LAUSR

Abstract The DUI (learning by doing-using-interacting) mode offers a promising theoretical framework to explain why many small- and medium-sized enterprises (SMEs) are successful in innovation without research and development (R&D) efforts. In this context, we argue that—because of the informal, person-centered, and interactive nature of the DUI mode—small business owners should be in a key position to trigger DUI learning processes at the company level. Based on a large SME data set from Germany, we show empirically that Big Five personality traits of small business owners positively affect self-selection into DUI-based innovation in less R&D-intensive SMEs. That is, companies operating largely under the DUI mode seem to benefit in particular from certain owners’ personality characteristics. In addition, we present novel evidence that complementarities between different Big Five traits exist in terms of self-selection into the DUI mode, thereby pointing to the role of personality prototypes. The paper concludes with implications for policy and further research. Plain English Summary Solving the SME innovation puzzle—resilient owner personalities boost small firm innovativeness. This psychological effect only exists in non-R&D SMEs, providing a new explanation for their surprising innovation success. SME owners are involved in most day-to-day activities of their company. An owner’s personality therefore directly affects external and internal communication flows, laying the foundation for a company’s innovation culture. We show that a resilient personality type—an owner who is characterized by emotional stability, openness, extraversion, and conscientiousness—benefits innovation in non-R&D SMEs. According to our analysis, resilient owners are about 5.5% more likely to trigger an innovation mode within their company that builds on non-R&D-based knowledge, communication, and interaction. Our research implies that entrepreneurship education and consultancy should foster psychological self-awareness, and thereby increase an owner’s understanding of his/her most effective role in terms of firm-level innovation. Successful entrepreneurship and innovation is not fully determined by one’s personality type, but knowing one’s own strength and weaknesses can help to carve out an effective niche, defining the scope of one’s responsibility, as well as its limits.