Running Small Businesses: Measuring the Impact of Household- and State-Level Conscientiousness on Entrepreneurship

Abstract

This paper studies the influence of conscientiousness on entrepreneurship activities. Using various proxies from the PSID Well Being survey, we find that households' conscientiousness positively relates to the average number of businesses they own, beyond other Big Five traits. This positive association is robust to alternative explanations and continues to hold at the state level, suggesting that individual personality traits affect aggregate economic outcomes. We provide external validity for our results using the largest online directory of U.S. marathons as a proxy for state-level conscientiousness. Specifically, we find higher growth and survival rates of small-sized businesses in states with a larger population of runners. Overall, our results suggest that certain element of personality traits affects entrepreneurial activities and their success.

Keywords: conscientiousness, small-sized businesses, entrepreneurship, local economic growth, PSID