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Adversity Quotient: Perceived Perseverance and New Venture Formation

Gideon D. Markmana*, Robert A. Baronb, David B. Balkinc

aTerry College of Business,

University of Georgia, Athens, GA 30602-6256 bLally School of Management and Technology,

Rensselaer Polytechnic Institute, 110 8th St., Troy, NY 12180 cLeeds School of Business,

University of Colorado at Boulder, Boulder, CO 80309

Abstract

We propose that the ability to create a successful new venture requires determination and

strong self-belief. While past research shows that self-efficacy is fundamental in most work

functioning, this study extends our understanding of individual differences in the context of

entrepreneurship by looking at perceived perseverance. Specifically, we focus on adversity

quotient (AQ), which provides a measure of one’s perceived capacity to prevail in the face of

adversity. Results showed that patent inventors who started new ventures scored significantly

higher not only on self-efficacy, but also on two distinct aspects of AQ – perceived control over

adversity and perceived ownership regarding outcome of adversity – than did inventors who

work as employees for established organizations. Post hoc analysis also revealed that the higher

the AQ score of patent inventors the higher their annual earnings.

* Corresponding address. Tel.: 706-542-3751; fax: 706-542-3743 Email address: [email protected]

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1. Executive Summary

A growing research stream suggests that individual differences may play an important

role in entrepreneurship. To mention just a few studies, Scott Shane (2000) shows that

individuals from very different technological backgrounds who use the very same invention

(e.g., 3DP) develop very different business opportunities. Sarasvathy, Simon, and Lave (1998)

used verbal protocols to show that entrepreneurs – as compared with bankers – evaluate and

process information differently. Busenitz and Barney (1997) suggest that entrepreneurs, as

compared with managers, perceive and react to risk differently. In their research entrepreneurs

gathered significantly less information, utilized less formal techniques to analyze problems, and

followed less rational decision processes. Simon and his colleagues (2000), who studied several

cognitive biases, suggest that entrepreneurs might not realize that certain tasks are beyond their

control.

This paper extends and expands this ongoing work on individual differences by

examining the effects of perceived perseverance, a well-documented construct in social

psychology, that to date has been overlooked by entrepreneurship research. An extensive review

of the literature on perseverance has identified four interrelated constructs that may be

particularly important to entrepreneurs (cf., Stoltz, 1997, 2000). Collectively called adversity

quotient (AQ), these constructs include perceived control over adversity; perceived ownership of

the outcome of adversity (regardless the cause or origin of the adversity); perceived scope of

adversity or how far adversity seems to “bleed” into other areas of one’s life; and finally

perceived endurance of adversity (i.e., how long will the adversity last). Additionally, since self-

efficacy is such a robust predictor of human variability, including in entrepreneurship (Chen,

Greene, and Crick, 1998), we decided to test for the unique effect of AQ, over and above self-

efficacy. In a nutshell, we propose that because setbacks, challenges, snags, and disappointments

characterize the process of new venture formation, perceived capacity to persevere may

distinguish those who start new companies from those who work as employees.

Findings were base on a random sample of 203 patent inventors (41% response rate) all

of whom obtained patents during 1997 and 1998 in the same technological space.

Demographically, entrepreneurs and non-entrepreneurs were quite similar: The average inventor

in this study was 47 years old, had more than 19 years of formal education, at the time of the

survey had been granted over 13 patents, and earned approximately $118,000 a year. On

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average, entrepreneurs had started their firms with two cofounders and had raised over $6

million to build their new ventures. A MANOVA offered support for two of the four

hypotheses. That is, inventors who used their patents to build a new company, as compared with

inventors who work as employees and invent for their employers, had higher perceived control

over adversity, higher perceived ownership over the outcome of adversity, and higher self-

efficacy. The two groups did not differ with respect to their perceived scope and endurance of

adversity. A post hoc analysis on all patent inventors regardless of whether they were

entrepreneurs or not showed positive relationships between inventors’ overall AQ score (AQ

composite index) and income. To give a concrete example, the annual earning of patent

inventors who’s average AQ score was in the top 20% was approximately $35,000 more than the

annual earning of inventors whose average AQ was in the bottom 20%.

In closing, it is important to realize the resurging interest in individual differences in

entrepreneurship, which provided solid foundation to our study (a partial list might include

Baron, 1998, 2000; Busenitz and Barney, 1997; Chen, Greene, and Crick, 1998; Ensley, Carland,

Carland, and Banks, 1999; Honig, 1998; Sarasvathy, Simon, and Lave, 1998; Stewart, Watson,

Carland, and Carland, 1999, to name a few). Keeping previous research in mind, our study

advances research on individual differences in entrepreneurship along several dimensions. We

used a random sample and we classified inventors into technical entrepreneurs and technical

non-entrepreneur only after we received the surveys. This is a strong point because we did not

know ahead of time whether some – or even any – of the inventors were indeed entrepreneurs.

The sample used was highly homogenous; assessing individual differences among inventors,

who invent in the same technological space, and at the same time period provides a sound

hypotheses testing. We also tested for non-response bias; we compared our sample with 46 non-

participating inventors and there were no significant differences between the two groups on age,

education, income, and innovation. Three unusual variables this study brings to research on

individual differences in entrepreneurs include adversity quotient, inventive capacity, and

financial success as captured, respectively, by perceived capacity to persevere, the number of

patents granted to each inventor, and their annual earnings. Finally, and probably most

interesting, is the new evidence that perceived capacity to persevere explains human variability

in entrepreneurship and that it is distinctly different than self-efficacy.

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2. Introduction

“Our greatest glory is not in never failing, but in rising every time we fail.” Confucius

A recent and growing research stream suggests that individual differences play an

important role in entrepreneurship (Baum, Locke, and Smith, 2001). To mention a few,

individuals from diverse technological backgrounds who assess the same technological invention

(e.g., 3DP) seem to recognize and then develop different bus iness opportunities (Shane, 2000).

Sarasvathy, Simon, and Lave (1998) used verbal protocols to illustrate that entrepreneurs

evaluate and process information differently from bankers. Additional evidence suggests that

entrepreneurs, as compared with managers of existing firms, may perceive and react to risk

differently; entrepreneurs gathered significantly less information, utilized less formal techniques

to analyze problems, and followed less rational decision processes than managers did (Busenitz,

1999; Busenitz and Barney, 1997). In contrast, Kaish and Gilad (1991) found that entrepreneurs

spent considerably more time searching for information and paid attention to different risk cues

than did executives of established firms. Studying several biases such as illusion of control and

the belief in the law of small numbers, Simon, Houghton, and Aquino (2000) suggest that

entrepreneurs might not realize that certain tasks are beyond their control. Others noted that

entrepreneurs tend to make quick decisions (Bird, 1988; Eisenhardt, 1989; Stevenson,

Grousbeck, Roberts, and Bhidé, 1999). New evidence also confirms that common cognitive

scripts not only explain similarities in decision-making among entrepreneurs across cultures but

also behavioral differences between entrepreneurs and non-entrepreneurs within countries

(Mitchell, Smith, Seawright, and Morse, 2000). Most recently, a longitudinal and cross-sectional

research showed that, in the architectural woodworking industry, CEOs’ traits, skill, and

motivation are significant (direct or indirect) correlates of ventures growth (Baum and Lock, in

press; Baum, Locke, and Smith, 2001). Finally, entrepreneurs and non-entrepreneurs may react

to environmental complexity in contrasting ways. Meyer and Dean (1990) report that

professional managers replace founding entrepreneurs because the latter reach the “executive

limit;” entrepreneurs fail to adequately reduce environmental complexity and thereby constrain

the growth of their own venture.

In recent years, Baron and his colleagues (e.g., Baron, 1998, 2000; Baron and Markman,

2000; in press; Baron, Markman, and Hirsa, in press; Markman and Baron, in press; Markman,

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Balkin, and Baron, 2001) and others (e.g., Baum, Locke, and Smith, 2001; Baum and Lock, in

press; Chen, Greene, and Crick, 1998; Krueger, 1993) have sought to address the question of

individual differences by providing stronger theoretical and empirical links between

entrepreneurship and applied and social psychology. The research reported in this paper sought

to extend this ongoing work by examining the effects of perceived perseverance – a well-

documented construct in the area of social psychology (cf., Eisenberger, 1992) that, to date, has

been overlooked by entrepreneurship researchers.1 In brief, since setbacks, challenges, snags,

and disappointments characterize the process of new venture formation we propose that the

perceived capacity to persevere in the face of adversity is one individual difference that may

distinguish those who start new companies from those who don’t.

Despite repeated assertions – particularly by economic paradigms – that at the core of

entrepreneurship is “opportunities recognition” and “alertness” (cf., Kirzner, 1997), we maintain

that with a few exceptions entrepreneurship research has overlooked key activities such as the

actual pursuit of opportunities or the ability to essentially convert abstract ideas and new

technological discoveries into moneymaking services or products. The recognition versus

execution debate is not new. Entrepreneurial discovery theory (cf., Kirzner, 1997) suggests that

in the face of diverse profit possibilities, the key to success is to first recognize and then pursue

the “right” opportunity. At the extreme, misidentification and the pursuit of obsolete

opportunities is an error from which recovery is long, costly, and frequently impractical. This

point is important because entrepreneurs start their venture with limited capital and new

offerings that are constrained by a narrow window of opportunity, meager organizational slack,

and limited product or service legitimacy (Aldrich, 1999; Aldrich and Fiol, 1994). To echo West

and Meyer (1997): although mature or diversified firms can afford to err and pursue, at least for a

while, low-margin opportunities, entrepreneurs – to survive and thrive – must place a premium

on correctly recognizing fertile opportunities.

Since an entrepreneurial undertaking is based on more than a “good idea” (Timmons,

1994), many scholars remain adamant that the opportunity – and particularly the process of

opportunity recognition – remains fundamental to the entrepreneurial process (Shane, 2000;

1 Some entrepreneurship research addressed the issue of persistence and tenacity (cf., Baum and his colleagues, in press and 2001; McGrath, 1995) and others have used persistence as an outcome (cf., Gatewood, Shaver, and

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Shane and Venkataraman, 2000). However, our interviews of patent inventors, technology

transfer executives, and patent attorneys taught us that only a few novel, useful, and non-obvious

inventions are actually commercialized, thus suggesting that recognizing opportunity is perhaps

necessary but clearly insufficient for entrepreneurship to take place. Because the recognition of

opportunity is largely an intangible, cognitive process to be assessed mainly when the new

venture or product is launched, a fundamental question in entrepreneurship research is not only

who can discover opportunities, but also who can persevere to harvest them (Shane and

Venkataraman, 2000).

In fact, business history is quite familiar with inferior products, services, and

technologies that nevertheless outmaneuvered, out-marketed, and outsold superior counterparts.

For example the Wintel (Microsoft operating system and Intel microprocessor) standard of

personal computers became the dominant computing technology despite the fact that Apple's

MacIntosh technology provided user- friendlier interface. The technology to record video data on

magnetic tape and the subsequent battle between Betamax and VHS is another example. To use

another anecdote, although science fiction enthusiasts envisioned teleportation – dematerializing

an object at one location, and sending the details of that object’s precise atomic configuration

elsewhere, where it is reconstructed – as a real opportunity, for years it was thought to violate the

Heisenberg uncertainty principle of quantum mechanics (Einstein, Podolsky, and Rosen, 1935).

Now, using a paradoxical feature of quantum mechanics known as the Einstein-Podolsky-Rosen

correlation or EPR entanglement, it is known that quantum teleportation is possible – at least

with photons (Bennett, 1993). The point is that despite the recognition of an opportunity (i.e.,

where time and space could be eliminated from travel), complex technological barriers, high and

long-term risk, and intensive investment capital required to convert such opportunity into a

reality daunt entrepreneurs, investors, and even nations. Like Thomas Edison, who accumulated

1,093 patents and noted that genius is 1% inspiration and 99% perspiration, we point that it is

one thing to identify abstract opportunities, but an entirely different matter to harvest them.

We concede that opportunity recognition may be a precondition to entrepreneurial efforts,

yet we note that it remains unclear who are the persons who not only recognize novel, useful,

and non-obvious technologies, but also personally use these inventions to establish new ventures.

Gartner, 1995). However, such research neither measured the underlying psychological factors that make one

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Because the pursuit of opportunities – particularly in domains characterized by new

technological discoveries – is very challenging (McGrath, 1995), we suspect that at least part of

the answer to this question lies in human variability in terms of perceived capacity to persevere

in the face of adversity. Hence, the goal of this paper is to address the following question: Are

patent inventors start new companies to develop and sell their technological discoveries

(hereinafter called technical entrepreneurs) higher in terms of the perceived capacity to persevere

in the face of adversity than inventors who opt to work as employees for established

organizations (hereinafter called technical non-entrepreneurs)?

3. Theory and Hypotheses

Although the concept of perseverance has been studied for many years, most research on

this topic has focused on how beliefs persist in light of new information and in spite of the

discrediting of old information. More recently, Eisenberger (1992); Eisenberger, Kuhlman, and

Cotterell (1992), Eisenberger and Leonard (1980), have extended this line of work to the domain

of task performance and work persistence. For example, Eisenberger (1992) found that

reinforced effort results in persistence that transfers to different tasks: the phenomenon of

learned industriousness (Eisenberger, 1992) occurs when high effort on one task (e.g., solving

complex anagrams) transfers to another (e.g., detecting differences between cartoon drawings).

Eisenberger and Leonard (1980) found that high effort reduces disruptive responses such as

frustration produced by early failure, and thus leading to greater subsequent persistence. Like

Eisenberger (1992), we define perseverance as one’s capability to persist in the face of

difficulties, risks, and failure. We propose that because individuals experience varying levels of

adversity, success is determined, to an important degree, by the extent to which individuals

persevere despite what appear to be insurmountable obstacles, or in Stoltz’s terms (1997, 2000),

adversity. A corollary of this is that perceived perseverance may be crucial – even if insufficient

– for one’s success in entrepreneurial settings.

We suggest that perceived capacity to persevere influences individuals’ courses of action,

the level of effort they put forth while pursuing their endeavors, the length of their endurance and

the level of their resilience in the face of lasting obstacles and repeated failures (cf., Eisenberger

persist nor made distinctions between types of perseverance. We thank an anonymous reviewer to this comment.

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and Leonard, 1980). Perceived perseverance also influences how much stress and setbacks

individuals experience while they cope with taxing situations, and the level of accomplishments

they realize (Bandura, 1997). For instance, perseverant people find out ways to circumvent

constraints or change them by their actions, whereas less diligent people are easily discouraged

by impediments and unexpected challenges (Bandura, 1997; Eisenberger, et al., 1992).

Launching a new high- tech venture requires a high level of conviction in one’s ability to

overcome challenges plus the successfully transformation of the new technologies into attractive

commercial products or services. We propose that people who discover or invent similar

inventions and are exposed to very comparable obstacles differ in the way they perceive

adversity. This proposition begs the following question: What specific types of perseverance

will be most useful to entrepreneurs? Although the answer to this interesting question depends,

to an important degree, on the various situations entrepreneurs face, a careful review of available

evidence (e.g., Stoltz, 1997, 2000) indicates that one’s adversity quotient (AQ), the perceived

ability to persevere and persist in the face of adversity, is composed of four interrelated

constructs. These include, (1) perceived control over adversity; (2) perceived ownership of the

outcome of adversity (regardless of its cause); (3) perceived scope of adversity (i.e., how far the

adversity “bleeds” into other areas of one’s life); and finally (4) perceived endurance of adversity

(i.e., how long the adversity lasts). As detailed below, we predict that technical inventors who

create new ventures perceive higher levels of control over the adversity they face, sense greater

ownership regarding outcomes of the adversity, limit the scope of the adversity so that it does not

impinge on other areas of their lives, and see adversity as a temporary – rather than enduring –

setback.

Although studies on individual differences recognize some unavoidable overlaps among

many useful constructs – such as self-efficacy, self-esteem, locus of control, and expectancy –

evidence from theoretical and applied studies on human variability suggests that each of these

constructs has unique features that merit their conceptual distinctness (Bandura, 1995, 1997; Nir

and Neumann, 1995). Clearly, simultaneously assessing the four types of AQ with each of these

constructs is beyond the scope of a single article, yet to further theoretical development we

conclude the theory section with additional discussion regarding self-efficacy. We decided to

test for the unique effect of self-efficacy, rather than self-esteem or locus of control, because

research has shown that the former is a robust predictor of superior task performance (cf.,

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Bandura, 1997), and human variability in entrepreneurship (Chen, Greene, and Crick, 1998). We

reasoned that testing for the unique effect of AQ, over and above self-efficacy, would provide

additional construct validity for AQ.

3.1. Control: Perceived Control over Adversity

People strive to control events that affect their life circumstances because doing so

provides innumerable personal, financial, and social benefits (Lam and Schaubroeck, 2000).

Being able to predict and control events fosters adaptive preparedness, whereas inability to exert

influence over adversity breeds apprehension, apathy, and at times despair (Bandura, 1986).

Also, because actions are based more on what is perceived or believed than on what is

objectively true, alleged control is an important precursor to one’s level of motivation and

actions. Specific perceived control over adversity is a major basis of action because people who

believe they can attain certain outcomes have the incentive to act (Bandura, 1997). Perceived

control over adversity – which is central to most human behaviors and the focus of this theory –

should not be confused with general “locus of control”; the former refers specifically to control

over adversity whereas the latter is a global measure of one’s ability to influence one’s own fate

or outcomes (Stoltz, 1997). Perceived control over adversity influences the course of action, the

level of effort put forth, and the length of perseverance and resilience in the face of obstacles,

failures, or hardship. Perceived control over adversity also affects how much stress individuals

experience while they cope with taxing environments, as well as the level of accomplishments

they realize (Stoltz, 2000). In short, perceived control over adversity influences what individuals

do and become and their motivation to act despite impediments.

Theory and practice agree that when confronting setbacks, perseverant individuals

intensify their effort and experiment with new actions, whereas those who are less perseverant

quickly give up (Bandura, 1987; Cervone, 1989). We note that the development and use of new

technologies as a basis for new components or even end products is the outcome of intensive

work conducted by determined, self-disciplined individuals (cf., McGrath, 1995). Indeed, our

interviews with numerous patent inventors (entrepreneurs and non-entrepreneurs) indicate that

their key challenge is to persevere until they thoroughly troubleshoot vexing technological

obstacles. Since launching a new venture entails a combination of both technological and

business obstacles, it stands to reason that entrepreneurs would probably have stronger perceived

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control over their adversity. Stated differently, launching a business requires strong perceived

control over adversity along both technological and business va lue chains; entrepreneurs must

not only convert their new technological discovery into working prototypes but also transform

them into viable moneymaking products and services. In short, while we suspect that all

inventors perceive strong control over the ir adversity, we expect entrepreneurs to perceive even

stronger control over their adversity, as they are personally obliged to convert their new

technology into a business. Hence the following hypothesis:

Hypothesis 1: Inventors who build new venture based on their discoveries tend to have higher perceived capacity to control adversity than inventors who invent for an existing company.

3.2. Accountability: Perceived Ownership of the Outcomes of the Adversity

Accountability, particularly in response to unfavorable events, manifests itself as regret,

disappointment, and blame (Roese 1997). Some individuals, for instance, experience intense

discontent when they fail to attain outcomes for which they have a strong mental image

(Medvec, Madey, and Gilovich 1995). Such strong emotions are important because growing

empirical evidence suggests that emotions have profound effects on perceptions and judgments

(e.g., Forgas, 1995), understanding of cause-effect relationships, decision-making, and thus on

task performance (Mandel and Lehman 1996). Perceived accountability, despite the short-term

negative affect it generates (e.g., sadness, disappointment, and blame), is offset by inferential

benefits that prove advantageous on a longer-term basis. For example, when task performance is

deemed inferior because of lack of effort (rather than ability), a causally potent antecedent has

been identified; deploying additional effort will enhance future performance. Substandard

execution and its associated negative affectivity alert us to a particular problem and prompt

corrective thinking and action (Schwarz, Bless, Srtack, and Klumpp, 1991). In short, once

accountability “mobilizes” us to rectify negative outcome (Peeters and Czapinski, 1990), an

adaptive reaction is established. Accountable individuals focus on actions and outcomes; they

take steps to circumvent unpleasant events or center their attention on the outcomes of adversity

regardless of its origin (Stoltz, 1997). Because technical entrepreneurs operate in highly

dynamic environments in which the process of transforming technological opportunities into

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innovative products or services rarely goes undisturbed, human variability in reaction to setbacks

and disappointments may be quite telling. The question, then, is whether technical

entrepreneurs, in the presence of adversity and setbacks, perceive stronger accountability over

adversity (regardless of its origin) than do technical non-entrepreneurs?

Two rationales suggest that the answer to this question is yes. First, agency theory holds

that owners (i.e., principals) are more committed to and accountable to producing commercial

outcomes than their agents (Deckop, Mangel, and Cirka, 1999). Although inventors may be

equally accountable for their new inventions, technical entrepreneurs – because of the substantial

stake and personal investment, in their new venture and the salient economic link between

innovation and competitive advantage – will perceive stronger ownership over outcomes of

adversity they face than agents. Lack of perceived ownership over adversity among technical

entrepreneurs might increase unnecessary business risk, which can bring premature failure.

Implications from research in participative management (cf., Coyle-Shapiro, 1999) suggest that

because technical entrepreneurs own, and actively partake in the daily management of, their

venture they will be more accountable. It is also true that labor laws and the strong demand for

technical workers shield technical employees and tenured incumbents from being personally

responsible for transforming inventions into end products. Thus, agency theory and the obvious

bond between inventions and competitiveness suggest that technical entrepreneurs will perceive

stronger ownership over outcome of adversity than their counterparts.

Second, research shows that accountability and the assignment of blame are particularly

vivid in contexts involving product failure (Creyer and Gurhan, 1997). This suggests that

accountability may be predominantly strong if the outcome in question produces repeated

negative outcomes (e.g., failing to secure a patent on a key invention and thus suffering financial

hardship), which may serve to continually reactivate thoughts of accountability. Keeping this in

mind, it is also apparent that the work span and responsibility horizons of technical non-

entrepreneurs and technical entrepreneurs are unequal. Technical entrepreneurs are in charge of

their business, its growth, and competitiveness; they are liable for more cross-functional work,

integrated tasks, and outcomes. Entrepreneurship is an occupation in transition; technical

entrepreneurs work with more diverse and interdependent stakeholders and they are accountable

for deliverables that are outside their immediate function and control. The cross-functional

nature of their work diverges from the traditional work and compartmentalized activities that are

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common in domains in which technical non-entrepreneurs work. The sense of personal

ownership, beneficial spillovers from innovation, and broad work span and responsibility

horizons suggest that entrepreneurs will perceive stronger accountability for the adversity they

face than will technical non-entrepreneurs.

Hypothesis 2: Inventors who build new venture based on their discoveries tend to have higher perceived ownership of the outcome of adversity than inventors who invent for an existing company.

3.3. Scope: How Far Will the Adversity Reach?

Scope or range of adversity relates to the extent to which perceived adversity will

impinge on other aspects of one’s life. Social psychologists have found that the moderating

influences of strain on coping resources and pessimism can be detrimental to task performance

and that some people are better able to “quarantine” negative emotions than others (cf., Seligman

et al., 1995). Adversity is said to have a wide scope when it encumbers adaptive functioning: a

dreadful meeting ruins the whole day; a conflict with a single person hinders all interpersonal

relationships; and a poor performance on a weeklong project seems like a career failure. The

higher the perceived scope of the adversity, the more people tend to “catastrophize,” thus

allowing adversity to spread into other areas of their lives and work. Such persons adopt

pessimistic outlooks; experience agitation, sleeplessness, bitterness, and helplessness; make poor

decisions; and become socially and professionally isolated (cf. Stoltz, 1997; Waldroop and

Butler, 2000). When adversity is perceived as far-reaching, it is self-handicapping; it “takes

over” one’s life and hinders adaptive functioning and adequate performance.

Regardless of occupation, the ability to quarantine adversity benefits all individuals

(Lyubomirsky, Caldwell, and Nolen-Hoeksema, 1998), however, because the financial well-

being of technical entrepreneurs, more so than that of technical non-entrepreneurs, depends on

their ability to work through obstacles, they will have a better perceived ability to fend off and

quickly isolate adversity. Although both technical entrepreneurs and technical non-entrepreneurs

must overcome technological problems, as we explained before, the former encounter a

tremendous amount of additional rejection as they battle market disbelief and investors’ scrutiny.

Thus, because allowing adversity to hemorrhage into other areas of one’s life leads to

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helplessness that in turn prolongs the duration of negative moods, distracts task performance, and

hinders one’s ability to capitalize on opportunities (Seligman et al., 1995), we predict that

technical entrepreneurs will report higher perceived ability to isolate adversity and misfortune.

We therefore offer the following hypothesis:

Hypothesis 3: Inventors who build new venture based on their discoveries tend to perceive adversity as more limited in scope than inventors who invent for an existing company.

3.4. Endurance: How Long will the Adversity Last?

Paradigms that describe the innovation process as a linear progression inevitably fail to

capture its uncertain and serendipitous nature, its unremitting irregularity, disorder, and

complexity (cf., Van de Ven, Polley, Garud, and Venkataraman, 1999). Solutions to scientific

puzzles or applied problems yield no immediate economic rents because innovation is the

outcome of not only basic and applied research but also a complex confluence of product

development, engineering, manufacturing, marketing, distribution, servicing – all of which are

followed by product adaptation and upgrading. The process contains innumerable leaps ahead,

feedback loops, and sudden and unexpected lacunae, with adversities and snags that may seem

enduring or even unsolvable. This point is important because most of the responsibility of

technical non-entrepreneurs is concentrated at the inception and prototyping phase, whereas

technical entrepreneurs are accountable for events that may arise throughout the value chain –

from product inception and prototyping, to production and sales, and finally to service, repair,

and returns. Thus, it seems that the pathways to entrepreneurial pursuits are strewn with more

lasting holdups and inherent short-term disincentives than the professional career tracks

sponsored by established institutions.

Innovation projects demand heavy personal investments that go beyond intellectual

effort, and the benefits – if and when they are finally realized – come after a lengthy process of

refinements with numerous setbacks (cf., Leifer et al., 2000). Adverse market reactions,

unresponsive suppliers, and what appear to be unapproachable buyers represent other

disincentives to debuting unconventional products and services. Because new technologies –

particularly during early stages when the availability of capital and resource is most important –

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frequently fail to make sense to investors, conventional wisdom constitutes yet another barrier

that entrepreneurs must overcome.

Finally, technical entrepreneurs also face rival companies that jockey for position within

an industry as well as political, legal, regulatory, and economic conditions that can reduce a

firm’s degrees of freedom to pursue strategic choices (Zahra and Neubaum, 1998). They must

also overcome technological hostility due to radical shifts in resources deployment techniques

and technological standards (Zahra and Neubaum, 1998). As entrepreneurs confront these

diverse types of hostilities, perseverant commitment is clearly important. We therefore suggest

that entrepreneurs’ perseverance to mobilize the effort needed to convert discoveries into

products and services is prolonged when adversity is seen as short- lived rather than enduring.

That is, when the perceived adversity is non-enduring, technical entrepreneurs would be more

likely to make an effort. Hence, the following hypothesis:

Hypothesis 4: Inventors who build new venture based on their discoveries tend to perceive adversity as more short- lived than inventors who invent for an existing company.

3.5. Self-Efficacy: Perceived Ability to Accomplish Tasks

In order to extend theory and because of potential conceptual overlap, it is important to

distinguish Adversity Quotient (AQ) from the well-known and highly validated self-efficacy

construct. For example, AQ entails perceived ability to handle adversity whereas self-efficacy

involves the perception that one can organize and effectively execute actions to produce certain

outcomes (Bandura, 1997). Although some research has already suggested that self-efficacy

differentiates entrepreneurs from non-entrepreneurs (e.g., Chen, Greene, and Crick, 1998), we

reassess self-efficacy because it would be in theory’s best interest to test whether AQ explains

additional variance that is not explained by self-efficacy.

To briefly reiterate the rationale presented in previous self-efficacy research in this

context (cf., Chen, Greene, and Crick, 1998; Krueger & Brazeal, 1994), starting a new venture

including raising capital, attracting partners and recruiting key employees, and overcoming what

appear to be insurmountable technical and business obstacles is substantially more difficult than

managing an existing operation. While self-efficacy benefits persons regardless of occupation,

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championing innovative research that culminates in new venture creation seems to call for high

self-efficacy. Indeed, entrepreneurs appear to work under significant constraints, including time,

funding, and uncertain outcomes despite their relentless technical and business effort. Since the

process of technological discovery is strewn with many barriers, the conversion of such

inventions into products and services rests heavily not only on effort and creative work, but also

on sustained strong self-efficacy. Since self-efficacy reliably predicts personal effectiveness in

diverse tasks and careers (Bandura, 1997), we suggest that it will also be related to the pursuit of

entrepreneurial activity.

4. Methods

To reduce selection biases commonly found in entrepreneurship research (see Markman,

Balkin, and Baron, 2001, for a detailed discussion on this issue), while obtaining evidence on the

hypotheses, we extracted a random sample from a list of 4861 patent inventors, obtained from

the US Patents and Trademark Office. All 4861 inventors were granted patents for their

inventions during 1997 and 1998 for inventions encompassing surgery devices (patent classes

600, 601, 602, 604, 606, 607). Since the original list of 4861 inventors included only minimal

contact information (i.e., first and last name, city, and state), we used Visual Basic to scan the

Nation Wide Phone Directory (NWPD) software that resides on CD ROMs and to retrieve

complete contact information (e.g., full address and phone number) for each inventor.

The Visual Basic output yielded 3491 non-duplicated entries. Then, using Excel

Spreadsheet and the “randomize” command function, we selected a random sample of 586 patent

inventors, all of whom were contacted via telephone and were invited to participate in our study.

Two weeks later we called all the non-respondents and then sent our second batch of survey

mailing. We repeated the same procedure two to six additional times with all non-responding

inventors. Although we sent surveys to a random sample of 568 patent inventors and received

233 surveys back (41% response rate), only 203 were usable. Hence, in contrast to many studies

in entrepreneurship that compared samples of known entrepreneurs with a sample of

predetermined non-entrepreneurs, we relied on a random sample of inventors, all of whom invent

in the same technological space, at the same time period, and we did not know ahead of time,

which inventors were entrepreneurs and which were not.

16

Placed at the last section of the mail survey, a qualifying question asked inventors to

indicate whether they used their invention to start their own business in 1997 or 1998. Such a

qualifying question used successfully in previous studies including the Entrepreneurship

Research Consortium (ERC project; Carter, Gartner, and Reynolds, 1996). Of the 203 inventors,

49 (24%) used their invention to start a new company and therefore were classified as technical

entrepreneurs (coded as 1). The remaining 154 (76%) worked as inventors for established

companies, and thus were classified as technical non-entrepreneurs (coded as 0). This relatively

high rate of entrepreneurship (24%) may be attributable to the monopolistic nature of patents.

Unlike traditional businesses, startups anchored in patents enjoy substantial technological

protection, competitive insulation, some legitimacy, and a relatively wider window of

opportunity (effective patent life is approximately 17 years).

Again, unlike many studies in entrepreneurship, we did not know ahead of time whether

some – or even any – of the inventors were indeed entrepreneurs; we only classified inventors

into group membership once the completed surveys were returned to us. We also decided to

focus on patent inventors because patents are one reasonable proxy for technological innovation,

a precursor to newly developed product components, and an indication of technological capital

(Balkin, Markman, and Gomez-Mejia, 2000). Patents may also erect legal and technical barriers

to rivals. For example, our interviews of patent inventors, technology transfer executives, and

patent attorneys suggested that good patents may provide footholds to new technologies and

therefore are an important source of competitive advantage. Finally, patents are an indication of

inventive capacity that benefits society (Trajtenberg, 1990).

Before outlining the study’s procedures and operations, it is worthwhile to reemphasize

four things that distinguish this study from others. First, classification of participants, in this

case, patent inventors as technical entrepreneurs or as technical non-entrepreneur, was made

only after the surveys were collected and data were coded. Second, restricting the assessments

of entrepreneurs and non-entrepreneurs to inventors who invent in the same technological space

at roughly the same time period (1997-1998) provides a stronger test of hypotheses outlined

above. Third, although the source of the primary data collection was based on self-reported

surveys, we also verified data consistency through phone interviews and crosschecks with the US

Patent and Trademarks Office website (e.g., patent count). Fourth, we made an attempt to

account for non-response bias. To this end, we compared our random sample with 46 inventors

17

who refused to return their surveys back on age, formal education, annual income, and number of

patents developed. Data from non-responding inventors – obtained via phone calls – and

analysis showed no significant differences between the two samples. Finally, because of

potential covariation between opportunities and individuals, Shane (2000) advocates the

methodological point that studies on individual differences should control for the characteristics

of the opportunity. We were aware of the opportunity control problem and took three steps

alleviate this predicament. First, using a random sample of inventors implies that the

characteristics of the opportunities may also be randomly distributed between the two groups.

Second, our AQ measures were not tied to the opportunity, but instead were based on the same

hypothetical scenarios described henceforth (Table 1). And finally, inventors in this study

invented highly related patents (surgery devices), which to some extent represents a set of

opportunities with similar characteristics.

4.1. Procedures and Operational Measures

Inventors were asked to complete a short questionnaire consisting of several scales

adapted from widely used measures of adversity quotient (Stoltz, 1997, 2000) and self-efficacy

(Maurer and Pierce, 1998). The adversity quotient (AQ) measure consisted of 40 items scale that

was developed and validated by Stoltz (1997, 2000) with more than 100,000 participants from

diverse organizations in a variety of industries. Each item consisted of a statement representing

hypothetical events (e.g., “you apply for a job change and don’t get it”; “you fail to meet the

deadline on a major project”) followed by four questions, each representing the four dimensions

described earlier (i.e., control, ownership, scope, and endurance). The respondents’ task was to

indicate, on a five-point scale, the extent to which the statements represented them (see Table 1

for constructs description). Factor analysis showed that constructs, composed of eight items

each, were reliable (e.g., control: α = .77; ownership: α = .81; scope: α = .83; and endurance: α

= .81). Following Stoltz’s recommendation (1997, 2000) we created one additional variable – a

composite index of AQ score. Summing the scores on each of the four independent AQ

constructs (described above) and dividing by four computed this variable of AQ composite

index.

18

Table 1 Sample Items Used in Adversity Quotient Scale Inventors used a 5-point scale to indicate the extent to which they agreed with each of the statements following the situations described below. Situation: Someone you consider important is not receptive to your ideas.

Control: How much control do you feel you have in this situation?

1 = no control 5 = complete control

Ownership: To what extent do you feel responsible for dealing with the outcome(s) of this situation?

1 = not responsible at all 5 = completely responsible

Scope: The reason this person was not responsive is something that is …

1 = related to all aspects of my life

5 = related to this situation only

Endurance: The reason this person was not responsive to my ideas will …

1 = persist for a long time 5 = not persist very long

Situation: You apply for a job change and don’t get it.

Control: How much control do you feel you have in this situation?

1 = no control 5 = complete control

Ownership: To what extent do you feel responsible for dealing with the outcome(s) of this situation?

1 = not responsible at all 5 = completely responsible

Scope: The reason I didn’t get the job change is something that:

1 = related to all aspects of my life

5 = related to this situation only

Endurance: The reason I did not get the job change will: 1 = persist for a long time 5 = not persist very long Situation: You fail to meet the deadline on a major project.

Control: How much control do you feel you have in this situation?

1 = no control 5 = complete control

Ownership: To what extent do you feel responsible for dealing with the outcome(s) of this situation?

1 = not responsible at all 5 = completely responsible

Scope: The reason I didn’t meet the deadline is something that:

1 = related to all aspect of my life

5 = related to this situation only

Endurance: The reason I did not meet the deadline will: 1 = persist for a long time 5 = not persist very long

Although it is frequently recommended to rely on self-efficacy scales that measure

perceived efficacy with regards to specific tasks, one exception to this rule entails circumstances

whereby the tasks under consideration are broad or require a very diverse set of skills (cf.,

Bandura, 1997). Since starting high tech ventures requires diverse capabilities for which

validated specific self-efficacy scales are not yet available, we followed Bandura’s advice and

used a general scale. Using an eight- item, seven-point scale (1 = strongly disagree; 7 = strongly

agree), we measured perceived self-efficacy in terms of the belief about what one can do under

different conditions with whatever skills one possesses. This measure was used successfully in

previous research (Maurer and Pierce, 1998) and included such general statements as “I am

strong enough to overcome life's struggles,” “I can handle the situations that life brings,” and ” I

usually feel I can handle the typical problems that come up in life” (α = .89).

19

Consistent with previous research on individual differences in entrepreneurship, the

survey obtained additional control variables such as age, education (measured by years of formal

education), and personal annual income for 1998. Since all the participants in our study worked

on novel, non-obvious, and useful technologies, an additional control variable that our study

brings to this type of research is a measure of innovation as captured by the number of patents

granted to each inventor (Griliches, 1990; Romer, 1996).

4.2. Analyses

A MANOVA examined the relationship between the entrepreneur and non-entrepreneur

variable on a set of four dependent variables: AQ-control; AQ-ownership; AQ-scope; and AQ-

endurance. Age, years of education, innovation (i.e., number of patents), income, and self-

efficacy were included as covariates.

5. Results

Table 2 Means, Standard Deviations, and Correlations among Study Variablesª

Mean s.d. 1 2 3 4 5 6 7 8 9 1. Groupb 0.24 0.44 2. Age 47.23 9.33 .05 3. Education 19.69 2.69 .16* .15* 4. Innovation 13.14 17.00 -.03 .05 .11 5. Incomec 118273 83845 .00 .06 -.01 .05 6. Self-Efficacy 6.01 .99 .17** .03 .01 .05 .11 7. AQ-control 3.36 .59 .26** .15* .03 .09 .23** .18** 8. AQ-ownership 3.99 .51 .20** .12 -.20 -.02 .17* .42** .17** 9. AQ-scope 3.86 .56 .02 .08 -.01 -.02 .08 .07 .38** .18** 10. AQ-endurance 3.19 .50 .12 -.01 -.03 -.10 .14 .08 .22** .28** .11

* Correlation is significant at the .05 level (2-tailed). ** Correlation is significant at the .01 level (2-tailed). ª N = 203 b Group refers to technical entrepreneurs versus technical non-entrepreneurs. c Income is annual earnings in dollars.

Table 2 presents means, standard deviations, and correlations for all the inventors,

regardless of group membership. As shown in Table 2, the average inventor in this study was 47

years old, had more than 19 years of forma l education, and at the time of the survey had been

granted over 13 patents. In 1998, the average inventor earned approximately $118,000 a year.

Entrepreneurs and non-entrepreneurs were closely matched on education, age, income, and

20

innovations, and the inventors who also became entrepreneurs had started their firms with two

cofounders and had raised, on average, $6 million to build their company.

The results of the MANOVA revealed statistically significant differences between

entrepreneurs and non-entrepreneurs on the set of four dependent variables (Pillai's Trace = .09;

F = 2.80; p = .02). The size of the multivariate effect of entrepreneurship on the four dependent

variables, as indexed by partial eta squared, was .09. Univariate ANOVAs revealed that group

membership (i.e., entrepreneurs vs. non-entrepreneurs) was significantly related to AQ-control (F

= 8.03; p = .005); AQ-ownership (F = 4.07; p = .05), but not to AQ-scope or AQ-endurance.

Specifically, means AQ-control and AQ-ownership were higher for entrepreneurs than for non-

entrepreneurs (respectively 3.6 vs. 3.3; 4.2 vs. 3.9 for AQ-control and AQ-ownership; and 6.4 vs.

5.8 for self-efficacy). Thus, while the data offered support for hypotheses 1 and 2, hypotheses 3

and 4 were not supported. Table 3 shows the adjusted means for the four dependent variables

broken-down for entrepreneurs and non-entrepreneurs. Consistent with predictions made

elsewhere (Chen, Greene, and Crick, 1998), we too find that entrepreneurs tend to have

significantly higher self-efficacy (F = 5.27; p = .02).

Table 3 MANOVA Analysis: Dependent Variable Meansª For Entrepreneurs and Non-Entrepreneurs Dependent Variable Entrepreneurs Non-Entrepreneur F-value eta2 AQ-Control 3.65 3.32 8.03* .05 AQ-Ownership 4.20 3.90 4.06* .03 AQ-Scope 3.84 3.86 .05 .00 AQ-Endurance 3.23 3.16 .50 .00 Multivariate effect: Pillai's trace = .09, F = 2.80*, eta2 = .09 * p < .05 ª Means adjusted for covariates: years of age and education, annual income, number of patents, and self-efficacy.

6. Discussions and conclusions

As we outlined at the beginning of this article, much research in entrepreneurship is using

stronger theoretical links and better empirical testing to address the question of individual

differences (e.g., Baron, 1998, 2000; Baron and Markman, 2000; in press; Baron, Markman, and

Hirsa, in press; Busenitz and Barney, 1997; Markman and Baron, in press; Chen, Greene, and

Crick, 1998; Krueger, 1993; Markman, Balkin, and Baron, 2001). We tried to extend this

ongoing work by proposing that stronger perceived capacity to persevere (Stoltz, 1997, 2000) is

21

associated with new venture formation. Findings confirmed that those inventors who start new

ventures have significantly higher perceived control over the adversity and perceived ownership

of the outcome of adversity that they face.

Despite these findings, the two groups did not differ on perceived scope and endurance of

adversity. More to the point, we predicted that entrepreneurs would perceive themselves as

better able to react to, fend off, and quickly quarantine adversity, yet it appears that the perceived

ability to isolate adversity and see it as transient was the same across patent inventors. One

potential explanation for this finding is that the mental state of inventors can strongly affect their

intellectual and creative work; preoccupation with unpleasant thoughts can exercise a subtle

sovereignty over the ability to work and create patentable inventions. Indeed, Eisenberger

(1992) proposed that increased cognitive performance and resilience against adversity create a

positive feedback loop that reinforces additional high effort and ingenuity. Another noteworthy

detail is that although perceived AQ-scope was highly similar for both groups, a cursory review

of Table 3 shows that the average score of AQ-scope was quite high (i.e., over 3.8 on a 5-point

scale). This suggests that both technical entrepreneurs and technical non-entrepreneurs are able

to “quarantine” negative emotions (cf., Seligman et al., 1995). Since both groups scored high on

AQ-scope, they are equally unlikely to “catastrophize,” thus preventing perceived adversity from

spreading into other areas of their lives and work (cf. Stoltz, 1997).

Research in social and applied psychology shows that self-efficacy reliably predicts

personal effectiveness under diverse tasks and careers (cf., Bandura, 1997), and new studies

confirm that entrepreneurs tend to have higher self-efficacy (Chen, Greene, and Crick, 1998).

We tried to extend such results to patent inventors and our findings confirm that inventors who

start new ventures have significantly higher self-efficacy. Importantly, and more interesting was

our finding that after controlling for self-efficacy, inventors’ perceived capacity to persevere

continue to distinguish between entrepreneurs and non-entrepreneurs. Again, results show that,

over and above self-efficacy, perceived perseverance is related to new venture formation; each of

the three constructs – self-efficacy (eta2 = .04); AQ-control (eta2 = .05); and AQ-ownership (eta2

= .03) – accounted for unique variance that was not captured by the other constructs.

Since past research suggests that perceived capacity to persevere predict personal

effectiveness under diverse tasks and careers (cf., Bandura, 1997; Eisenberger, 1992), we were

curious whether AQ explain some variability in inventors’ annual earnings – a crude proxy of

22

personal success. To this end, we ran a simple stepwise hierarchical regression, in which we

regressed annual income first on all the control variables (age, education, innovation), and then

on self-efficacy and AQ composite index (captured by an aggregate measure of perceived control

over, ownership of the outcome of, scope of, and finally (4) perceived endurance of the

adversity). Our post hoc analysis showed that patent inventors with high AQ composite index,

tended to earn significantly more than patent inventors whose AQ composite index was low

(adjusted R² = 12%; F = 4.40; p = .01). To give a concrete example, the annual earnings of

patent inventors who’s average AQ was in the top 20% (AQ composite index = 3.8) was

approximately $128,692 versus $93,933, which was the annual earnings of inventors whose

average AQ was in the bottom 20% (AQ composite index = 3.3) – almost $35,000 per year

difference. Thus, higher AQ scores – as measured across all patent inventors – were related to

higher personal income. Taken together, over and above self-efficacy, perceived perseverance

(i.e., specifically AQ-control and AQ-ownership) is related new venture formation and to

inventors’ annual earnings. Naturally our ad hoc analysis provides a simple initial assessment of

the link between perceived perseverance and personal success. Such link should be the subject

of future empirical research, which includes wage determination variables.

This study has some important implications for research, theory, and practice. It provides

guidance for future research on individua l differences in the context of new product development

and innovation and it makes contributions to our understanding of individual differences in the

context of entrepreneurship. For example, it shows that even among persons who discover

novel, useful, and non-obvious technologies, those who undertake the daunting journey of

creating new ventures appear to score higher on perceived perseverance.

The study’s focus on adversity and the evidence that people are not victims of their

adversities provide hope. That is, unlike relatively stable personality and trait characteristics,

perceptions of adversity are somewhat open to modification. As perseverance enables human

action, at least to some extent people are the architects of their own destinies (Bandura, 1986).

Assuming all else equal, one’s reaction to adversity is – with the appropriate education and

training (and barring impediments such as long term depression) – improvable (Stoltz, 1997;

Waldroop and Butler, 2000). For example, developing perceived control and accountability is

accelerated when individuals alter the reasons they assign for their successes and failures. When

people change their explanations for why important and impactful outcomes occurred, they

23

improve their expectations for positive outcomes in the future (Mifflin and Schulman, 1986;

Seligman, Reivich, Jaycox, and Gillham, 1995). Seligman and his colleagues (1995) suggest that

providing individuals with such tools and skills can help them transform helplessness into

mastery tha t bolsters self-efficacy and perseverance. Teaching individuals to challenge their

thoughts and assumptions can “immunize” them against adverse impact of setbacks

(Eisenberger, 1992). Improving one’s AQ reduces the risk of helplessness as it boosts

performance, improves physical health, and increases self- reliance in the face of new challenges

(Stoltz, 1997).

At another level, evidence also suggests that a “can-do” attitude rubs off; that being

around dynamic individuals who keep adversity in perspective is infectious (cf., Smith and

Muenchen, 1995). This suggests that entrepreneurs can use their pattern of thinking (e.g., “can-

do”) to inspire and motivate their partners and others who work with them. Finally, since

perceived perseverance is significantly associated with personal success, we may want to –

assuming all else equal – give strong considerations to agents with high AQ. A corollary of the

fact that AQ is both augmentable and functional is that it may be worthwhile to assess the AQ of

future entrepreneurs. For example, investors such as venture capitalists may improve their odds

if they consider technical inventors’ adversity quotient. Similarly, in the context of corporate

entrepreneurship, managers may assess intrepreneurs’ AQ levels to identify early career track of

technical people to become champions of new business units. Of course, these suggestions are

tentative and awaiting further empirical testing and validation.

Before concluding, several limitations to this study must be addressed. First, although

dividing patent inventors into technical entrepreneurs and technical non-entrepreneurs simplifies

the methodology, it is an oversimplification. In reality, particularly over time, inventors may

“migrate” from working for others to working for themselves and vice versa. Some inventors

may be building their own startup – which may or may not be tied to their patent – while holding

employment elsewhere. Also, the survey did not collect data on the organizations in which

participants work, and it is possible that some inventors who were classified as technical non-

entrepreneurs actually work for start-up firms. In other words, the division of participants into

two dichotomous groups may fail to capture a richness that ranges between what we

categorically termed technical entrepreneurs and technical non-entrepreneurs. While the use of

24

two dichotomous groups proved quite revealing, assessment of more than two groups was

beyond the scope of our study and thus awaiting further empirical testing.

A second limitation stems from the reliance on patent count as a proxy of innovation.

Economists note that the distribution of patent quality is highly skewed toward the low end with

a long, thin tail into the high-value end (Trajtenberg, 1990). Our interviews with technical

inventors, chief technology officers (CTOs), intellectual property attorneys, and technology

transfer directors reveal that fewer than 10% of patents are commercialized. This is not

surprising because many patents have no market value until they are toned with several other

patents (e.g., Gillette’s Mach 3 is protected with over 30 patents!). Additionally, some inventors

may file for patents for intellectual reasons, others to passively “protect” technology share, and

yet others use patents to strategically position their invention in a particular technological space.

Also, our interviews suggest that patents may allow inventors to cajole rivals into alliances,

partnerships, and concessions that are not of the rivals’ initial liking. In short, as patent count is

an imprecise proxy of innovation, we suggest that future empirical research try to distinguish

between high- and low-quality innovations.

Future empirical studies should also attempt to measure and control for additional factors

relating to individual differences (such as locus of control, need for achievement, level of

motivation, self-esteem, and so on), contextual factors (e.g., independent inventors vs. inventors

working for someone else) and various outcomes variables (such as starting a new business,

performance, success, etc.). As we suggested earlier, a key challenge to field researcher is the

unavoidable tradeoff between casting a broad empirical net and response rate. Highly inclusive

survey instruments with a myriad of psychometric scales are also lengthy and time-consuming,

and while such surveys may work in classroom settings, they are prohibitively difficult to justify

to inventors and scientists or to persuade them to respond.

One final weakness of our study, which is mainly due to its cross-sectional design, relates

to uncertainty regarding causality. Since data were collected after inventors began building their

new ventures, it is unclear whether founding a new firm increases one’s perceived AQ-control,

AQ-ownership, and self-efficacy or whether scoring high on these dimensions leads one to found

a new venture. However, two points – and a rich research stream on the causal efficacy of

human thought (cf., Bandura, 1995) – suggest that the perceptions identified in this study are

more likely to precede the act of new venture formation than to be the result of it. First, it is

25

important to recall that we relied on a general, rather than specific, measure of self-efficacy.

Since general self-efficacy is the result of lifelong experiences; is quite stable by the time

individuals are adults (Bandura, 1997); and since we obtained data from entrepreneurs shortly

after they had launched their new ventures, such short-term business activity, in and of itself,

probably did not elevate one’s self-efficacy in any meaningful way. Second, success and failure

in diverse activities and over prolonged periods of time shape one’s perceived AQ-control and

AQ-ownership (Stoltz, 1997, 2000). As explained above, since our technical entrepreneurs

launched their new ventures only a few months before we surveyed them, it is unlikely that these

relatively short-term activities had already altered inventors’ perceived AQ-control and AQ-

ownership in such a significant magnitudes. Clearly, only longitudinal methods or experimental

research design will full address this question, but in the meantime, and for the reason outlined

above, we suspect that differences in AQ-control, AQ-ownership, and self-efficacy may

contribute to the decision to become an entrepreneur rather than the opposite.

Notwithstanding these limitations, it is important to recognize the recent resurgence of

interest in individual differences in the field of entrepreneurship (Baron, 1998, 2000; Baum et al.,

2001; Busenitz and Barney, 1997; Chen, et al., 1998; Ensley, et al., 1999; Honig, 1998;

Sarasvathy, et al., 1998; Stewart, et al., 1999, to name a few). In this context, this study adds

some value as it was based on a random sample of inventors, all of whom had invented patents in

the same technological space, at the same time period (1997 and 1998), and we – the researchers

– did not know ahead of time which inventors were entrepreneurs and which were not.

Collecting income information is another dimension that separates this study from its

predecessors. Our study provides evidence that suggests that adversity quotient – the perceived

capacity to persevere in the face of daunting and formidable obstacles – may be related to annual

earnings. For example, patent inventors who’s average AQ was in the top 20% enjoyed almost

$35,000 more in annual earnings than inventors whose average AQ was in the bottom 20%.

Furthermore, since perceived perseverance, specifically AQ-control and AQ-ownership, explain

added variance that was not captured by self-efficacy, our study expends our knowledge of

individual differences; it introduces new constructs that we believe merit further empirical

testing.

In closing, we found that technical entrepreneurs, as compared with technical non-

entrepreneurs, report significantly higher levels of perceived control and accountability over

26

adversity and higher levels of self-efficacy. We also found that, among our inventors, high AQ

is related to personal success as measured by annual earnings. To the extent that perceived

perseverance is vital in life, we suspect that Confucius was right; our greatest glory is not in

never failing but in rising every time we fail.

Acknowledgements

We gratefully acknowledge that this research was funded in part by the 2001 John

Broadbent Endowment for Research in Entrepreneurship at Rensselaer Polytechnic Institute.

The opinions (and errors) are the authors’ and not the grantor’s

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