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News : International Last Updated: Apr 24, 2009 - 5:31:05 PM


Scientists say entrepreneurs’ brains are different to those of managers; Entrepreneurial process could be taught or enhanced by drugs
By Finfacts Team
Nov 13, 2008 - 5:24:17 AM

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John Flaherty, Managing Director and co-Founder of Galway-based CF Tooling and winner of 2008 Ernst & Young Entrepreneur Of The Year, adds the finishing touches to a Chinese dragon at the opening of a new production facility in the southern Chinese city of Dongguan in July 2008.

Scientists have shown that entrepreneurs’ brains are different to those of managers and suggest that the entrepreneurial process could be taught, or enhanced by drugs.

A study at Cambridge university, published on Thursday in the journal Nature, found that entrepreneurs’ brains were more active in the region responsible for taking “risky or hot” decisions.

Risk taking by managers is currently a front burner issue given the havoc of the financial crisis. That issue wasn't explored by the researchers but it occurs to Finfacts that collective or copycat decisions that were not perceived as personally risky, were the hallmark of the likes of the hapless Stan O'Neal at Merrill Lynch who was obsessed with the performance of rival Goldman Sachs, copied them but the GS managers saw that the US subprime market was about to blow up and hedged their bets in time. O'Neal got a platinum boot worth $161 million. What he lost was his pride while an entrepreneur at an early stage in particular, may have personal lock, stock and barrel at risk.

Psychological and biomedical research has traditionally considered risk-taking as an abnormal expression of behaviour, as exemplified by its association with substance abuse and bipolar disorder. However, the Cambridge research, which was funded by the Wellcome Trust and the Medical Research Council, found that entrepreneurs represent an example of highly adaptive risk-taking behaviour which can result in positive outcomes during stressful economic circumstances. This 'functional impulsivity', the ability to make quick decisions under stress, may have evolutionary value as a means of seizing opportunities in a rapidly-changing environment.

Entrepreneurs choose to start their own business ventures rather than working within an existing company. Whilst there is a potential for considerable profit in making the decision to "go out on their own," these individuals accept the accompanying risks (to finances, reputation, family stability and even self-esteem) as many new ventures fail. The scientists propose that it is these types of decisions which differentiate entrepreneurs from others.

To test their hypothesis, the scientists had 16 entrepreneurs from "Silicon Fen" (the cluster of high-tech companies in and around Cambridge) and 17 managers complete a computerised neurocognitive assessment measuring various aspects of their decision-making abilities. On a decision-making task that required 'cold' processes, entrepreneurs and managers performed similarly. ("Cold" processes govern real-life decisions such as when planning the opening of a consulting company or hiring staff.)

The researchers then had the entrepreneurs and managers make "hot" or risky decisions which involved evaluating rewarding versus punishing outcomes. (For example, the decision between financing one of several potentially excellent but risky business opportunities is a hot decision – it is too difficult for emotions not to play a role.) On this test, although entrepreneurs and managers both made good quality decisions, entrepreneurs were significantly riskier. Entrepreneurs also showed superior cognitive flexibility and higher ratings on questionnaires which measure impulsivity. These cognitive processes are intimately linked to brain neurochemistry, particularly to the neurotransmitter dopamine.

Professor Barbara Sahakian, lead author of the study, said: "This study has shown that not all risk-taking is disadvantageous, particularly when combined with enhanced flexible problem solving. In fact, risky or 'hot' decision-making is an essential part of the entrepreneurial process and may be possible to teach, particularly in young adults where higher risk taking is likely and age-appropriate.

"Additionally, from previous studies we know that drugs can be used to manipulate dopamine levels, leading to changes in risky decision-making. Therefore, our findings also raise the question of whether one could enhance entrepreneurship pharmacologically."

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