates into an overly optimistic perception of risk. This helps them start a business or take an existing business to the next level. Risk-tolerant individuals are likely to thrive in complexity, uncertainty and urgency. No obstacle is too great and no challenge is too difficult for them. They are likely to invest in new projects and explore new markets when people who are more risk-averse may be paralyzed by fear of the unknown.

Over the last few years, Gallup's assessment of 2,500 U.S. entrepreneurs found that higher levels of entrepreneurial talent significantly increase one's odds of business success. Highly talented entrepreneurs, compared with their less talented peers, are:

  • three times more likely to build large businesses and to grow them significantly
  • four times more likely to create jobs
  • four times more likely to exceed profit goals
  • five times more likely to exceed sales goals

In another study of 111 small businesses in Nebraska, Gallup found that highly talented entrepreneurs exhibited distinctive behaviors. These behaviors caused the highly talented entrepreneurs to outperform others by 22 percentage points in year-over-year profit growth. Compared with their less talented peers, highly talented entrepreneurs:

  • were more likely to clearly articulate the competitive advantage of their companies to their clients
  • were more likely to make decisions about pricing and product or service development with their customers in mind
  • spent a great deal more time planning for growth and aligning employee responsibilities with company goals
  • were more likely to align employees' strengths with their roles, thus maximizing employee engagement and increasing individual performance

As you can see from these studies, there is a clear positive relationship between entrepreneurial talents and business creation and success. Business-building talent affects behaviors that in turn influence entrepreneurial outcomes.

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