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Does personality matter? Small business owners and modes of innovation

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  • Petrik Runst

    (Institute for Small Business Economics at the Georg-August-University Goettingen)

  • Jörg Thomä

    (Institute for Small Business Economics at the Georg-August-University Goettingen)

Abstract

The DUI (learning by doing-using-interacting) mode offers a promising theoretical framework to explain why many small- and medium-sized enterprises (SMEs) are successful in innovation without research and development (R&D) efforts. In this context, we argue that—because of the informal, person-centered, and interactive nature of the DUI mode—small business owners should be in a key position to trigger DUI learning processes at the company level. Based on a large SME data set from Germany, we show empirically that Big Five personality traits of small business owners positively affect self-selection into DUI-based innovation in less R&D-intensive SMEs. That is, companies operating largely under the DUI mode seem to benefit in particular from certain owners’ personality characteristics. In addition, we present novel evidence that complementarities between different Big Five traits exist in terms of self-selection into the DUI mode, thereby pointing to the role of personality prototypes. The paper concludes with implications for policy and further research. Plain English Summary Solving the SME innovation puzzle—resilient owner personalities boost small firm innovativeness. This psychological effect only exists in non-R&D SMEs, providing a new explanation for their surprising innovation success. SME owners are involved in most day-to-day activities of their company. An owner’s personality therefore directly affects external and internal communication flows, laying the foundation for a company’s innovation culture. We show that a resilient personality type—an owner who is characterized by emotional stability, openness, extraversion, and conscientiousness—benefits innovation in non-R&D SMEs. According to our analysis, resilient owners are about 5.5% more likely to trigger an innovation mode within their company that builds on non-R&D-based knowledge, communication, and interaction. Our research implies that entrepreneurship education and consultancy should foster psychological self-awareness, and thereby increase an owner’s understanding of his/her most effective role in terms of firm-level innovation. Successful entrepreneurship and innovation is not fully determined by one’s personality type, but knowing one’s own strength and weaknesses can help to carve out an effective niche, defining the scope of one’s responsibility, as well as its limits.

Suggested Citation

  • Petrik Runst & Jörg Thomä, 2022. "Does personality matter? Small business owners and modes of innovation," Small Business Economics, Springer, vol. 58(4), pages 2235-2260, April.
    • Handle: RePEc:kap:sbusec:v:58:y:2022:i:4:d:10.1007_s11187-021-00509-1
    DOI: 10.1007/s11187-021-00509-1
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    Cited by:

    1. Runst, Petrik & Thomä, Jörg, 2023. "Personality and self-employment: A journey into the craft's way of doing business," ifh Working Papers 38/2023, Volkswirtschaftliches Institut für Mittelstand und Handwerk an der Universität Göttingen (ifh), revised 2023.
    2. Runst, Petrik & Thomä, Jörg, 2024. "The R&D Risk-Return Trade-Off: Exploring the Diversity of Young Innovative Firms," ifh Working Papers 43/2024, Volkswirtschaftliches Institut für Mittelstand und Handwerk an der Universität Göttingen (ifh).
    3. Reher, Leonie & Runst, Petrik & Thomä, Jörg, 2024. "Personality and regional innovativeness: An empirical analysis of German patent data," Research Policy, Elsevier, vol. 53(6).
    4. Artamoshina, Polina & Shirokova, Galina & Osiyevskyy, Oleksiy & Bodolica, Virginia, 2023. "ADHD symptoms of CEOs and business model innovation in the SME context," Technovation, Elsevier, vol. 128(C).
    5. Bischoff, Thore Sören & Thonipara, Anita, 2022. "Treiber der Digitalisierung des Handwerks auf dem Land," ifh Forschungsberichte 6, Volkswirtschaftliches Institut für Mittelstand und Handwerk an der Universität Göttingen (ifh).
    6. Bischoff, Thore Sören & Hipp, Ann & Runst, Petrik, 2023. "Firm innovation and generalized trust as a regional resource," Research Policy, Elsevier, vol. 52(8).
    7. Reher, Leonie & Runst, Petrik & Thomä, Jörg, 2022. "Personality and regional innovativeness: An empirical analysis of German patent data," ifh Working Papers 39/2022, Volkswirtschaftliches Institut für Mittelstand und Handwerk an der Universität Göttingen (ifh).
    8. Hädrich, Tobias & Reher, Leonie & Thomä, Jörg, 2023. "Solving the puzzle? An innovation mode perspective on lagging regions," ifh Working Papers 42/2023, Volkswirtschaftliches Institut für Mittelstand und Handwerk an der Universität Göttingen (ifh).

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