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Prediction based on entrepreneurship-prone personality profiles: sometimes worse than the toss of a coin

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Listed:
  • Alexander Konon

    (DIW Berlin)

  • Alexander S. Kritikos

    (DIW Berlin
    University of Potsdam
    IZA
    IAB)

Abstract

The human personality predicts a wide range of activities and occupational choices—from musical sophistication to entrepreneurial careers. However, which method should be applied if information on personality traits is used for prediction and advice? In psychological research, group profiles are widely employed. In this contribution, we examine the performance of profiles using the example of career prediction and advice, involving a comparison of average trait scores of successful entrepreneurs with the traits of potential entrepreneurs. Based on a simple theoretical model estimated with GSOEP data and analyzed with Monte Carlo methods, we show, for the first time, that the choice of the comparison method matters substantially. We reveal that under certain conditions the performance of average profiles is inferior to the tossing of a coin. Alternative methods, such as directly estimating success probabilities, deliver better performance and are more robust.

Suggested Citation

  • Alexander Konon & Alexander S. Kritikos, 2019. "Prediction based on entrepreneurship-prone personality profiles: sometimes worse than the toss of a coin," Small Business Economics, Springer, vol. 53(1), pages 1-20, June.
    • Handle: RePEc:kap:sbusec:v:53:y:2019:i:1:d:10.1007_s11187-018-0111-8
    DOI: 10.1007/s11187-018-0111-8
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    Cited by:

    1. Insoo Cho & Peter F. Orazem, 2021. "How endogenous risk preferences and sample selection affect analysis of firm survival," Small Business Economics, Springer, vol. 56(4), pages 1309-1332, April.
    2. Petrik Runst & Jörg Thomä, 2023. "Resilient entrepreneurs? — revisiting the relationship between the Big Five and self-employment," Small Business Economics, Springer, vol. 61(1), pages 417-443, June.
    3. Runst, Petrik & Thomä, Jörg, 2022. "Resilient entrepreneurs? Revisiting the relationship between the Big Five and self-employment," ifh Working Papers 34/2022, Volkswirtschaftliches Institut für Mittelstand und Handwerk an der Universität Göttingen (ifh).
    4. Newbert, Scott L. & Kher, Romi & Yang, Shu, 2022. "Now that's interesting and important! Moving beyond averages to increase the inferential value of empirical findings in entrepreneurship research," Journal of Business Venturing, Elsevier, vol. 37(2).
    5. Elena-Loreni Baciu & Delia Vîrgă & Theofild-Andrei Lazăr, 2020. "What Characteristics Help Entrepreneurs ‘Make It’ Early on in Their Entrepreneurial Careers? Findings of a Regional Study from Romania," Sustainability, MDPI, vol. 12(12), pages 1-27, June.
    6. Caliendo, Marco & Fossen, Frank M. & Kritikos, Alexander S., 2022. "Personality characteristics and the decision to hire," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 31(3), pages 736-761.

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    More about this item

    Keywords

    Advice; Personality; Entrepreneurship; Profiles;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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