PERSONALITY BASED PREDICTION OF ENTREPRENEURIAL RISK TOLERANCE IN EMERGING MARKETS

Abstract

Venture undertakings in developing countries are marked by high levels of ambiguity, missing or unsteady supporting structures, and socio-economic shifts. Under such conditions, risk acceptance emerges as an individual characteristic that is critical in supporting or undermining new businesses. This study focuses on the connection between an individual’s psychographic traits and entrepreneurial risk tolerance, examining solely emerging economies. This is the focus of the study: the connection of risk-taking behavior in entrepreneurs to some of their personality traits, Openness to Experience, Extraversion, Conscientiousness, Agreeableness, and Neuroticism, through the Big Five Personality Framework. A quantitative research strategy was implemented through a systematic questionnaire directed to 300 entrepreneurs in India, Nigeria, and Brazil. Analysis was conducted by multiple linear regressions. Machine learning approaches—logistic regression and decision tree classifiers—were employed to analyze the predictive power of each personality trait.The results showing that Openness to Experience and Extraversion positively augment risk tolerance while Neuroticism diminishes risk tolerance are noteworthy. The influence of Conscientiousness and Agreeableness is marked by dependence on the context of the given market. These results strengthen the argument for psychographic segmentation in entrepreneurship, especially in dynamically changing markets where the need for personality traits like the need for cognition and emotions is crucial in the decision-making framework. The research directly benefits investors, startup accelerators, and even policymakers by illuminating the psychological traits linked to resilience and adaptability in entrepreneurs. Moreover, by integrating psychological dimensions into the economic framework, the actions of the entrepreneurs in the unpredictable environment of the economy is better understood, and the literature is all the more richer.