What distinguishes
entrepreneurial individuals from others? How do some of a society's poorest
individuals manage to succeed? What strategies do they use? What constitutes
this spirit of wealth creation?
These questions represent the essence of our research. One thought is that luck alone explains the success of an entrepreneur. Luck, by definition, is a random phenomenon - it can come and
go without notice. If luck determined success, we would not expect a pattern of
outcomes, and success in one period would have no correlation with success in a
subsequent period. Naturally, this would make a policy discussion difficult
since there are no practical means by which we can control or influence luck.
By studying the Townsend Thai
Survey data, a monthly panel of data that follows several hundred households in
Thailand for nearly a decade, we can reasonably rule out luck as a significant
factor in determining success. Research indicates that instead of luck, other
factors are associated with success*. In particular, we find that something specific to each household
contributes largely to success. This brings us closer to visualizing what
factors can make an individual successful.
What specific attributes
contribute to success?
The Townsend Thai monthly data
allow us to observe across time and identify which households are successful
and which households are not. Success cannot simply be attributed to the age of
the household head, his or her level of education, or the number of household
members. In addition to these, analysis
indicates that specific factors unique to each household also contribute to
success. For one household this factor could be the members' motivation to
select better inputs for its business, while for another household it could be
the ability to share knowledge and expertise among members effectively.
The data provide an in-depth
look, but looking at households all together does not allow us to tease out
what these household specific factors are. By constructing household case
studies and through supplemental field visits and interviews, researchers have
been able to gain a better understanding of what such factors might be. In one
instance, our researchers visited a successful household that relied upon dairy
farming as its main source of income. The entrepreneurial motivation of the
household members was evident as they explained what set them apart from other
households engaged in the same occupation. Both adult members of the household
attributed their attention to cow selection as a significant factor in their
success. They actively consulted cow merchants to learn how to select healthy
cows and subsequently used these tips to acquire healthy animals. Additionally,
when one member received training on dairy farming, the member's spouse also
invested time in learning those skills from her. Thus, we observe an
entrepreneurial motivation, paired with skill building, specific to this
household that drives its outcome.
Does this success last?
We return to our initial
question: what makes an entrepreneur successful? In studying this large range of data we are
able to identify strong patterns of success among households, in that households
that were successful in one period were far more likely to be successful again
in the future. This high level of persistence confirms that luck does not play
a significant role in determining success. Rather, we find that
household-specific factors, such as entrepreneurial motivation or initiative to
seek out and share expertise, contribute most notably to entrepreneurial
success. Research continues to further investigate the determinants of success
in order to better answer these compelling questions of successful enterprise
and wealth creation.
To read more about factors that contribute to
entrepreneurial success, visit http://townsend.uchicago.edu/Wealth%20Accumulation_June%202009.pdf.
*Success can have many different interpretations. As an indicator for success,
we use the return on assets (ROA), or how much profit a household can generate
given a certain amount of assets. A high ROA number corresponds to a high level
of success.
Photo by flickr user bfick.
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