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Administrator’s Guide

Introduction This brief guide was written to provide additional information for professionals using the Entrepreneurial Readiness Inventory (ERI). The ERI helps individuals assess whether they have the personality characteristics, behaviors, and resources to successfully start and maintain their own business. This includes all entrepreneurial ventures, from freelancing to small business ownership. This knowledge can then be used to make more informed career choices. It is designed to be self-scored and self-interpreted without the use of any other materials, thus providing immediate results for the respondent and/or counselor.

Background

A thorough review of the literature was conducted to support the development of the Entrepreneurial Readiness Inventory. This review included a review of the literature related to entrepreneurial start-ups, the psychology of entrepreneurship, entrepreneurial approaches, and entrepreneurship and career development. Following is a brief summary of the research that underlies the ERI. This guide is designed to accompany the Entrepreneurial Readiness Inventory. © 2009 by John Liptak. Published by JIST Works, an imprint of JIST Publishing, 7321 Shadeland Station, Suite 200, Indianapolis, IN 46256-3923. Phone: 800-648-JIST. Fax: 877-454-7839. E-mail: [email protected]. Web site: www.jist.com. All rights reserved. Duplication of this document is permitted for internal distribution to staff using the Entrepreneurial Readiness Inventory. No other use is permitted without written permission from the publisher. For additional career resources, please visit www.jist.com. For a JIST catalog, call 800-648-JIST or visit www.jist.com.

Entrepreneurial Readiness Inventory Administrator’s Guide

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Entrepreneurship Defined Most people think of entrepreneurship as the process of starting a new business. Researchers, theorists, and business practitioners define it in many different ways, however. For example, Gartner (1988) feels that an entrepreneur is simply someone who creates new independent organizations. On the other hand, Shane and Venkataraman (2000) define entrepreneurship as

a field of business that seeks to understand how opportunities to create something new (e.g., new products or services, new markets, new production processes or raw materials, new ways of organizing existing technologies) arise and are discovered or created by specific persons, who then use various means to exploit or develop them, thus producing a wide range of effects (p. 218).

Most theorists see entrepreneurship as an organized business venture designed to make a profit. Liptak (2008), however, suggests that entrepreneurship is increasingly being seen as a mindset or attitude that a person develops concerning work and freedom. This mindset is characterized by certain key beliefs and preferences that contrast with many of the defining characteristics of a more traditional work role. Some of the contrasting attitudes about working for someone versus working for yourself can be seen in Figure 1.

Figure 1: Entrepreneurial Mindset vs. Traditional Work Role

Own Your Own Business Work for Someone Else

• You are the owner of your time • Financial rewards depend on your

efforts • Work and leisure are often fused

together • Work is directed by you

• You time is at the mercy of an employer

• Financial rewards are fixed and determined by the employer

• Leisure comes when work is done • Work is directed by your supervisor

Regardless of how entrepreneurship is defined, it is essential for our economic and social well-being. This fact is evident from the large numbers of people who are forgoing traditional employment in the hopes of starting their own business. Small business start-ups are the impetus behind a capitalist system—one that thrives on innovation, ownership, risk, and reward. Additionally, entrepreneurship remains one of the cornerstones of our national heritage, ingrained in the still prevalent philosophy that with hard work and a little imagination, anyone can achieve the American Dream. In addition, recent technological advances have made the process of starting one’s own business—or at least becoming self-employed—more accessible to a wider population. The next section will describe recent trends and contemporary statistics regarding entrepreneurship.

Entrepreneurship Today Liptak (2001) finds that as the trend toward downsizing continues, more people are starting small businesses or working from home. Recent research indicates that about 10.2 percent of the workforce, or 13.8 million workers, are self-employed. In addition, research indicates that nearly 50 percent of the United States population has considered


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self-employment, with nearly 700,000 Americans starting new businesses each year (Liptak, 2008). This research also suggests that many of these ventures are being started by nontraditional populations. Not only are minorities and females starting businesses, but they are doing so in record numbers. Women, especially, are taking advantage of self-employment opportunities. Pink (2001) finds that the rate of self-employment for women has been 12 times that of men. Now at the end of the decade, Wild Women Entrepreneurs (2009) completed a comprehensive study of facts about female entrepreneurship. Some of its findings include the following:

• Women make up 41 percent of entrepreneurs with a net worth of $500,000 or more.

• Nationwide, women-owned businesses have grown steadily in each of the last 10 years.

• The number of women-owned businesses in this country grew at twice the rate of all firms from 1997 to 2002.

• As of 2004, almost two-thirds (63 percent) of all women-owned businesses are privately held.

• Women currently own approximately 9.1 million small businesses in the U.S. and are starting them at twice the rate of their male counterparts.

• Women-owned firms in the U.S. now provide jobs for 18.5 million people and generate sales of nearly $2.38 trillion annually.

• The number of women-owned firms with 500 or more employees increased by 124.3 percent during the 1997–2002 period, which is nine times as fast as all women-owned firms and nearly triple the 45.8 percent growth among all firms with 500 or more employees.

• The desire for independence is a key motivating factor for women business owners when starting a business. In fact, when asked, 45 percent said they were motivated by independence.

According to Brush, Elam, and Allen (2008), over the last decade, minorities have demonstrated higher rates of entrepreneurship than have the non-minority population, and these minority entrepreneurs show the same demographic characteristics and motivation as non-minority entrepreneurs in terms of business types, growth expectation, and education. Another important finding for minority entrepreneurs revolves around their motivation for turning to entrepreneurship. 70 percent of African-Americans, 57.1 percent of Korean-Americans, and 72.6 percent of Mexican-Americans say they launched their businesses after believing they were denied a job because of their race and ethnicity.

According to Reynolds, Carter, Gartner, Greene, and Cox (2009), approximately 10 million American adults are involved in the process of starting nearly six million potential new businesses at any given time. Their national, multi-year study tracks a group of emerging entrepreneurs as they progress through the entrepreneurial process, revealing that new business formation is as widespread as getting married or the birth of a baby and involves all racial and ethnic groups. Among their key findings:


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• Approximately 10.1 million adults in the U.S. are attempting to create a new business at any given time. With nearly one half of all new ventures started by teams of people, this represents about 5.6 million potential new businesses.

• Blacks are about 50 percent more likely to engage in start-up activities than whites. Hispanic men are about 20 percent more likely than white men to be involved with a start-up, but the difference isn’t statistically significant. Hispanic men are about equally as likely to attempt to start a business as white women, but they are less likely to be participating in start-up activities than black women.

• Education significantly predicts promising entrepreneurship, particularly for blacks and Hispanics. Approximately 26 of every 100 black men and 20 of every 100 Hispanic men with graduate education experience report efforts to start a new business. This compares to 10 of every 100 white men with graduate education experience.

The numbers of older Americans who are starting their own business also continues to grow. The American Association of Retired Persons (AARP) recently released a study that explores the number of older Americans becoming self-employed. Among workers 50 and older, 16.4 percent (about 5.6 million workers) are self-employed. In addition, one in three of these workers make the transition to self-employment after the age of 50. Similarly, Hopkins (2005) finds that 5.6 million workers age 50 and older are now self-employed, a 23 percent jump from 1990. He also finds that the numbers of older workers beginning business ventures is expected to rise further as baby boomers seek more job security and technology drives down start-up costs.

Why People Choose Entrepreneurship

There are many different reasons people pursue entrepreneurship. Lock (2005) believes that entrepreneurs have sparked much of the economy because of the ease with which small and home-based businesses can be started. He cites the facts that “Web sites are free, easy to create, and a useful device to attract customers, investors, and new employees with ideas” (p. 308). In fact, the U.S. Census Bureau reports that in 2007, 3 out of every 100 adults in the United States (3 percent of the population) chose the entrepreneurial path each month and created a new business. The Ewing Marion Kauffman Foundation conducted a study of the Census Bureau’s results and found that more than half a million new businesses are started each month. A government that encourages small business growth, an economy that relies on and rewards it, and technology that makes it even easier help to account for the steady stream of the newly self-employed. But these economic and logistical forces are paralleled with a shift in worker values and attitudes. Pink (2001) refers to entrepreneurs as “free agents” and suggests that free agents have replaced the person who faithfully works for an organization in exchange for a regular paycheck, pension, job security, and a place in the corporate world. He believes that there are several reasons for this increase in free agents: (1) The social contract (loyalty for security) that organizations once offered to individuals has been withdrawn; (2) workers rather than companies increasingly own the tools needed to produce wealth; (3) prosperity is reaching more people; and (4) organizations have shorter lives – many of us will outlive the company for which we work (p. 51).


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Liptak (2008) suggests that people choose entrepreneurship because they can find additional success and fulfill personal needs and dreams by engaging in entrepreneurial ventures, often while employed in a full-time job (p. 39). Several other reasons prompting prospective entrepreneurs to pursue their goals of self-employment include the following:

• Discontent with 8 to 5: The new entrepreneurs are not content working for someone else. They demand a situation in which there are intrinsic rewards such as an opportunity to be creative, to have fun, to be enthusiastic, to take risks, and to use all of their talents. The new entrepreneur resists the idea of simply “making a living”—getting up every morning and going to a job that is not fulfilling or challenging and where most of us have no autonomy or input into the decisions that are made.

• The myth of job security: Many of us were raised to believe that you go to work for a company, corporation, or government agency and work there until you retire. This is not true in today’s work environment. Companies have streamlined operations and forced employees into early retirement. No longer are people guaranteed promotions and pay raises based on their performance. For some, work is no longer even available, regardless of education or work experience. In such an insecure world, the risks associated with entrepreneurship suddenly look less risky (or at least equally risky).

• The growth of small business: New entrepreneurs know that big business is not where the opportunities are. Many people are finding jobs in small companies where they find more flexibility and autonomy. Improvements in telecommunications and the explosion of the Internet have made working from home a much more viable alternative. This same technology allows entrepreneurs the opportunity to create their own jobs and businesses without a lot of capital.

• Being comfortable with change: New entrepreneurs see change as a necessary ingredient of effective career development. Since they are not interested in “climbing the corporate ladder,” they see no need to stay at one job for their entire career. They look at job-hopping as a way of building skills and as a way of maintaining their participation in interesting leisure activities. Thus, a job to them is merely a way to learn important skills and make money to support their real interest: the growth of their own business (pp. 39–40).

Many people choose entrepreneurship over traditional career options because of the financial rewards. It has been shown that people who own their own businesses make more money than people in corporate jobs. Some of the most comprehensive research has been completed in the millionaire studies. In their research concerning the advantages of entrepreneurship over a traditional corporate career, Stanley and Danko (1996) found that

• Two-thirds of the millionaires surveyed were self-employed. Self-employed people make up approximately 10 percent of the workers in America but account for two-thirds of the millionaires.

• Self-employed people are four times more likely to be millionaires than those who work for others.


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• The characteristics of business owners are more important in predicting their level of wealth than the type of business they own.

As can be seen, there are many different reasons why people choose entrepreneurship rather than a traditional 8-to-5 job. Whatever the reasons, the research shows that it is not an easy road. Shane (2008) finds that of all of the business that were started in 1992, only 29 percent are still alive 10 years later. Similarly, according to Knaup (2005), about 66 percent of all small businesses are in existence after two years, and after four years, that percentage drops to 44 percent. Some of the reasons cited for these failures include poor execution, lacking the right entrepreneurial attitude, unwillingness to make necessary sacrifices or take risks, and poor planning. Because of the high rate of failure, it is critical to have a measure of a person’s readiness to be an entrepreneur. Thus, the ERI can be an excellent assessment tool for identifying those clients who have a good chance of being successful as an entrepreneur and those who might be best to continue on a traditional career path.

Need for the Entrepreneurial Readiness Inventory To be successful as entrepreneurs, people must possess certain behaviors, motives, and cognitive frameworks. Lock (2005b) says that owning a business has long been the American dream and an entrepreneurial spirit is vital to starting a new business. He recommends that before starting a business, people ask themselves if they have the qualities of an entrepreneur. Peterson and Gonzalez (2005) say that entrepreneurial behavior is critical for people who want to start their own business and for employees who want to maintain their jobs. They suggest that thinking like an entrepreneur is an important ingredient in many aspects of the global economy. They conclude that “organizations that downsize will find those workers who think like entrepreneurs more valuable, while the world of work will be looking for people who can deal with change and find new solutions to problems.” Baum, Frese, Baron, & Katz (2007) find that “entrepreneurs’ personal characteristics (individual differences) are the most important factors for business success—even more important than the business idea or industry setting” (p. 1). Many different factors have been taken into consideration when attempting to identify people who are ready to become successful entrepreneurs. Some of the factors that have been considered in the research include personality characteristics, competencies, and motivation. The Entrepreneurial Readiness Inventory is designed so that people can explore those personality characteristics, competencies, and motives before they begin an entrepreneurial venture. The ERI also provides suggestions for enhancing one’s entrepreneurial readiness. By using the information provided by the ERI, test takers will

• Learn more about their strengths and weaknesses as an entrepreneur prior to starting their own business or becoming self-employed.

• Identify ways to enhance their entrepreneurial readiness.

• Exhibit enhanced self-esteem.


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The ERI is intended for use in any type of program that provides career and employment counseling or any educational program that explores career options and/or entrepreneurial options. Agencies and schools that could use the ERI include high schools, comprehensive career guidance programs, employment counseling programs, rehabilitation counseling programs, college counseling centers, after school programs, disability employment programs, college career and placement offices, community colleges, corporate outplacement firms, military transition programs, school-to-work programs, employee development programs, or any agency that works with individuals who are engaged in career planning and exploration.

Administration and Interpretation The ERI is simple to take and can be easily scored and interpreted. Each assessment contains 60 statements that describe the qualities deemed important for entrepreneurial success. Each statement asks test takers to rate how well the statement describes them on a 4-point scale ranging from “Very Much Like Me” to “Not Like Me.” The ERI also includes scoring directions, a scoring profile, descriptions of the six essential characteristics, and an interpretive guide that helps test takers to connect their results to specific ways to develop their own business. A space is provided for test takers to develop an action plan for entrepreneurial success, accompanied by a set of Internet and print resources to help entrepreneurs develop their own business.

The ERI can be administered to individuals or to groups. It is written for individuals at or above the 7th grade level. Because none of the items are gender-specific, the ERI is appropriate for a variety of audiences and populations.

Administering the ERI

The ERI can be self-administered and the inventory booklets are consumable. A pencil or pen is the only other item necessary for administering, scoring, and interpreting the inventory. The first page of the inventory contains spaces for normative data including name, date, gender, and age. Instruct each respondent to fill in the necessary information. Then read the description on the first page and the instructions for Step 1 while all respondents follow along. Test administrators should ensure that each respondent clearly understands all of the instructions and the response format. Respondents should be instructed to mark all of their responses directly on the inventory booklet. The ERI requires approximately 20–25 minutes to complete. The ERI uses a series of steps to guide respondents. In Step 1, respondents mark their answers for each of the 60 statements. Respondents are asked to read each statement and then circle the response that best represents how well the statement describes them. Each of the scales is made up of 10 items that represent the entrepreneurial characteristic being measured by the ERI. In Step 2 respondents add their scores for each color-coded scale. Step 3 provides a chart that allows test takers to chart their scores from 10 to 40. Results are recorded on the profile. This profile helps respondents to understand their scores better. Step 4 helps test takers to interpret what their scores mean. It provides descriptions of the six scales and tips and activities to help test takers explore and write about their entrepreneurial interests. Test takers should be encouraged to review each of the scales but to concentrate on those scales with the


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lowest scores. Step 5 encouragers test takers to develop an action plan and apply what they have learned to starting their own business. Lastly, a variety of Internet and print resources are provided to help potential entrepreneurs to be successful in starting and maintaining their own business.

Understanding and Interpreting ERI Scores The ERI yields content-referenced scores in the form of raw scores. A raw score, in this case, is the total of the numbers circled for each of the 10 self-report entrepreneurial characteristics statements for the six scales. The performance of individual respondents or groups of respondents can only be evaluated in terms of the mean scores on each of the scales. For each of the scales on the ERI:

• Scores of 31 to 40 are high and indicate that the respondent has many of the

traits and characteristics to become a successful entrepreneur and should explore entrepreneurship further.

• Scores of 21 to 30 are moderate and indicate that the respondent has some of the traits and characteristics to become a successful entrepreneur but should work on developing more of them.

• Scores of 11 to 20 are low and indicate that the respondent does not have many of the traits and characteristics to become a successful entrepreneur. He or she should consider other career options.

Respondents generally have one or more areas in which they score in the low or low-average categories. The respondents should concentrate on exploring their strengths and weaknesses first. However, they should also look for ways to use their scores to enhance their chances of entrepreneurial success. This is best accomplished by having respondents complete all of the activities in Step 4. This will help them to think about important aspects of entrepreneurship before starting a small business. Keep in mind that it is not necessary to score high on every scale on the ERI. This assessment is designed to help people contemplating starting their own business to explore their entrepreneurial traits. While research has found that each of these traits is important to successful entrepreneurship, it is not necessary to have all of them to a high degree. Someone with relatively high scores in many of the scales likely can compensate for weaknesses in other areas. Alternatively, some respondents may score in the average or low ranges for most or all of the six scales. If this is the case, they may not be suited for an entrepreneurial career. For these people, it is usually recommended that they pursue more traditional career options and career paths. If they are set on starting their own business, they should be encouraged to do further research into entrepreneurship, to discuss the possibility with a professional or a career counselor, and to start a small business or home-based business on the weekends to “test” the idea out while they have the security of a steady paycheck.

Illustrative Case


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Sue is a 52-year-old office manager with a bachelor’s degree in business administration. She loves her work but will soon have 25 years of service completed and will be eligible for retirement. She is afraid that when she retires she will get bored from not having anything to do. She says that she “likes to be busy all the time.” Sue has always wanted to start a business in which she would walk dogs and sit for pets when their owners were away. She has several pets herself and sometimes volunteers at the local animal shelter. She has been a little reluctant to try and start her own business. Her scores on the ERI include

Vision: 25

Risk Tolerance: 18

Perseverance: 29

Motivation: 34

Independence: 31

Resources: 20 As can be seen from Sue’s results, she has the motivation to be a successful entrepreneur. She seems to embrace the challenge and be passionate about the type of business she plans to start. She truly believes that her efforts would determine how successful the business would be. A high score on the Independence scale suggests that she is a self-starter and enjoys making her own decisions. Sue’s vision for her business is somewhat limited, however. She knows the type of business she would like to start, but has not visualized how she could implement her ideas in her community. She also does not have a back-up plan. Sue’s biggest challenges in starting her own business come in the form of risk tolerance and resources. She scored in the low range on both of these two scales. She has worked for so long, the thought of going without a paycheck and putting money into a business that has no guaranteed income makes her very nervous. She seems not to be a huge risk taker in any areas of her life or career. It was suggested that she start her business on the weekends without sacrificing her current paycheck. In addition, she was prompted to do further research into her options (including exploring franchising) and to talk with other people in the community who have started businesses in an attempt to identify a potential mentor.

Research and Development This section outlines the stages involved in the development of the ERI. It includes guidelines for development, item construction, item selection, item standardization, and norm development and testing.

Guidelines for Development

The ERI was developed to fill the need for a quick and reliable instrument to help people explore and determine whether they have the characteristics needed to start their own business. It also provides counselors and teachers with information that they can use to help their clients and students explore the career option of entrepreneurship. The ERI was developed to meet the following guidelines:


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1. The instrument should measure a wide range of entrepreneurial

characteristics. To help people identify their readiness to start their own business, six scales were developed that were representative entrepreneurial characteristics identified in the literature.

2. The instrument should be easy to administer, score, and interpret. The ERI uses a four-point Likert question-answer format that allows respondents to quickly determine their entrepreneurial strengths and weaknesses. The consumable format makes it easy to complete, score, and interpret the assessment.

3. The instrument should apply to both men and women. Norms for the ERI have been developed for both men and women.

4. The instrument should contain items that are applicable to people of all ages. Norms developed for the ERI show an age range from 19 to 62.

Scale Development The great majority of the research related to new business start-ups suggests that entrepreneurs’ personal characteristics are the most important factors for business success. This research indicates that these personal entrepreneurial characteristics are even more important than the business type, format, and industry setting. Despite this research, very little research has been conducted related to the specific characteristics that entrepreneurs need in order to be successful in starting their own business. Baum, Frese, Baron, and Katz (2007) report that “despite the belief that entrepreneurs’ personal characteristics are important for new venture success, the psychology of the entrepreneur has not been thoroughly studied” (pp. 1–2). They recommend that researchers still need to work to identify personal entrepreneurial characteristics that can help people decide whether entrepreneurship is the best option available for them. Most of the research related to the specific characteristics needed for entrepreneurs to start and maintain their own business is reviewed in Baum, Frese, & Baron’s The Psychology of Entrepreneurship (2007). In their comprehensive review of the research related to entrepreneurial readiness, they identify both the motivational and personality traits that are necessary to begin and maintain a new business venture. This comprehensive review of the entrepreneurial literature forms the basis for the six scales on the ERI. Locke and Baum (2007) suggest that motivation is the force that energizes, sustains, and directs the actions of entrepreneurs. They reviewed the entrepreneurship motivation models and from these models identify the traits most necessary for prospective entrepreneurs. Figure 2 shows the correlation between these traits and the scales on the ERI.

Figure 2: Comparison of Motivational Traits and ERI Scales


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Motivational Trait Needed ERI Scale

Vision: Concept of what the business would be Vision

Self-Confidence: Self-esteem and the need to take chances

Risk Tolerance

Tenacity & Egoistic Passion: Not giving up when things go wrong

Perseverance

Achievement Motivation: The desire to achieve a standard of excellence

Motivation

Independence: The desire to work for oneself Independence

Situationally Specific Resources: Confidence in having what it takes to succeed

Resources

Rauch and Frese (2007) say that personality characteristics are enduring dispositions that show a high degree of stability over time. They conducted a thorough review of the literature related to personality traits and entrepreneurship before identifying the characteristics that are critical for entrepreneurs to possess in that they have an effect on business creation and success. Figure 3 shows the correlation between these personality characteristics and the scales on the ERI.

Figure 3: Comparison of Personality Characteristics and ERI Scales

Personality Characteristic Needed ERI Scale

Innovativeness: Willingness and interest in looking for novel ways of doing things

Vision

Risk-Taking: An individual disposition toward risk Risk Tolerance

Self-Efficacy: The confidence to persevere when problems arise

Perseverance

Need for Achievement: The need for challenging tasks rather than routine work

Motivation

Autonomy: An interest in making one’s own decisions

Independence

Feeling of Control: The belief that one has the personal resources to succeed

Resources

Item Selection


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A large pool of items that were representative of the six major scales on the ERI was developed and later revised using the research studies and reviews of the literature cited previously. Many of these research studies were specifically designed to identify the personality characteristics and motivational factors that influenced entrepreneurs in starting and building businesses. The items used for the ERI were designed based on many of the research questions asked in these studies. In addition, the items selected for inclusion on the ERI were representative of both the personality characteristics and the motivational factors reviewed in the literature. A pool of items was identified and then was subjected to a split-half statistical study (see Table 1) to eliminate items that did not cluster well. The subjects used for this study were members of an entrepreneurial club at a mid-size university. This analysis enabled the elimination of items that did not correlate well with the other items on the scale. In developing items for the ERI, the author used language that is currently being used in the literature related to motivational factors, competencies, and personality traits of entrepreneurs. After the items were developed, they were reviewed and edited for clarity, style, and appropriateness for identifying barriers for people interested in starting their own business. Items were additionally screened to eliminate any reference to sex, race, culture, or ethnic origin.

Item Standardization

The ERI was designed to measure a person’s readiness to begin and maintain a new business venture. The author identified a population of people interested in being entrepreneurs to complete the assessment. This population completed drafts of the ERI to gather data concerning the statistical characteristics on each of the items. From this research, a final pool of 10 items was chosen which best represented each of the six scales on the ERI. This initial research yielded information about the appropriateness of items for each of the ERI scales; reactions of respondents concerning the inventory format and content; and reactions of respondents concerning the ease of administration, scoring, and profiling of the assessment. Experts in the field of business were used to eliminate items that were too similar to one another. The data collected was then subjected to split-half correlation coefficients to identify the items that best represented the six scales on the ERI. The items accepted for the final form were again reviewed for content, clarity, and style. Careful examination was conducted to eliminate any possible gender or race bias.

Reliability Reliability is often defined as the consistency with which a test measures what it purports to measure. Evidence of the reliability of a test may be presented in terms of reliability coefficients, test-retest correlations, and interscale correlations. Tables 1, 2, and 3 present these types of reliability information. As can be seen in Table 1, the ERI showed very strong internal consistency validity with split-half correlations ranging from .67 (Perseverance scale) to .95 (Vision scale). All of the split-half correlations were significant at the .01 significance level. Then, approximately one month after the original testing, 24 people in the sample population were re-tested using the ERI (see Table 2).


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Test-retest correlations for the ERI ranged from .60 (Perseverance scale) to .93 (Independence scale). All of these correlations were also significant at the .01 level. Table 3 shows the correlations among the ERI scales. The inter-item correlations provide information about whether the scales measure a single unidimensional latent construct. The smaller the correlations, the less overlap there is among scales. The ERI showed very strong interscale correlations with the largest correlations being among the Perseverance scale and the Risk Tolerance scale (.410). All of the other correlations were low. This relatively high correlation for the Risk Tolerance and the Perseverance scales suggests that people who take risks are likely to persevere when it comes to starting their own business. This is logical and appears to be backed up in the review of the literature. All of the other interscale correlations were smaller, adding to the independence of each of the scales on the ERI.

Validity Validity is often defined as the extent to which a test measures what it purports to measure. Evidence of validity for the ERI is presented in the form of means and standard deviations. Table 4 shows the scale means and standard deviations for men and women who completed the ERI. Note that women scored highest on the Motivation (M = 32.54) scale and then the Independence (M = 30.26) scale. Their scores on these two scales were higher than the men who completed the ERI. This suggests that women are generally eager to start businesses and have the entrepreneurial spirit. They also value the independence that accompanies entrepreneurship and do not need the structure and other perks associated with traditional employment. However, women scored lowest on the Risk Tolerance (M = 19.00) scale and the Resources (M = 21.46) scale. This suggests that women are somewhat reluctant to take the financial and emotional risks associated with starting their own business and lack the resources in general to begin and maintain a business start-up. On average, women may need more assistance with overcoming their fears, minimizing the risks associated with business start-ups, and gathering practical resources that can help with planning a new business. Men scored highest on the Motivation (M = 32.12) and Perseverance (M = 31.55) scales. This suggests that men are also generally eager to start their own business and are equally inclined to proceed with their start-up even when encountering difficulties and challenges. Men also were much more likely to tolerate the risks (M = 29.23) associated with entrepreneurship and have the resources (M = 29.84) needed to start and maintain their own business. Men scored lowest on the Vision (M = 27.24) scale, suggesting they may need more assistance, on average, during the conceptualization stage. Overall, men and women scored highest on the Motivation (M = 32.34), Independence (M = 30.03), and Perseverance (M = 30.15) scales. This suggests that people completing the ERI tend to have the desire and perseverance to start their own businesses. However, they need the most assistance in overcoming their fear of risk (M = 23.92), defining their business concept (M = 26.55), and finding the necessary resources (M = 25.49) to be successful.


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entrepreneur next door: Characteristics of individuals starting companies in America. Kansas City, MO: Ewing Marion Kauffman Foundation.

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Shane, S., & Venkataraman, S. (2000). The promise of entrepreneurship as a field of

research. Academy of Management Review, 25, pp. 217–226. Stanley, T.J., & Danko, W.D. (1996). The millionaire next door. Atlanta, GA: Longstreet

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About the Author

John Liptak, Ed.D., is one of the leading developers of quantitative and qualitative assessments in the country. He is the Associate Director of the Experiential Learning and Career Development office at Radford University in Radford, Virginia. He provides career assessment and career counseling services for students and administers and interprets a variety of career assessments. Dr. Liptak focuses on helping students develop their careers by becoming engaged in a variety of learning, leisure, and work experiences. In addition to the ERI, Dr. Liptak has created the following assessments for JIST Publishing: Work Smarts, Transferable Skills Scale (TSS), Career Exploration

Inventory (CEI), Transition-to-Work Inventory (TWI), Job Search Knowledge Scale (JSKS), Job Survival and Success Scale (JSSS), Barriers to Employment Success

Inventory (BESI), Job Search Attitude Inventory (JSAI), Interview Style Inventory (ISI),

Career Planning Scale (CPS), and College Survival and Success Scale (CSSS). He is also the author of Career Quizzes.


© JIST Works 16

Table 1: Internal Consistency

(Split-Half Correlations) *

Scale Correlation Coefficient

Vision .95**

Risk Tolerance .91**

Perseverance .67**

Motivation .79**

Independence .84**

Resources .87**

* N = 48 adults ** Correlation significant at the 0.01 level

Table 2: Stability (Test-Retest

Correlation) * +

Scale Correlation Coefficient

Vision .69**

Risk Tolerance .90**

Perseverance .60**

Motivation .86**

Independence .93**

Resources .90**

* N = 30 adults + 1 month after original testing ** Correlation significant at the 0.01 level

Table 3: ERI Interscale Correlations*

Scale Vision Risk

Tolerance Perseverance Motivation Independence Resources

Vision 1.00 –.097 –.138 .214 –.069 –.313

Risk Tolerance 1.00 .410** –.058 –.144 .062

Perseverance 1.00 .053 .280 –.397

Motivation 1.00 –.174 .051

Independence 1.00 .110

Resources 1.00

* N = 24 adults ** Correlation significant at the 0.05 level


© JIST Works 17

Table 4: ERI Means and Standard Deviations for Adults

Total (N = 154) Male (N = 74) Female (N = 80) Scale

Mean SD Mean SD Mean SD

Vision 26.55 3.00 27.24 3.50 25.90 2.30

Risk Tolerance 23.92 5.80 29.23 3.00 19.00 2.20

Perseverance 30.15 3.00 31.55 3.00 28.85 2.50

Motivation 32.34 2.70 32.12 3.30 32.54 2.20

Independence 30.03 4.90 29.77 6.00 30.26 3.60

Resources 25.49 5.60 29.84 4.70 21.46 2.33

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