Entrepreneurship brings forth economic freedom in its ability to allow individuals to choose how they would like to make the money needed to support themselves and their family members. Benefits of entrepreneurship include but are not limited to, providing a means for boosting the economy and reducing unemployment rates by creating employment opportunities and utilizing innovative technological processes. (Yang & Ai, 2019, p. 2) However, entrepreneurship is not for everyone and it takes a certain kind of individual to be successful as an entrepreneur.
The article titled, “Effect of the Big Five Personality on Entrepreneurial Probability: Influence of China’s Household Registration System” written by Jisheng Yang and Di Ai explores how personality traits influence entrepreneurial probability as a result of China’s household registration system. China’s household registration system, hukou, determines the social economic level of individuals by examining access to quality services, educational resources and overall outcomes. It is believed that the hukou determines personality traits that later determines the probability of entrepreneurship. (Yang & Ai, 2019. P.2) The personality traits that will be explored include the Big Five Personality traits that the author referenced from Goldberg. The personality traits are conscientious, extroversion, agreeableness, openness and neuroticism.
As a result of the hukou there is a difference in the type of job opportunities that are available to urban and rural residents residing in China. Rural residents are restricted to the available resources and their mobility in society is limited forcing them to often be products of employment discrimination. It is not uncommon for a rural resident to be forced into starting a business with very limited funding or resources because of the effects of employment discrimination from the household registration system. (Yang & Ai, 2019. P.3) Rural residents are more likely to be farmers while urban residents would consider themselves to be self- employed.
Study Methodology and Results
To get a better understanding of the impact the hukou status has on individuals, personality traits and entrepreneurship, the sample population was divided into urban and rural residents based on their household registration. The Big Five personality traits were utilized because previous studies have shown that personality traits are originally determined by genetics and are later influenced by societal factors such as family, school and work environments. (Yang & Ai, 2019. P.3) Personality develops in an individual’s youth and becomes stable in adulthood. Entrepreneurship involves taking risks and making critical decisions. Therefore, it is not uncommon that personality traits would be influenced by entrepreneurship. Entrepreneur success is attributed to the need for achievement and being hardworking.
For the purpose of this study three hypotheses were formed to gather a conclusion on how personality traits determine entrepreneurial probability. The hypotheses are listed as followed directly from the article. “H1: The effect of conscientiousness on entrepreneurial probability is uncertain. H2: The higher an individual’s score on extraversion, the higher the probability of him/her being self-employed. H3: The effect of agreeableness on entrepreneurial probability is uncertain. H4: The higher an individual’s score on openness, the higher is the probability of him/her being self- employed. H5: The higher an individual’s score to neuroticism, the lower the probability of him/her being self-employed. H6: “The household registration system will have an impact on the relationship between personality traits and self- employed, but the effect is uncertain.” (Yang & Ai, 2019. P.4-5)
The data was gathered utilizing the China Family Panel Studies (CFPS) from 2012, 2014, and 2016 covering 16,000 households across 25 provinces, municipalities and autonomous regions by adopting multi-stage, probability proportional to size methods. The data provided economic activities, education, population migration, health, and reality of the sociology of Chinese development. (Yang & Ai, 2019. P.5) Only 2014 and 2016 include employment information and the three main classifications were farming (farming their owned land), self-employment (non-agricultural entrepreneurship), and non-agricultural employment for both urban and rural residents. (Yang & Ai, 2019. P.5) Study questions were based on the Big Five personality traits and socioeconomic factors were considered.
A t-test was conducted for the mean equality of employment status. The results showed that conscientiousness, agreeableness, and openness of the self-employed group was significantly lower than the ones in the non-agricultural employment group. (Yang & Ai, 2019. P.7) On the other hand, conscientiousness, extraversion, agreeableness, and openness of the self-employed was significantly higher than the individuals in the farming classification. (Yang & Ai, 2019. P.7) Conscientiousness, for the urban hukou was not significantly different for those in the self-employed and non-agricultural employment. For the rural population group the differences between the three classification groups were relatively the same. It was concluded that personality traits may be influenced by the household registration system and it was decided to consider the effects that come from the household registration. (Yang & Ai, 2019. P.8) A logit model was utilized and heterogeneity tests on the sample groups using the city size classification from the 2016 set of data.
The heterogeneity test showed there were great differences in the effects personality traits had on the job choices. Non-agricultural employment showed to have no significant effect on entrepreneurial probability for small to medium cities. It also showed that conscientiousness and openness are favorable to raising entrepreneurial probability in cities that were large. This was related to an individual’s ability to find a job due to higher levels of education and more employment opportunities for those individuals with urban hukou. (Yang & Ai, 2019. P.13) However, if the individual is not open or lack ambition it is not relatively easy to just start a business. The data also showed that agreeableness promotes entrepreneurship in small cities for individuals the rural hukou sample for the employment category of farming. It was stated that individuals in rural areas have a hard time starting businesses in larger cities due to the lack of resources and high start-up costs. Being agreeable allows them to relationships faster in the smaller cities with the clients and the vendors which is very critical to entrepreneurial achievement. (Yang & Ai, 2019. P.13)
As mentioned at the start of this paper, entrepreneurship provides a means for economic growth and works to reduce unemployment by providing opportunities. However, there was no clear evidence to state whether personality traits truly impacted entrepreneurship in China. In the farming classification it was concluded that individuals having conscientiousness and agreeableness significantly increases entrepreneurial probability in the rural sample group because of the strong use of relationship building. The data also showed that when the data is subdivided by city size that the entrepreneurial probability is impacted.
This study was limited due to the questionnaire being subjective to what others defined the personality traits closes according to the CFPS dataset. The hypotheses were not identified to be true or false. It is still believed entrepreneurship is strong influenced by a variation of personality traits and it takes a certain type of individual to have the drive to run a business. More research will need to be conducted in the future to determine how personality traits really impact the probability of entrepreneurship. This research will need to focus on providing an assessment to both rural and urban residents with a foundation based solely on personality traits and characteristics.
- Yang, J., & Ai, D. (2019). Effect of the Big Five Personality Traits on Entrepreneurial Probability: Influence of China’s Household Registration System. Journal of Labor Research, 1–17. doi: 10.1007/s12122-019-09294-z