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Are Entrepreneurs Born or Made?

September 19, 2013

It's an age-old question: Are entrepreneurs a special breed, born into this world with a drive and need to succeed that most of humanity lacks, or can they can be created through education, experience and mentorship? We spoke to two academics who have strong opinions on the matter.

That question has taken on urgency recently. In the past five years, multiple studies have indicated that there may be an "entrepreneur gene"--or at least that people with certain genetic characteristics and personality traits are more likely to be successful entrepreneurs than others. In his 2010 book Born Entrepreneurs, Born Leaders, Scott Shane, professor of entrepreneurial studies at Cleveland's Case Western Reserve University, suggests that genes don't just influence whether a person will start a business; they may even determine how much money a person will earn. In other words, some people are born to be alpha wolves, and the rest will work in the mailroom.

It's a divisive thought--especially for Americans bred on the idea that with education and drive they can be anything they choose. Such ideas call to question entrepreneurial education as an institution and put forth the specter of business schools taking DNA cheek swabs along with application packets. While it's unlikely we'll see a Brave New World version of business education anytime soon, such concepts do put the idea of entrepreneurial education under the microscope. Does it work for everybody? If people are born entrepreneurs, do they need to read endless case studies, or would a few accounting and ethics classes be enough?

We asked two prominent and opinionated researchers to weigh in on the question. James V. Koch is a board of visitors professor of economics and president emeritus at Old Dominion University in Norfolk, Va. He's also co-author with James L. Fisher of the 2008 book Born, Not Made: The Entrepreneurial Personality, which argues that many entrepreneurs are simply wired that way, giving them a natural advantage in the business world. Julian Lange is a senior professor of entrepreneurship at Babson College in Wellesley, Mass. His research in the past five years indicates that exposure to the ideas and lessons of entrepreneurship can have lasting effects on students, even if they are not "natural" entrepreneurs.

We asked each of them to make their case.

James V. Koche of Old Dominion University

Entrepreneurs are Born

James V. Koch | Old Dominion University
James V. Koche of Old Dominion University

Entrepreneurs are Made

Julian Lange | Babson College

Entrepreneurs are Born

James V. Koche of Old Dominion University
Photo © Eric Schmidt

James V. Koch

Old Dominion University

What did you think about entrepreneurship education vs. natural ability before doing research for your book?
I think my view, being an academic, was that we can teach [entrepreneurship] and do it well. I was a bit surprised at the scientific literature that suggested heredity has a good deal to do with personality and behavior. When I began to look at the literature, virtually every reputable scientist sees it as interaction of heredity and environment.

Some personalities are much more favorable for entrepreneurship. It is an important thing, and it really constrains and influences outcomes. As a consequence, if you want to know who's most likely to be an entrepreneur, don't go to a business school and see who has taken entrepreneurship courses. The more important thing is to look at someone's personality and ability to bear risks. I would stress that I'm not saying genetics is the whole thing--I do think experience and knowledge and observation and environment count. But I'm not sure you can teach somebody to love to take risks. It seems hard-wired in the individual.

If entrepreneurship comes from an interaction of heredity and environment, how much of it do you think is truly genetic?
Let me use a metaphor. Short people don't make it often in the NBA, just like certain kinds of genetically hard-wired individuals don't make it as entrepreneurs, and others do. In reading the genetic literature, we found that up to 60 percent of critical personality characteristics are heritable. Significant portions of personality traits critical to entrepreneurs, like the willingness to take risks and the ability to tolerate ambiguity and uncertainty, are heritable.

I was particularly impressed by twin studies and what happens when you observe their behavior when they're raised together vs. being raised apart. It's pretty persuasive stuff. A good deal of entrepreneurial behavior is genetically determined.

Have you done your own research?
We went out and looked at a very large number of entrepreneurs to get a handle on their environments, characteristics and personalities. Then we had a control group of non-entrepreneurial businesspeople and another group that was not involved in business at all, like nuns and government workers. We saw significant differences among these groups.

What are the characteristics of entrepreneurs?
The first sentence of my book says, "Entrepreneurs are different." They have the ability to deal with uncertainty, to take risks and tolerate ambiguity. They usually have a personality that is mercurial, and they have highs that are really high and lows that are really low. There's good evidence that they have strong self-confidence but also tend to be overoptimistic. They rely extensively on their own intuition.

All these things aren't positive. A very large proportion of entrepreneurs fail. They tend not to be as devoted to consensus decision-making. They violate the status quo more often. Many don't accept defeat or losses gracefully. They are energetic, and a higher percentage tend to be loners and work long hours. All of these things appear in other segments of the population, but they appear more commonly among entrepreneurs. Research shows there's heritability in these traits, and some genetic determinants of these personality characteristics.

Is business school valuable for entrepreneurs?
Since I teach MBA students, I believe that knowing more about economics and accounting is always valuable to an entrepre-neur. But I don't know whether we can bring someone into the classroom and change their appetite for risk. Maybe in very small doses. But you're really running uphill to change someone's personality.

So is entrepreneurship education worthwhile?
I think [co-author] Jim Fisher and I would argue that a lot of entrepreneurship programs are superfluous and can't deliver what they say. Education can make people better accountants, economists and better at tax law, but it can't effectively change risk preferences, and it can't change genetics.

Has the research changed since your book came out?
The evidence has become stronger in the genetic realm. Now that more people are doing fundamental genetic research into personality traits, this lends more credibility and credence to what we're saying. Recent research clearly indicates that in some cases, environment triggers genetic tendencies, that certain situations trigger genes that would otherwise lie dormant. These are interesting findings that give our particular conclusion added weight.

Can we learn to trigger dormant entrepreneurship genes?
The truth is we don't know what triggers genes. Right now biologists and geneticists are working on things like how temperature affects the genes of fruit flies. We don't have any direct evidence on entrepreneurs. But basic biological evidence suggests that there are things that can trigger someone to be an entrepreneur. In the next 10, 20 or 30 years, people will really drill down into what makes some people actively become entrepreneurs and go off and take risks. All you have to do is look around. The types of people who become elementary-school teachers are not the same people who join the Marines and go to Afghanistan. Research over the next decades will isolate personality types and isolate the triggers that cause their genetics to come into play.

Some say education can be one of those triggers.
I regard as dubious claims that going into a college classroom is one of the things that triggers entrepreneur genes. Those who go into entrepreneurship programs are self-selected to begin with in terms of traits and genetics. It would be interesting to have a control group and see if there are things in that environment that alter their risk-taking behavior. I think these are exciting avenues of research.

Is there a place for people who are interested in entrepreneurship but don't have the right personality?
Yes, of course. Take myself: I am a consultant, advisor and investor, but not an individual who typically puts it all on the line. We need accountants, economists and marketing people. There are all kinds of roles to be filled in entrepreneurial enterprises, but someone has to lay it on the line, be the risk-taker and say, "I'm going to take this chance." People usually sort themselves out in society into occupations they choose based on personality. They tend to do things that make them most comfortable. The notion that I can add 6 inches to someone's height and that will make them an NBA player is bankrupt. So why do we think we can send someone to a business school and change their risk-taking preference?

Entrepreneurs are Made

Julian Lange of Babson College
Photo © Michael Warren

Julian Lange

Babson College

What makes you think entrepreneurship can be taught?
I think much of the recent research shows that entrepreneurship can be taught. The thing that some people talking about genetics are getting at is that people have different proclivities toward entrepreneurship and different sets of skills or endowments intellectually. Maybe, simply put, you can't teach someone to be passionate about entrepreneurship. On the other hand, I've been teaching for 20 years, and in my experience people can definitely discover their passion for entrepreneurship in the classroom. And in terms of general skills, if they start out with interests or endowments that make them more likely to be entrepreneurs or less likely, you can enhance their ability to be entrepreneurs through teaching. In some ways we can say there is a certain element of entrepreneurs that are born, not made. But some entrepreneurs can be made better.

Is there any evidence that education can increase one's likelihood of becoming an entrepreneur?
There's a study I did along with professors William Bygrave and Edward Marram at Babson, along with two grad students, investigating whether entrepreneurial education has a lasting influence. It's one of several papers in the past few years looking at that question. What we found is that education does have a lasting influence over whether people became entrepreneurs.

We had a database put together of over 4,000 Babson alumni from between 1985 and 2009, two-thirds of whom had taken at least one of our core elective courses on entrepreneurship. What we found was that taking two or more entrepreneurship elective courses positively affected their intention to become and their becoming an entrepreneur. The effect was there at the time they graduated and long after that.

What about risk-taking? Isn't that a core entrepreneurial skill that can't be taught?
There's a continuum, from people who don't want to take risks to daredevils and everything in between. I've observed many entrepreneurs over time, and it's on a spectrum. I'm an entrepreneur myself; I was CEO of Software Arts, the startup that created VisiCalc, the first electronic spreadsheet, and I'm no daredevil. Sure, entrepreneurs are better if they're willing to take risks, but they also have to respect that risk.

Some people don't want any risk, and some are always looking for risk. Most entrepreneurs I know and observe are people in the middle. They're not willing to take risk for risk's sake, but they'll take it if it's necessary to start or advance or keep their business going.

If risk-taking isn't the key, what skills are important to entrepreneurs?
One of the things we teach in entrepreneurship and give exposure to is opportunity recognition. Some people may go through life and don't quite see the opportunities. Once they look at the world through a slightly different lens, they start to see what may have potential. Opportunities in general don't jump out and you say "Ahh!"--they have to be shaped, they have to be created, and once people understand that process, they will never look at the world the same way again. It doesn't mean they will act on the opportunity--that's a different part of the process. But if people are more sensitive to seeing opportunities, they are more likely to act on them.

There's one course I teach that's more of a survey of entrepreneurship. I always tell the students the objective is not to make them say "I want to be an entrepreneur!" at the end of the course. I want them to understand what it means. Sometimes people romanticize entrepreneurship and look at successful entrepreneurs and think it happened overnight. At the end of the course people say, "I enjoyed it, but I don't think I want to be an entrepreneur. I want to be something else." But periodically I'll get communications saying, "Remember me? I was someone who said I didn't want to be an entrepreneur. Check out the website my partners and I just started." I'm not sure if they would have been sensitized to the opportunity if they hadn't taken the course.

Education helps people to change at different points in their business and personal lives. It helps them become more receptive to entrepreneurship.

Is there any type of person or personality type that should avoid entrepreneurship?
I would put it in a more positive way. I have seen many different people become entrepreneurs with very different skill sets and at different points in their careers. I think it would be hard to make a bet that someone is not going to be an entrepreneur based on their skills and proclivities or at a particular point in their life. The exceptions prove the rule again and again. If we eliminate the extremes, we find a very wide continuum of people who become successful. No one person has all the skills necessary to handle everything him or herself. You get a team to cover your bases. Even if one person has everything going for them, there are only 24 hours a day in a seven-day week. You need other people to work with you and make up for additional skills you don't have.

In no way are we saying that certain people don't have the characteristics to be entrepreneurs. I've observed many, many combinations of characteristics that have been successful. Not everyone is cookie-cutter.

What do entrepreneurship programs offer students?
I think there are a lot of advantages of entrepreneurship programs. One of them is to develop skills they may already have to be more useful--technical skills or leadership skills. Also, being in an environment where other people are interested helps in networking, getting feedback and determining what is necessary at different stages of an idea. One course for MBA students I teach puts them together with successful entrepreneurs. That one-on-one experience can be very helpful to them.

Babson takes a very practical approach. We give students a wide experience in learning, then doing. We talk about entrepreneurship through thought and action, both of which are necessary.

What if it turns out entrepreneurship is primarily genetic? Would that change the way you teach?
What you want to do when you're a professor is to develop and present students with the best possible tools for becoming entrepreneurs. I'm interested in any and all evidence to do this. I think these studies are interesting, and there are characteristics that anecdotally you can observe that can be associated with successful entrepreneurs. But one of the issues I have has to do with association and correlation and causality. There may be characteristics that correspond to entrepreneurs, but it reminds me of what Thomas Edison said [about] "1 percent inspiration and 99 percent perspiration." You have to work at it and shape it.

People have different skill sets and natural talents. Look at other analogies. People in sports or music might have great talent or physical strength, but the people who are the most outstanding might not be the people with the most physical strength. Often they are people who work hard, try to overcome deficiencies and put things together in a package that works for them. In no way am I saying people can't have characteristics that make entrepreneurship easier, but there's a combo there, and learning skills is an extremely important part of the process.