Hanna Hottenrott (TUM School of Management – Technical University of Munich)

Founder Personality and R&D Decisions in Entrepreneurial Firms

Campus Luigi Einaudi Aula 3D 233

Personality is a main driver of human decision-making. Research on corporate research and development (R&D), however, typically considers strategic decision-making to be independent of the decision-maker’s personality traits. This study investigates the role of CEO personality for R&D decisions building on an entrepreneurial decision model which illustrates the role of major personality traits (ROCEAN: risk tolerance, openness to experience, conscientiousness, extraversion, neuroticism) for both risky and less risky investment decisions. We test the predictions from this model using detailed data from founders in 4,732 ventures founded during between 2011 and 2017. The empirical results show that R&D decisions in entrepreneurial firms are strongly imprinted by the CEO’s personality. We find that higher risk tolerance and openness to experience result in a higher likelihood that the firm engages in R&D, higher levels of R&D expenditures, and a higher ratio of R&D per employee. Comparing R&D decisions to tangible investments, we find that risk tolerance plays a less important role, while founders with higher scores for agreeableness and neuroticism invest less in both R&D and tangible investments. More conscientiousness founders show lower R&D engagement but invest more into tangible assets. We discuss implications for entrepreneurship research and policy.