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

  • Alexander Konon
  • Alexander S. Kritikos
Article

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.

Keywords

Advice Personality Entrepreneurship Profiles 

JEL Classification

C15 D81 L26 

Notes

Acknowledgments

We are indebted two anonymous referees as well as to the participants of the Entrepreneurship Residence Week, in particular to Moren Levesque, Simon Parker, and Mirjam van Praag for their helpful comments.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.German Institute for Economic ResearchDIW BerlinBerlinGermany
  2. 2.University of PotsdamPotsdamGermany
  3. 3.IZABonnGermany
  4. 4.IABNurembergGermany

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