Personality traits and the likelihood of self-employment: A journey into the crafts' way of doing business

Runst, Petrik; Thomä, Jörg Article Personality traits and the likelihood of self-employment: A journey into the crafts' way of doing business German Economic Review (GER) Provided in Cooperation with: Verein für Socialpolitik / German Economic Association Suggested Citation: Runst, Petrik; Thomä, Jörg (2025) : Personality traits and the likelihood of selfemployment: A journey into the crafts' way of doing business, German Economic Review (GER), ISSN 1468-0475, De Gruyter, Berlin, Vol. 26, Iss. 3, pp. 229-265, https://doi.org/10.1515/ger-2024-0033 This Version is available at: https://hdl.handle.net/10419/331955 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ ger 2025; 26(3): 229–265 Petrik Runst and Jörg Thomä* Personality Traits and the Likelihood of Self-Employment: A Journey into the Crafts’ Way of Doing Business https://doi.org/10.1515/ger-2024-0033 Received April 5, 2024; accepted February 2, 2025; published online March 3, 2025 Abstract:Given the renewed scholarly interest in the crafts, this paper explores the nuances of crafts entrepreneurship through a personality-based approach. Our findings validate prior research on the general influence of broad and narrow personality traits on self-employment. However, our analysis also suggests that certain effects differ between crafts and non-crafts, most notably the role of the Big Five trait of conscientiousness – suggesting that there is something ‘unique’ about the crafts’ way of doing business that goes beyond firm size. In this way, we provide evidence that personality may affect self-employment differently depending on the sector or field of entrepreneurship. Keywords: self-employment; personality traits; entrepreneurship; crafts sector JEL Classification: L26; M13; D91 1 Introduction In Germany, 95 trades belong to what is legally defined as the crafts sector, which comprises around five million professionals, or about 12.5 percent of the German labor force (see Haverkamp, Wesling, and Seibert 2019;Müller, Markworth, and Söndermann 2011), constitutes a core segment of the German Mittelstand (Pahnke and Welter 2019), and has been the subject of a number of academic and policy *Corresponding author: Jörg Thomä, Institute for Small Business Economics, University of Göttingen (ifh), Heinrich-Düker-Weg 6, 37073 Goettingen, Germany, E-mail: [email protected]goettingen.de.https://orcid.org/0000-0002-0300-1776 Petrik Runst, Institute for Small Business Economics, University of Göttingen (ifh), Goettingen, Germany; and Institute of Rural Economics (Thünen), Braunschweig, Germany Open Access. ©2025 the author(s), published by De Gruyter. This work is licensed under the Creative Commons Attribution 4.0 International License. 230 —P. Runst and J. Thomä debates in recent years (e.g. Aretz, Gregory, and Arntz 2013;Fredriksen, Runst, and Bizer 2019;Runst and Thomä 2020;Runst and Wyrwich 2023;Runst et al. 2019; Schmitz 2019). Economic activity in the crafts has recently received increased attention in entrepreneurship and management research, with studies examining the typical competitive strategies chosen by owners of craft companies (Cattani, Dunbar, and Shapira 2017;Sasaki, Nummela, and Ravasi 2021;Solomon and Mathias 2020), entrepreneurial behavior in the crafts (Pret and Cogan 2019);theroleofcrafts people’s shared identities in work satisfaction and business success (Binder and Blankenberg 2022;Mathias et al. 2018), the craft-specific approach to work organization and knowledge acquisition (e.g. Bell, Dacin, and Toraldo 2021;Bell and Vachhani 2020;Kroezen et al. 2021;Kuhn and Galloway 2015;Thomä and Zimmermann 2013), and related forms of firm-level innovation (Runst and Thomä 2022;Thomä and Zimmermann 2020). The renewed scholarly interest in the craft-based mode of competition, work, learning and innovation suggests that there is something ‘unique’ about the craft’s way of doing business that goes beyond the small firm sizes typical of the craft sector. To give a few examples: Kroezen et al. (2021) conceptualize ‘craft’ as “a timeless approach to work that prioritizes human engagement over machine control”. Closely related to this, the empirical results of Binder and Blankenberg (2022) imply that the strong desire among craftspeople to work with their own hands, applying their skills and know-how in the creation of products or services, is a source of individual pride and occupational identity. The study by Solomon and Mathias (2020) suggests that business owners in the crafts, due to their strong desire for personal independence, tend to avoid being influenced by external stakeholders – and therefore often have a critical view of business growth. The aim of this paper is to take a closer look at what makes the crafts unique in empirical terms (not least in comparison with other small firms) and thereby shed light on the conceptual core of the various studies mentioned above. Following Hoyte (2019), we argue that the fundamental specificity of the crafts is closely linked to the personal characteristics of the business owner – or entrepreneur –, as he or she has a formative influence on all operational matters in the mostly very small craft enterprises. In fact, the ‘crafts entrepreneur’ type has been conceptualized in the literature as having distinct motivations and goals (e.g. Cooper and Dunkelberg 1986;Miner, Smith, and Bracker 1992;Smith 1967;Smith and Miner 1983; Woo, Cooper, and Dunkelberg 1991). This paper therefore takes a personality approach to explore the potential uniqueness of crafts entrepreneurship. We empirically investigate the relationship between personality traits and the likelihood of self-employment (as a Personality and Self-Employment in the Crafts —231 commonly used indicator of entrepreneurship) in the crafts sector using a representative panel data set of German individuals. By comparing this with individuals who become self-employed in non-crafts occupations, the personality trait specificities of crafts entrepreneurship are examined – which contributes to the recent research on the craft-based mode of doing business (e.g. Cattani, Dunbar, and Shapira 2017;Kroezen et al. 2021;Kuhn and Galloway 2015;Pret and Cogan 2019; Sasaki, Nummela, and Ravasi 2021;Solomon and Mathias 2020). Broad (the Big Five; see Digman 1990;John, Donahue, and Kentle 1991;McCrae and Costa 2008) and narrow traits of personality (locus of control, risk tolerance; see Chell, Harworth, and Brearley 1991;Rotter 1966) are considered – which represents a common measurement approach to personality in the entrepreneurship literature (see e.g. Brandstätter 2011;Caliendo, Fossen, and Kritikos 2014;Leutner et al. 2014;Obschonka and Stuetzer 2017;Runst and Thomä 2023). In this way, the present paper also aims to contribute to this general literature by showing for the first time (to the best of the author’s knowledge) that it is necessary to distinguish between different sectors or fields of entrepreneurship when analyzing the influence of personality traits on self-employment decisions. With this empirical approach, the present paper goes beyond the conceptual paper of Hoyte (2019), who examines the personality patterns of artisan entrepreneurship (as a subset of crafts entrepreneurship, mainly found in cultural and creative industries) from a purely theoretical perspective. The remainder of the paper is structured as follows. Section 2 discusses the theoretical background of the following empirical analysis. Section 3 presents the data set and describes the methodical procedure, before the results are detailed in Section 4. Finally, Section 5 summarizes the main contributions and draws conclusions for policy and research. 2 Conceptional Background 2.1 The Crafts Entrepreneur According to a widely used theoretical typology (e.g. Miner, Smith, and Bracker 1992;Solomon and Mathias 2020;Woo, Cooper, and Dunkelberg 1991), which goes back to Smith (1967) and Smith and Miner (1983), there is a basic entrepreneurial type that can be expected to be closely associated to business activity in the crafts. For the ‘crafts entrepreneur’, the opportunity for self-directed work and personal autonomy constitutes a primary motivation for venturing into self-employment (Binder and Blankenberg 2022;Bridge and O’Neill 2018;Hornaday 1990;Runst and Thomä 2021). According to this concept, these individuals are less motivated by financial gains or the opportunity to build a large business organization. Instead, 232 —P. Runst and J. Thomä crafts entrepreneurs can be more succinctly characterized by personal goals such as a desire for independence, autonomy, and self-realization through active participation in the productive and creative processes (Amin and Roberts 2008;Kuhn and Galloway 2015;Smith and Miner 1983;Solomon and Mathias 2020;Woo, Cooper, and Dunkelberg 1991). They value the act of practicing a trade or occupation, and thus the mastery of knowledge and skills, i.e. the achievement of craftsmanship (Binder and Blankenberg 2022;Hoyte 2019;Nooteboom 1994;Sennett 2008;Thomä and Zimmermann 2020). On the other hand, they tend to see administrative and management tasks tend to be perceived as a necessary evil of entrepreneurial activity (Das and Teng 1998;Smith and Miner 1983;Woo, Cooper, and Dunkelberg 1991). Accordingly, people who opt for self-employment in the crafts often strive for personal competency and creative problem-solving in the creation of individualized, non-mass-produced products and services. They often do not have a well-developed marketing strategy, and if they do, it emphasizes the company’s reputation for delivering high quality. Since crafts entrepreneurs often find personal self-fulfillment in the acquisition of tacit know-how in a specific technical field, innovations conducted by crafts enterprises are usually of a customized nature and often take the form of step-bystep optimization, further development or adaptation of existing products, services and processes (i.e. incremental innovations; Amin and Roberts 2008;Das and Teng 1998;Miner, Smith, and Bracker 1992;Runst and Thomä 2022;Thomä and Zimmermann 2020). Moreover, crafts entrepreneurs tend to stick to tried and tested routines (Das and Teng 1998;Hoyte 2019;Miner, Smith, and Bracker 1992). In doing so, they perfect traditional ways of working and doing in a conscientious manner. When they make changes, they do so less proactively and are less likely to create novel markets and introduce fundamentally new products, processes and services. Instead, self-employed people of crafts type behave relatively more reactively: they tend to adapt more slowly to changing conditions and only do so to the necessary extent to safeguard their existing business model, thus limiting entrepreneurial risk (Bridge and O’Neill 2018;Miner, Smith, and Bracker 1992). Crafts entrepreneurs therefore often run long-lasting businesses that tend to remain small, preferring stability over growth (Solomon and Mathias 2020). 2.2 The Formal and Informal Institutional Background of the German Crafts Sector The German Trade and Crafts Code (TCC, Handwerksordnung) defines and regulates more than 90 crafts trades. In many of these trades, the law requires advanced vocational training to be eligible to start a business, i.e. the head of a crafts company Personality and Self-Employment in the Crafts —233 must hold a so-called Meister-degree.1In 2004, some trades have been partially (e.g. bakers and butchers) or fully (e.g. brewers, instrument maker) deregulated. However, some of these reforms have been reversed in 2020. According to official statistics (Federal Statistical Office), there were 5.4 million active craftspeople in Germany in 2021. Of these, around 80 per cent are in crafts trades with entry restrictions that require the owner or employed manager to have a master craftsmen’s qualification. It is therefore reasonable to assume that for most craftspeople the path to self-employment is a sequential one, starting with basic vocational training (and therefore wage employment in the crafts sector) before potentially moving on to become a self-employed business owner in the crafts sector. Nevertheless, we must not lose sight of alternative paths. For example, as a result of the 2004 TCC deregulation, a certain share of individuals may move from wage employment in the non-crafts sector to self-employment in the crafts sector. Another more likely potential pathway is from crafts wage employment to self-employment outside the crafts sector. In addition to the formal institutions of the German crafts sector, the informal institutional background of the crafts must also be taken into account. For example, the results of Runst and Thomä (2021) provide empirical evidence for the assumption that the likelihood of being a ‘crafts entrepreneur’ type is considerably higher among self-employed individuals in the German crafts sector than in non-crafts occupations, as delineated by the TCC. Based on data from the IAB/ZEW Start-up Panel – a representative survey of start-up businesses in Germany – they show that the desire for self-determined work and the implementation of a new business idea are the most frequent driving forces for starting up a business, both in the crafts and in the non-crafts. However, the motive of ‘self-determined work’ is significantly more important among founders in the crafts than in non-crafts occupations. This points to the singular motives and goals of the self-employed in the crafts, in line with the ‘crafts entrepreneur’ described above, which are driven less by the desire for profit and growth than by the desire for personal autonomy, self-realization and expertise in one’s own trade or occupation. In contrast, the implementation of a new business idea is relatively less often the central motive for founding a company in the German crafts sector – which in turn may indicate a lower personal focus on profit and growth. 1In order to acquire a Meister-degree, a person must complete basic vocational training (which lasts about three years) and become a Geselle. After that, the Geselle can the take further training and pass associated exams in order to become a master craftsman. 234 —P. Runst and J. Thomä 2.3 Broad and Narrow Personality Traits The Big Five is a widely used model of personality traits (Digman 1990; John, Donahue, and Kentle 1991;McCrae and Costa 2008). It states that the main facets of human personality can be condensed into five basic dimensions that remain more or less stable across the lifespan: extraversion, conscientiousness, emotional stability, openness to experience and agreeableness. Extraversion indicates a preference for social interactions. It is also increasingly associated with a higher reward sensitivity (see Cohen et al. 2005;Lucas et al. 2000). Agreeable individuals try to avoid interpersonal conflict, forgive others more easily, and are more thoughtful in their interactions with others. They prefer cooperation over competition. In addition, agreeableness is associated with expressing oneself carefully to avoid upsetting others and showing a higher degree of empathy. On the other hand, people with higher scores of conscientiousness act in a controlled and structured way. They plan ahead and tend towards perfectionism. At the same time, they show a higher degree of accuracy, diligence, precision and determination. The trait of emotional stability indicates how well a person is able to deal with setbacks and stress factors. High emotional stability is associated with less severe mood swings, less anxiety, sadness, insecurity or other negative feelings. Openness indicates how willing a person is to make new experiences. Open-minded persons enjoy change and are more likely to be creative, imaginative and experimental, while they also have a strong imagination. The impact of the Big Five on the probability of self-employment and related entrepreneurial decisions has been extensively studied. Extraversion and openness in particular and – less clear – emotional stability and conscientiousness can have a positive influence on entrepreneurial decisions (e.g. Brandstätter 2011; Caliendo, Fossen, and Kritikos 2014;Runst and Thomä 2023;Zhao, Seibert, and Lumpkin 2010). Agreeableness shows no effects, apart from one paper finding a positive impact on exits from self-employment (see Caliendo, Fossen, and Kritikos 2014). Zhao, Seibert, and Lumpkin (2010) argue that agreeableness should be negatively related with both entrepreneurial performance and start-up intention, although their empirical results cannot support either hypothesis. While the Big Five constitute broad personality traits, narrow personality traits are also discussed in the literature. The four most important narrow traits associated with entrepreneurship are achievement motivation, need for autonomy, risk tolerance and locus of control (Bridge and O’Neill 2018). Based on the available data (see Section 3), the influence of the latter two of these traits on self-employment can be examined. A person’s self-efficacy belief or locus of control (LOC, Rotter 1966) reflects the conviction that a person has control over their own life. By contrast, a person scoring low on LOC believes that his or her life is shaped by external Personality and Self-Employment in the Crafts —235 factors over which he or she has no control. Furthermore, the degree of individual risk tolerance (Chell, Harworth, and Brearley 1991) is a narrow personality dimension that is plausibly related to entrepreneurial decisions, since the outcomes of self-employment are often uncertain. Moreover, humans have different risk preferences: some people prefer smaller, more secure income streams, while others would rather choose larger but more uncertain ones. The effects of LOC and risk tolerance have also been repeatedly investigated, supporting the hypothesis of a positive impact on the probability of self-employment (see e.g. Caliendo, Fossen, and Kritikos 2014). 2.4 Hypotheses On the one hand, individuals who are open to new experiences are more likely to recognize entrepreneurial opportunities than others, which should also be true for the crafts entrepreneur (Caliendo, Fossen, and Kritikos 2014). For example, in her conceptual paper, Hoyte (2019) describes the openness of artisan entrepreneurs (representingasubsampleofcraftspeoplewhoarefoundintheculturalandcreative industries) and their willingness to pass on cultural traditions. On the other hand, the degree of openness may be less important for crafts entrepreneurs as they are less focused on growth, profit-making and radical innovation (see Section 2.1). If one’s primary goal is to practice a trade and to generate incremental innovations in response to situational customer needs or circumstances, openness is less relevant than, for example, in highly innovative ventures that need to be constantly on the lookout for new trends and developments. In the case of crafts, openness should therefore be less strongly associated with self-employment than in the non-crafts (Hypothesis H1). Entrepreneurship is always socially embedded (Sarasvathy 2001,2008;Storr 2008), as entrepreneurs need to communicate and socialize with employees, customers, suppliers, financial institutions and other external partners. Generally speaking, extroverts are more attracted to self-employment than introverts (Caliendo, Fossen, and Kritikos 2014). This effect should be equally pronounced among crafts entrepreneurs. Overall, extraversion is therefore hypothesized to be a key driver of self-employment within and outside of the crafts sector (Hypothesis H2). The relationship between the trait of conscientiousness and self-employment is somewhat ambivalent. On the one hand, highly conscientious people who value routines may not be attracted to the uncertainties of running a business. On the other hand, the efficiency orientation, determination and precision of conscientious people may promote business performance in the long run (Brandstätter 2011; Zhao, Seibert, and Lumpkin 2010). Overall, the empirical literature does not provide 236 —P. Runst and J. Thomä evidence of a clear link between conscientiousness and self-employment. However, a positive effect of conscientiousness can be expected in case of the crafts. The desire for self-realization through the practice of a trade, craft or occupation – which is strongly anchored in the crafts entrepreneur type (see above) – and the associated high level of acquired professional-technical knowledge and skills suggests that a higher level of conscientiousness should positively affect self-employment in case of the crafts (Hypothesis H3). This hypothesis is in line with the conceptual proposition by Hoyte (2019) on the potential role of conscientiousness for artisan entrepreneurship in the cultural and creative industries. She states that craftsbased work requires a high degree of conscientiousness not only to learn a craft but also to practice it continuously throughout one’s life and pass it on through generations, thus forming a common occupational identity. Emotional stability – in particular the ability to make well-considered decisions under time pressure and deal with complex stress factors – is likely to be a general advantage for self-employed individuals (Zhao and Seibert 2006; Zhao, Seibert, and Lumpkin 2010). However, it can also be argued that less emotionally stable individuals may prefer owning a business (most likely a small one) to being in paid employment, as they are less likely to cope well as employees in a challenging work environment, e.g. characterized by stressful team interactions. Thus, individuals scoring low on emotional stability might engage in (necessity) entrepreneurship because it offers them a chance to leave wage employment. In summary, the effect of emotional stability on self-employment is ambivalent, and there are no specificities to be expected in the case of crafts entrepreneurship. The possible role of agreeableness also seems ambiguous: on the one hand, entrepreneurs need a certain amount of willpower in difficult conversations and the ability to tolerate such conflicts, while on the other hand, a very low level of owner agreeableness may resemble stubbornness and has the potential to disrupt social interaction to such an extent that employees may deliberately withhold their opinions and ideas. If owners insist on their own opinion without considering and including the thoughts of others, it can severely disrupt the business culture and hinder the co-creation of valuable new things (Runst and Thomä 2022). The possible influence of agreeableness on self-employment is thus – as in the case of emotional stability – ambivalent, supported by the mixed empirical results on this trait in the empirical literature (for an overview, see Brandstätter 2011). In the case of crafts, however, where practicing a trade or occupation in a small company (often without employees) can be a primary motivation for self-employment (see the discussion above on the ‘craft entrepreneur’), individuals with lower agreeableness scores may be particularly inclined to start a business. In this way, they can earn a living and realise their ambition to accumulate skills and experience-based competence in a particular trade or occupation without the need to interact and coordinate Personality and Self-Employment in the Crafts —243 effective in terms of performance, i.e. whether self-employed persons with corresponding traits do better on various measures. We therefore restrict our sample to the self-employed in crafts and non-crafts occupations and run various regression models of the following form: Successit =𝛼+𝛽Craftsit +𝛾Traitit +𝛿Craftsit ×Traitit +𝜃Xit +𝜀it (3) Self-employment success is assessed using three different measures: growth (i.e. the number of employees, measured as an ordinal variable with 7 categories), work satisfaction (measured as an ordinal variable with 11 categories) and the probability of exit. Ordered logistic models are used for growth and work satisfaction, and a random-effects panel regression model is used for the dependent variable on exit from self-employment. In contrast to the first and second step regressions, here ‘Crafts’ is defined as an indicator of current economic activity in the crafts sector. The coefficient of the corresponding crafts by trait interaction therefore captures the effect of a personality trait on a measure of self-employment success in the crafts sector. 4 Empirical Results 4.1 Employment vs. Self-Employment in Crafts Compared to Non-crafts The results of the multinomial logit regression (model 1) are shown in Table 2. The coefficients should be read in relation to the base group of non-crafts wage employment. Most importantly, columns (3) and (4) show the coefficients for selfemployment in the non-craft and craft sectors respectively. Extraversion is positively associated with self-employment regardless of the sector. A one unit increase in the extraversion score increases the multinomial log odds of preferring selfemployment (over non-craft wage employment) by 0.20–0.22, holding everything else constant.10 A test of equality between these two coefficients cannot be rejected (see column 5, Table 2). The effect is statistically significant at the 1 percent level. This is supported by the marginal effects reported in Table 3. A one unit increase in the extraversion score increases the absolute probability of being self-employed by 1.6 and 0.1 % respectively. Given the baseline probabilities of 9.4 % and 0.6 % of falling into the self-employment categories of non-crafts and crafts, the size of the effect should be considered to be large. 10 As mentioned in Section 3, we use factor scores for the personality traits that are standardized to have a mean of approximately 0 and a standard deviation of approximately 1. 244 —P. Runst and J. Thomä Table 2: Multinomial logit regression (dep. variable: employment status). (1) (2) (3) (4) (5) (6) Employed Self-employed Test Test Non-crafts Crafts Non-crafts Crafts (3) vs. (4) (2) vs. (4) Extraversion −0.0431 0.2009∗∗∗ 0.2184∗∗∗ –∗∗∗ (0.0271) (0.0165) (0.0636) Conscientiousness 0.1051∗∗∗ −0.0461∗∗ 0.1677∗∗ ∗∗ – (0.0311) (0.0183) (0.0726) Emotional stability −0.0410 −0.0713∗∗∗ −0.2338∗∗∗ ∗∗ ∗∗∗ (0.0291) (0.0174) (0.0661) Openness 0.0273 0.3292∗∗∗ 0.1938∗∗∗ –∗∗ (0.0318) (0.0194) (0.0738) Agreeableness 0.0077 0.0219 −0.1156∗ ∗∗∗ ∗∗ (0.0302) (0.0180) (0.0661) Risk 0.0305∗∗∗ 0.1496∗∗∗ 0.1406∗∗∗ –∗∗∗ (0.0100) (0.0061) (0.0232) LOC −0.0909∗∗∗ 0.2471∗∗∗ 0.2182∗∗∗ –∗∗∗ (0.0256) (0.0165) (0.0608) Crafts lag 4.0384∗∗∗ 0.5757∗∗∗ 4.2476∗∗∗ (0.0491) (0.0444) (0.1132) Age −0.0526∗∗∗ 0.2189∗∗∗ 0.3946∗∗∗ (0.0186) (0.0133) (0.0547) Age squared 0.0007∗∗∗ −0.0019∗∗∗ −0.0041∗∗∗ (0.0002) (0.0002) (0.0006) University −1.4938∗∗∗ 0.3839∗∗∗ −0.8283∗∗∗ (0.1117) (0.0319) (0.1869) Vocational training −0.1933∗∗∗ −0.1101∗∗∗ 0.3078∗ (0.0618) (0.0309) (0.1690) Lag part-time work −0.0420 −0.9215∗∗∗ −1.0440∗∗∗ (0.0682) (0.0423) (0.2410) Female −0.6075∗∗∗ −0.2147∗∗∗ −0.9921∗∗∗ (0.0560) (0.0289) (0.1453) Non-employed (lag) 1.3915∗∗∗ −0.0603 0.8312∗∗∗ (0.0717) (0.0607) (0.2287) Foreigner 0.3476∗∗∗ −0.0042 0.2781 (0.0709) (0.0513) (0.1904) Work experience −0.0113∗∗∗ −0.0159∗∗∗ −0.0001 (0.0035) (0.0020) (0.0098) Unemployment 0.0141 0.0080 −0.0029 experience (0.0091) (0.0065) (0.0259) High school −1.3116∗∗∗ 0.4990∗∗∗ 0.2748∗ (0.1100) (0.0316) (0.1587) Disability −0.0046∗∗∗ −0.0109∗∗∗ −0.0171∗∗∗ (0.0017) (0.0013) (0.0057) Personality and Self-Employment in the Crafts —245 Table 2: (continued) (1) (2) (3) (4) (5) (6) Employed Self-employed Test Test Non-crafts Crafts Non-crafts Crafts (3) vs. (4) (2) vs. (4) Father self-employed 0.1141 0.5075∗∗∗ 0.8979∗∗∗ (0.0725) (0.0384) (0.1418) Capital_income −2.4934∗∗∗ 1.2230∗∗∗ 1.2964∗∗∗ (0.5621) (0.0799) (0.1636) Region dummies Yes Yes Yes Yes Year dummies Yes Yes Yes Yes N95,294 95,294 95,294 95,294 Notes: Multinomial logit regression; the coefficients represent the change in the probability of falling into a particular employment category relative to the baseline category (employed non-crafts) in response to a one-unit change in a personality score. Standard errors in parentheses: ∗p<0.10, ∗∗ p< 0.05, ∗∗∗ p<0.01. Column (5) reports the results of a test evaluating the equality of the coefficients in columns (3) and (4), column (6) test the equality of (2) and (4). Table 3: Multinomial logit regression (dep. variable: employment status, marginal effects). (1) (2) (3) (4) Employed Self-employed Non-crafts Crafts Non-crafts Crafts Extraversion −0.015∗∗∗ −0.002∗∗∗ 0.016∗∗∗ 0.001∗∗∗ Conscientiousness 0.001 0.003∗∗∗ −0.004∗∗∗ 0.001∗ Emotional stability 0.007∗∗∗ 0.000 −0.005∗∗∗ −0.001∗∗∗ Openness −0.026∗∗∗ 0.000 0.025∗∗∗ 0.001∗∗ Agreeableness −0.002 0.000 0.002 −0.001∗ Risk −0.012∗∗∗ 0.000 0.011∗∗∗ 0.001∗∗∗ LOC −0.017∗∗∗ −0.004∗∗∗ 0.019∗∗∗ 0.001∗∗∗ Baseline probability 0.854 0.046 0.094 0.006 Controls Yes Yes Yes Yes Region dummies Yes Yes Yes Yes Year dummies Yes Yes Yes Yes N95,294 95,294 95,294 95,294 Notes: This table reports marginal effects for the multinomial logit model in Table 2. They can be interpreted as the change in the probability of falling into one of the four categories in response to a one-unit change in a personality trait. ∗p<0.10, ∗∗ p<0.05, ∗∗∗ p<0.01. Next, conscientiousness appears to affect self-employment in the opposite direction in the non-crafts and crafts occupations. A one unit increase in the conscientiousness score reduces the probability of preferring self-employment to wage 246 —P. Runst and J. Thomä employment by 4.6 % in non-crafts but increases it by 16.8 % in the crafts. According to the marginal effects (Table 3), the former effect is rather small, while the latter amounts to a substantial one-sixth increase compared to the baseline probability. Interestingly, conscientiousness has a similarly positive effect on wage employment in the crafts sector (relative to non-craft wage employment, Table 2), so it seems to be an overall crafts effect. The corresponding equality test between these two coefficients cannot therefore be rejected (see column 6, Table 2). However, the marginal effects in Table 3 suggest that the size of this effect is much stronger in crafts self-employment than in crafts paid employment, when compared to the baseline probability. While the coefficient of emotional stability is negative for self-employment in both sectors, its size is economically significant only in the crafts, where a one unit increase in the respective factor score reduces the baseline probability by about one sixth (see Tables 2 and 3). In contrast, openness has a positive effect on selfemployment in both crafts and non-crafts, and the effect size is large in both cases. The final BF characteristic, agreeableness, is only statistically significant and negative in crafts occupations (Table 2). Again, the marginal effects (Table 3) suggest that the corresponding effect size is quantitatively meaningful. Finally, the narrow personality traits are similarly associated with self-employment in all sectors. An increase in risk or LOC increases the likelihood of preferring self-employment in the crafts and non-crafts to wage employment. Overall, these results suggest that some traits affect self-employment decisions similarly across sectors (extraversion, openness, risk and LOC), but others seem to be craft-specific, most notably conscientiousness, emotional stability and agreeableness. We therefore find support for hypotheses 2, 3, 4 and 5, while hypotheses 1 to 6 are not confirmed. On the basis of these results, it is possible to imagine an entrepreneurial personality that theoretically maximizes the likelihood of becoming self-employed (in crafts or otherwise). A one-unit deviation increase or decrease in the scores of the seven traits examined here can theoretically double the baseline probability of being self-employed in the craft sector and almost double it in the non-craft sector. Thus, we conclude that personality effects are economically significant. 4.2 Drivers of Self-Employment in General Table 4 shows the differential impact of the personality traits on the likelihood of being currently self-employed (regardless of sector) for those who have been economically active in the crafts sector in the last three years and those who have not (column 1, Table 4). In addition, a distinction is made according to the number of employees of the self-employed in order to obtain more detailed information Personality and Self-Employment in the Crafts —247 Table 4: Panel regression (dep. variable: likelihood of self-employment, entry). (1) (2) (3) (4) Self-employed general Solo self-employed Self-employed 1 to 5 employees Entry Crafts lag 0.0068 −0.0008 0.0025 0.0008 (0.0062) (0.0055) (0.0039) (0.0033) Extraversion 0.0051∗∗∗ 0.0049∗∗∗ 0.0025∗∗ 0.0009 (0.0016) (0.0012) (0.0010) (0.0007) Extraversion ×crafts lag 0.0045 0.0054 0.0016 0.0018 (0.0043) (0.0035) (0.0029) (0.0019) Conscientiousness −0.0053∗∗∗ −0.0037∗∗∗ −0.0018∗∗ −0.0009 (0.0015) (0.0013) (0.0009) (0.0007) Conscientiousness ×crafts lag 0.0119∗∗ 0.0114∗∗∗ 0.0038 0.0060∗∗∗ (0.0047) (0.0036) (0.0036) (0.0020) Emotional stability 0.0001 0.0011 0.0004 0.0011 (0.0015) (0.0012) (0.0009) (0.0007) Emotional stability ×crafts lag 0.0003 −0.0014 −0.0007 0.0002 (0.0040) (0.0035) (0.0024) (0.0018) Openness 0.0081∗∗∗ 0.0061∗∗∗ 0.0027∗∗∗ 0.0045∗∗∗ (0.0016) (0.0014) (0.0009) (0.0008) Openness ×crafts lag −0.0001 −0.0005 0.0016 −0.0041∗∗ (0.0036) (0.0032) (0.0023) (0.0017) Agreeableness 0.0008 0.0012 −0.0004 −0.0002 (0.0016) (0.0013) (0.0010) (0.0007) Agreeableness ×crafts lag −0.0093∗∗ −0.0080∗−0.0011 −0.0014 (0.0047) (0.0043) (0.0029) (0.0022) Risk 0.0026∗∗∗ 0.0015∗∗∗ 0.0009∗∗∗ 0.0014∗∗∗ (0.0004) (0.0003) (0.0002) (0.0002) Risk ×crafts lag 0.0001 0.0013 −0.0001 0.0007 (0.0010) (0.0009) (0.0006) (0.0006) LOC 0.0062∗∗∗ 0.0033∗∗ 0.0030∗∗∗ 0.0006 (0.0018) (0.0015) (0.0011) (0.0008) LOC ×crafts lag 0.0006 0.0034 −0.0009 0.0007 (0.0038) (0.0033) (0.0025) (0.0018) Age 0.0096∗∗∗ 0.0066∗∗∗ 0.0049∗∗∗ 0.0021∗∗∗ (0.0013) (0.0010) (0.0008) (0.0005) Age squared −0.0001∗∗∗ −0.0001∗∗∗ −0.0000∗∗∗ −0.0000∗∗∗ (0.0000) (0.0000) (0.0000) (0.0000) University 0.0246∗∗∗ 0.0132∗∗ 0.0021 0.0082∗∗∗ (0.0068) (0.0054) (0.0043) (0.0030) Vocational training −0.0067 −0.0021 −0.0040 0.0013 (0.0053) (0.0047) (0.0035) (0.0022) Lag part-time work −0.0232∗∗∗ −0.0133∗∗∗ −0.0103∗∗∗ −0.0015 (0.0030) (0.0025) (0.0017) (0.0015) 248 —P. Runst and J. Thomä Table 4: (continued) (1) (2) (3) (4) Self-employed general Solo self-employed Self-employed 1 to 5 employees Entry Female −0.0268∗∗∗ −0.0151∗∗∗ −0.0154∗∗∗ −0.0066∗∗∗ (0.0044) (0.0037) (0.0030) (0.0018) Non-employed (lag) −0.0186∗∗∗ −0.0131∗∗∗ −0.0075∗∗∗ 0.0168∗∗∗ (0.0030) (0.0028) (0.0016) (0.0021) Foreigner −0.0029 −0.0032 −0.0016 −0.0027 (0.0058) (0.0054) (0.0031) (0.0023) Experience work 0.0008∗∗∗ −0.0002 0.0010∗∗∗ −0.0002∗ (0.0003) (0.0002) (0.0002) (0.0001) Experience unempl. −0.0013∗∗ −0.0002 −0.0006∗∗ −0.0003 (0.0006) (0.0005) (0.0002) (0.0003) High school 0.0593∗∗∗ 0.0376∗∗∗ 0.0298∗∗∗ 0.0121∗∗∗ (0.0061) (0.0051) (0.0041) (0.0027) Disability −0.0002∗∗ −0.0002∗∗ −0.0001∗−0.0000 (0.0001) (0.0001) (0.0001) (0.0000) Father self-employed 0.0444∗∗∗ 0.0202∗∗∗ 0.0210∗∗∗ 0.0063∗∗ (0.0067) (0.0054) (0.0047) (0.0028) Capital_income 0.0226∗∗∗ 0.0087∗∗ 0.0162∗∗∗ 0.0033 (0.0061) (0.0041) (0.0059) (0.0024) Region dummies Yes Yes Yes Yes Year dummies Yes Yes Yes Yes N111,559 107,204 105,110 102,168 Notes: Random effects panel regression. The coefficients can be interpreted as the change in the likelihood of being self-employed (or entering self-employment, col. 4). Standard errors in parentheses: ∗p<0.10, ∗∗ p<0.05, ∗∗∗ p<0.01. on the possible origin of the craft-specific effects identified in the previous section (columns 2 to 4, Table 4). As a robustness test, a further specification uses entry as an alternative dependent variable. This measures whether entry into self-employment took place in the current period (column 5, Table 4). In line with the multinomial logit results, the trait extraversion is generally positively associated with self-employment, however, there is no evidence for a stronger impact in the crafts. In line with the previous set of results, we find a negative association for conscientiousness and self-employment in general but a positive one in the crafts sector. The latter is mainly due to the group of solo self-employed, where there is a positive association with the trait conscientiousness (column 2, Table 4). At the same time, the craft-specific conscientiousness effect is confirmed when entry is used as dependent variable (column 5). At this point, the question Personality and Self-Employment in the Crafts —249 could be asked whether the crafts-specific conscientiousness effect might simply compensate for the negative effect in the non-crafts sector, and thus only have a relative effect. However, an additional test to check the total (or absolute) effect by personality traits on self-employment in the crafts sector shows that conscientiousness has a positive total effect on self-employment in the case of solo self-employed and in the case of entry (see Table A3 in the Appendix). There is no general effect of emotional stability on the dependent variable. In line with the multinomial logit results, there seems to be some negative impact in the crafts sector, but it is not statistically significant. Openness is positively related to self-employment in general. In the case of the crafts there is a weaker relationship only for solo self-employed and for entry, although this is only significant in the latter case. The last BF trait, agreeableness, generally has no positive effect on selfemployment. However, as with the multinomial logit results, there is an additional negative effect in the crafts sector, mainly due to being a solo self-employed. The two narrow traits, risk tolerance and LOC, are generally positively related to selfemployment and there are no additional effects due to being in the crafts sector. Overall, the results of the second step of the empirical analysis are similar to the multinomial logit results presented above, despite the slightly different modelling approach and the slightly different research question underlying both models: Once again we see a positive effect of conscientiousness and a negative effect of agreeableness in the crafts case, both particularly for the solo self-employed. Thus, hypotheses 3 and 4 are again supported by the empirical evidence. As with the multinomial logit results, emotional stability shows a negative relationship (again strongest among the solo self-employed), but this is now not statistically significant. 4.3 Self-Employment Success Table 5 shows the regression results on several indicators of self-employment success. As mentioned above, we examine whether the identified craft-specific personality factors (notably conscientiousness and agreeableness) also affect the performance of craftspeople once they are self-employed. First, we consider the dependent variable ‘number of employees’, which we interpret as an indicator of the growth orientation of a self-employed person. The results of an ordered logistic regression show that extraversion is generally positively related, while openness and agreeableness are negatively related to the number of employees a self-employed person has (column 1, Table 5). In contrast to agreeableness (and emotional stability), conscientiousness is again confirmed as a specific personality factor in crafts entrepreneurship: There is a negative relationship with the growth orientation of the crafts self-employed (Table 5). The marginal effects at each level 250 —P. Runst and J. Thomä Table 5: Panel regression (dep. variable: success indicators). (1) (2) (3) Number of employees Work satisfaction Exit Crafts lag −0.1604 −0.0075 −0.0162 (0.1569) (0.1672) (0.0296) Extraversion 0.0622∗∗ 0.1193∗∗∗ −0.0023 (0.0296) (0.0282) (0.0066) Extraversion ×crafts lag −0.1643∗∗ 0.0878 0.0087 (0.0665) (0.0811) (0.0178) Conscientiousness 0.0291 0.2383∗∗∗ −0.0066 (0.0339) (0.0314) (0.0065) Conscientiousness ×crafts lag −0.2169∗∗∗ 0.1923∗∗ 0.0008 (0.0751) (0.0950) (0.0166) Emotional stability −0.0274 0.4837∗∗∗ −0.0006 (0.0319) (0.0313) (0.0064) Emotional stability ×crafts lag 0.1437∗0.0806 0.0080 (0.0738) (0.0831) (0.0128) Openness −0.1296∗∗∗ 0.1322∗∗∗ 0.0033 (0.0337) (0.0345) (0.0071) Openness ×crafts lag 0.0094 0.0576 −0.0189 (0.0971) (0.1053) (0.0190) Agreeableness −0.0922∗∗∗ 0.1742∗∗∗ −0.0015 (0.0318) (0.0326) (0.0062) Agreeableness ×crafts lag 0.0832 0.0995 0.0246∗ (0.0783) (0.0887) (0.0147) Risk −0.0005 0.0213∗0.0002 (0.0106) (0.0110) (0.0019) Risk ×crafts lag −0.0192 −0.0086 −0.0009 (0.0269) (0.0297) (0.0046) LOC 0.1340∗∗∗ 0.4345∗∗∗ −0.0184∗∗∗ (0.0282) (0.0299) (0.0064) LOC ×crafts lag −0.0432 −0.0388 0.0050 (0.0691) (0.0787) (0.0151) Regression Type Ordered logit Ordered logit Panel regression Controls Yes Yes Yes Region dummies Yes Yes Yes Year dummies Yes Yes Yes N9,345 9,359 9,519 Notes: The dependent variable is the number of employees (column 1), measured on a Likert-scale that ranges from 0 to 6. Similarly, work satisfaction (column 2) is measured on a scale from 0 to 10. The binary variable exit (column 3) is equal to one if the individual was self-employed in period t−1 but is no longer self-employed in period t. Standard errors in parentheses; ∗p<0.10, ∗∗ p<0.05, ∗∗∗ p<0.01. Personality and Self-Employment in the Crafts —251 of the ordinal categories of the dependent variable are presented in Figure A1.It reiterates the role of the solo self-employed: Once a self-employed person starts to hire employees in his or her crafts enterprise, the effect of conscientiousness becomes negatively significant. This effect diminishes as firm size increases, but always remains negatively significant. In contrast, the results in column 2 of Table 5 suggest that work satisfaction is generally affected by personality characteristics. All BF traits are positively associated with work satisfaction as well as LOC, and to some extent this is also true for risk. In line with our theoretical outline above, we find an additional conscientiousness premium in the crafts, i.e. higher levels are positively related to work satisfaction among self-employed craftspeople (Table 5,seealsoFigure A2). Thus, in line with the above findings on the probability of self-employment, conscientiousness can be singled out as a trait specific to the crafts. Finally, we find no evidence of personality effects on the likelihood of exit, except for two traits: Higher levels of LOC generally have a negative effect on exit, highlighting the favorable influence of this trait on self-employment success. There is also a positive effect of agreeableness in the case of the crafts self-employed, which is in line with the above findings on the effect of agreeableness in the crafts sector. Overall, therefore, the multi-step analysis that has been carried out provides a conclusive picture, particularly with regard to the trait of conscientiousness (Hypothesis H3). In the theoretical discussion of the ‘craft entrepreneur’, we hypothesized that conscientiousness in the craft sector corresponds to the desire of many self-employed to realize themselves on the basis of their experience-based skills and competences and, for this reason, to deliberately keep their own firm small in order to avoid being overburdened with the management and organizational tasks that automatically go hand in hand with increasing firm size (Hypothesis H3). The empirical results support this hypothesis by showing that conscientiousness is a craft-specific driver that has a positive effect on the decision to become selfemployed in the crafts sector. Indeed, it is associated with lower growth orientation and, at the same time, higher work satisfaction among crafts self-employed. 4.4 Additional Specifications To check the robustness of our results, as mentioned in Section 3.1, we repeat the multinomial logit regression with an artisan sample (see Table A4 in the Appendix). The results are mostly similar to those in Section 4.1, with two exceptions. There is no longer a statistically significant positive openness effect for self-employed craftsmen, although the coefficient is still positive. Instead, we find a higher openness for employed artisans. Moreover, while the agreeableness coefficient is still negative in 252 —P. Runst and J. Thomä the case of self-employed artisans, but it is no longer statistically significant. Taking into account the significantly reduced number of observations, we therefore conclude that these results are consistent with the above findings. We also run the random effects panel regression of Section 4.2 with the artisan sub-sample (Table A5 in the Appendix). Again, we find similar results as before, with two notable exceptions in the case of solo self-employed. In contrast to the total sample of craftspeople, openness and LOC have a positive effect on the decision to become a solo self-employed. This seems plausible given the artistic and creative nature of artisans. Other results show the same coefficient signs, for example in the case of agreeableness, but are not statistically significant. Again, the smaller sample size must be taken into account. Finally, the sensitivity of the above results to the influence of the control variables is analyzed. Table A6 in the Appendix shows the multinomial logit regression for the total sample from Section 4.1 without controls. The positive effect of conscientiousness is again evident for self-employment in the crafts sector. At the same time, the positive effects of openness and risk and the negative influence of agreeableness are confirmed. Extraversion, emotional stability and LOC are no longer significant, although the signs of the coefficients are in the expected direction. With regard to the crafts-specific effects (especially conscientiousness), our results from Section 4.1 are thus confirmed. The same applies to the random effects regression from Section 4.2. The main results are confirmed in the no-control specification (Table A7 in the Appendix): In the case of solo self-employed, belonging to the crafts sector has a positive conscientiousness effect on self-employment, while in the case of agreeableness it has a negative effect. 5 Conclusions The renewed scholarly interest in the craft-based mode of competition, work, learning and innovation suggests that there are some unique aspects of the crafts’ way of doing business. This paper explores this issue further by examining the personality patterns of crafts entrepreneurship. Using a representative panel data set of German individuals, we investigate the relationship between broad (Big Five) and narrow (locus of control, risk tolerance) personality traits and self-employment in crafts trades. By comparing this with self-employed people from non-crafts occupations, we empirically identify the specificities of crafts entrepreneurship at the fundamental level of human personality. Our results confirm previous studies that an individual’s personality influences the likelihood of self-employment, but they also show that certain traits have a different effect in the case of crafts than in the non-crafts case – a finding that fits well Personality and Self-Employment in the Crafts —259 Table A6: Multinomial logit (dep. variable: employment status, without controls). (1) (2) (3) (4) Employed Self-employed Non-crafts Crafts Non-crafts Crafts Extraversion −0.0884∗∗∗ 0.0904∗∗∗ 0.0642 (0.0200) (0.0149) (0.0562) Conscientiousness 0.2003∗∗∗ −0.0935∗∗∗ 0.3006∗∗∗ (0.0239) (0.0164) (0.0677) Emotional stability 0.0399∗0.0335∗∗ −0.0325 (0.0220) (0.0157) (0.0590) Openness −0.0868∗∗∗ 0.4019∗∗∗ 0.1185∗ (0.0242) (0.0177) (0.0665) Agreeableness −0.1142∗∗∗ −0.0283∗−0.3446∗∗∗ (0.0224) (0.0162) (0.0579) Risk 0.0622∗∗∗ 0.1564∗∗∗ 0.1679∗∗∗ (0.0075) (0.0054) (0.0206) LOC −0.2737∗∗∗ 0.3089∗∗∗ 0.0902 (0.0195) (0.0150) (0.0550) N104,363 104,363 104,363 104,363 Notes: This table reports the coefficients of a multinomial regression without control variables, region or year fixed effects. The coefficients represent the change in the probability of falling into a particular employment category relative to the baseline category (employed non-crafts) in response to a one-unit change in a personality score. Standard errors in parentheses; ∗p<0.10, ∗∗ p<0.05, ∗∗∗ p<0.01. 260 —P. Runst and J. Thomä Table A7: Panel regression (dep. variable: likelihood of self-employment/entry, without controls). (1) (2) (3) (4) Self-employed general Solo self-employed 1to5 employees Entry Crafts lag 0.0033∗∗ 0.0041∗∗∗ 0.0019∗0.0005 (0.0017) (0.0013) (0.0011) (0.0004) Extraversion 0.0090 0.0011 0.0029 0.0011 (0.0062) (0.0054) (0.0037) (0.0026) Extraversion ×crafts lag 0.0038 0.0045 0.0006 0.0011 (0.0043) (0.0035) (0.0029) (0.0013) Conscientiousness −0.0043∗∗∗ −0.0029∗∗ −0.0015∗−0.0015∗∗∗ (0.0016) (0.0013) (0.0009) (0.0004) Conscientiousness ×crafts lag 0.0127∗∗∗ 0.0118∗∗∗ 0.0046 0.0038∗∗ (0.0046) (0.0035) (0.0035) (0.0015) Emotional stability 0.0023 0.0020 0.0015 0.0001 (0.0015) (0.0013) (0.0009) (0.0004) Emotional stability ×crafts lag 0.0013 −0.0005 −0.0006 0.0012 (0.0040) (0.0036) (0.0023) (0.0014) Openness 0.0082∗∗∗ 0.0060∗∗∗ 0.0028∗∗∗ 0.0041∗∗∗ (0.0016) (0.0014) (0.0010) (0.0005) Openness ×crafts lag −0.0005 −0.0007 0.0016 −0.0041∗∗∗ (0.0037) (0.0031) (0.0023) (0.0016) Agreeableness −0.0013 0.0002 −0.0012 0.0007 (0.0017) (0.0014) (0.0010) (0.0004) Agreeableness ×crafts lag −0.0085∗−0.0072∗−0.0015 −0.0016 (0.0046) (0.0043) (0.0027) (0.0015) Risk 0.0025∗∗∗ 0.0015∗∗∗ 0.0007∗∗∗ 0.0013∗∗∗ (0.0004) (0.0003) (0.0002) (0.0001) Risk ×crafts lag 0.0005 0.0014 0.0004 −0.0000 (0.0010) (0.0009) (0.0006) (0.0005) LOC 0.0085∗∗∗ 0.0045∗∗∗ 0.0036∗∗∗ 0.0005 (0.0018) (0.0015) (0.0011) (0.0004) LOC ×crafts lag −0.0006 0.0020 −0.0015 0.0006 (0.0037) (0.0032) (0.0024) (0.0013) N122,864 118,036 115,811 122,864 Notes: Random effects panel regressions without control variables, region or year fixed effects. Standard errors in parentheses; ∗p<0.10, ∗∗p<0.05, ∗∗∗p<0.01. Personality and Self-Employment in the Crafts —261 Figure A1: Conscientiousness and the number of employees (average marginal effects). Note: The ordinal regression on which the graph is based is reported in Table 5, column 1. The dependent variable is the number of employees, measured on a Likert-scale that ranges from 0 to 6. The main explanatory variable of interest is the interaction of the personality trait conscientiousness and whether an individual belongs to the crafts sector. The graph displays the marginal effects at each level of the ordinal categories of the dependent variable. The marginal effect coefficients are statistically significant at the 5 % level (not significant) for each outcome in the case of crafts (non-crafts). 262 —P. Runst and J. Thomä Figure A2: Conscientiousness and work satisfaction (average marginal effects). 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