The effects of testosterone on entrepreneurs

A new paper:

We collect information on prenatal testosterone in a large sample of entrepreneurs by measuring the length of their 2nd to 4th fingers in face to face interviews.

Entrepreneurs with higher exposure to prenatal testosterone (lower second to fourth digit ratio) manage larger firms, are matched with larger firms when acquire control and experience faster average growth over the years they manage the firm.

We also find that prenatal testosterone is correlated with elicited measures of entrepreneurial skills such as ability to stand work, and the latter are correlated with firm size.

My favorite part:

However, firms run by high-testosterone entrepreneurs have lower profitability as measured by return on assets. We offer evidence that this is because the same biological factor that enhances entrepreneurial skills also induces empire building preferences, which leads high-testosterone entrepreneurs to target a firm size that exceeds the profit maximizing value.

2 thoughts on “The effects of testosterone on entrepreneurs

  1. I think there was a line from the 4 hour body, about how Richard Branson, when asked how to come up with new ideas, thought for a second, then shrugged his shoulders and quipped: “Work out”.

    It’s the incubation period where we come up with ideas (just like we do in the shower, or while we’re jogging, etc.).

    I guess I made the jump from

    a)dude who works out once a week, low testosterone

    b)guy who pumps iron daily, lots of testosterone

    Needless to say, a female CEO is at a disadvantage here, but as you point out, might still post higher profit numbers. I kind of doubt it though. Bosses tend to be pushy and demanding. Hence, ahem..gonads.

  2. I was very interested in the line “entrepreneurial skills such as ability to stand work”. Conscientiousness? Physical endurance? As a person who doesn’t even like to make extra mouse clicks, this could explain a lot.
    But I didn’t get much by Googling it and in the paper it’s just defined as
    Cost of work effort: defined by the answer of this question to the entrepreneur: “When you work, after how many hours do you feel like stopping and doing something else?”