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Tuesday, February 25, 2020

Are Entrepreneurs Born or Made? What Does Research Says?

Entrepreneurs, social psychologists and economic theorists have all speculated whether entrepreneurs are born or made — in other words, whether you’re predisposed to become an entrepreneur due to your genetic makeup, or whether that disposition comes from your environment, conditioning or other external influences.

For most entrepreneurial hopefuls, it’s comforting to think that entrepreneurs are made, that even if you lack the “right” DNA, enough practice, experience and conditioning can help you be a success.

But step away from that comfort zone, because research seems to indicate the opposite: Entrepreneurship rates, it turns out, especially rates of entrepreneurship success, are influenced more by a person’s genes than his or her upbringing and degree of nurturing. Fortunately for the majority of entrepreneurial hopefuls, however, there’s a catch.

What the research says

There have been many studies attempting to answer this question, and they’ve landed on each side of the argument. In the nature vs. nurture debate (looking at factors beyond entrepreneurship), the most effective studies have been those done on twins, because they naturally share DNA, but may have experienced different environments and upbringings. An important distinction here is that identical twins share 100 percent of the same genetic information, while fraternal twins share 50 percent.

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One study that looked at entrepreneurial tendencies, specifically, was done by Scott Shane, a professor at Case Western Reserve University. Shane looked at hundreds of pairs of twins, eventually finding that the identical twins among them had much higher rates of “shared entrepreneurial tendencies” than their fraternal counterparts or subjects in the control group.

Further exploration of data, including the research of molecular genetics, has traced  this genetic heritability to four core entrepreneurial traits, each of which increases the likelihood of becoming an entrepreneur, while also being heritable:

1. The likelihood of starting a business. Genes can influence your probability of starting a business.

2. The ability to identify new opportunities. Your ability to identify business opportunities is similarly heritable.

3. The tendency to become self-employed. Related to but distinct from starting a business, self-employment is also a heritable probability.

4. Extroversion. Though extroversion by itself isn’t enough to motivate entrepreneurship, extroverts have an easier time making new connections, leading followers and engaging in a wider community.

less formal survey of entrepreneurial beliefs found that just 1 percent of entrepreneurs surveyed believed that higher education played any role in shaping their entrepreneurial mindset. Conversely, 61 percent said their entrepreneurial characteristics had arisen from their innate drive.

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The catch

What’s the catch here? All of these studies and surveys looked at entrepreneurs as a group; it paid no attention to how successful those entrepreneurs actually were. So, the takeaway here is that your genes play a role in your likelihood of actually starting a business, rather than whether that business will actually be successful.

In other words, just because you have a lower genetic likelihood of starting a business doesn’t mean you can’t start a business, or that the business won’t be successful. In fact, with significant drive and practice, you might be even more likely to succeed than someone genetically predisposed to starting a business — especially if that person hasn’t had as much real-world experience as you.

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The role experience plays

Another study, from Stanford Graduate School of Business professor Kathryn Shaw looked at data from 2.8 million small businesses to determine rates of success based on previous experience. As you might expect, success rates were dramatically higher for entrepreneurs who had previous experience running a business.

This may seem like an obvious observation, but it’s important to consider in the discussion on whether entrepreneurs are born or made; it turns out that, regardless of your tendency to start a business, the real determining factor for success is in how much experience you get in an entrepreneurial role.

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The two distinct questions we can ask

The first is: Are entrepreneurs born or made? This question looks only at a person’s probability of starting a business; and. according to research, entrepreneurs are more often born.

The second is: Are successful entrepreneurs born or made? This question ignores the probability of starting a business, instead favoring the probability of success within a leadership position of a business. According to research, successful entrepreneurs are more often made.

What does all of this mean for you, the aspiring entrepreneur? If you want to dig deeper, you can look to your family members to get a loose, subjective gauge of your relative chances of starting a business; if entrepreneurship runs in your family, you’re probably more likely to start a business. If you have a burning desire to be self-employed, entrepreneurship may be innate.

More importantly, though, regardless of your heritage, your chances of making a business successful aren’t set in stone. Even the least genetically likely entrepreneurs can become successful if they spend enough time improving their skills, gaining experience as entrepreneurs and committing themselves to better ideas and self-improvement.

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