The personality of e-commerce investors

Journal of Economic Psychology 25 (2004) 529–537

www.elsevier.com/locate/joep

The personality of e-commerce investors

Katrina Hunter, Simon Kemp *

Department of Psychology, University of Canterbury, Private Bag 4800, Christchurch, New Zealand

Received 29 November 2001; received in revised form 27 January 2003; accepted 14 March 2003

Available online 14 May 2003

Abstract

Two hundred and thirty-nine shareholders in three companies, two of them e-commerce

firms, one an established electronics company, completed questionnaires. The e-commerce in-

vestors were significantly younger, and considerably more disinhibited, susceptible to bore-

dom, experience seeking, open and impulsive than the other investors. They also held more

positive attitudes to e-commerce.

� 2003 Elsevier B.V. All rights reserved.

PsycINFO classification: 3120

JEL classification: E22

Keywords: Personality; Risk-taking; Attitudes to e-commerce; Investment decisions

1. Introduction

Most work on investment decisions has concentrated on features of the invest-

ment itself or on the financial and life circumstances of the investor (e.g. W€arneryd,2001), but it is possible that the personality of the investor is also important to the

decision. This paper investigated personality differences between people who chose

to invest in risky companies – specifically relatively new e-commerce companies –

and investors in more �normal� companies.

In recent years there has been a good deal of interest in risk-taking (e.g. Sitkin &

Pablo, 1992; Slanger & Rudestam, 1997; Zuckerman, 1978). People differ in their will-ingness to take risks, and there have been attempts to classify people on dimensions

* Corresponding author.

E-mail address: [email protected] (S. Kemp).

0167-4870/$ - see front matter � 2003 Elsevier B.V. All rights reserved.

doi:10.1016/S0167-4870(03)00050-3

mail to: [email protected]

530 K. Hunter, S. Kemp / Journal of Economic Psychology 25 (2004) 529–537

of risk propensity (e.g. Meller, Schwartz, & Cooke, 1998; Schneider & Lopes, 1986).

Obviously, risks occur in many different areas of life, and individual propensities to

take risk are often situation specific (e.g. Slovic, 1972; MacCrimmon & Wehrung,

1986). One type of risk-taking that is very important in the commercial world is

the risk that investors take when they acquire shares in a company. Naturally, the de-gree of risk depends on the company. Old, large, profitable companies are not nor-

mally such risky investments as small companies that are just starting up.

Companies in established lines of business are less risky than companies which are at-

tempting to break new commercial ground.

The present research focussed on investors in companies that retailed goods over

the Internet. It is now well known that during the 1990s, e-commerce often received

enthusiastic advocacy (Burnham, 1999; Evans & Wurster, 1999). The share prices of

many companies involved in e-commerce rose rapidly during the 1990s, and then fellwith some companies being driven out of business in 2000 and 2001. While the main

centre of e-commerce was in the USA, e-commerce companies were also founded in

other countries. Two such New Zealand companies were EStar Online and Eforce

Ltd.

EStar Online was a private company unlisted on the New Zealand (or any other)

Stock Exchange. The company�s primary business was the retailing of compact disks

using the Internet. At the time of the study (September, 2000), the unofficial share

price for this company was NZ $0.18, following previous highs over NZ $1. Becauseit is relatively difficult to trade shares in an unlisted company, at the time of the study

we considered it the riskiest of the three companies we studied. As at March 2001,

the company was still in business.

Eforce Ltd. was created in February 2000 from a previous saw-milling firm. The

new company had no timber interests, and offered a web-base of around 31,000 in-

dividuals to companies wishing to sell over the Internet. At the time of the study, the

share price was around $0.21 (following a price around $0.40 in February). The com-

pany was listed on the New Zealand Stock Exchange, and at the time of the studywas regarded by us as risky. In March 2001, the company was placed in receivership

and delisted.

The third company whose investors we studied was PDL Holdings Ltd. This com-

pany, like the others, was Christchurch based and concentrated on the manufacture

of electrical and plastic goods. It was not involved in e-commerce and was listed on

the New Zealand Stock Exchange. In 2000, the company had been in existence for

over 60 years, was profitable, and reporting sales growth both in New Zealand

and overseas. Hence we regarded it as the least risky of the three companies. During2001 it was completely taken over as a going concern.

Although the main emphasis of economic theories of investing has been on rational

considerations, it has also been acknowledged that psychological factors might also

be important (see, e.g., W€arneryd, 2001, for a review). As it has been consistently

shown that personality factors play a significant role in risk-taking behaviour, we hy-

pothesised that there might be personality differences between investors in the rela-

tively risky e-commerce companies and investors in the more conventional, longer

established company.

K. Hunter, S. Kemp / Journal of Economic Psychology 25 (2004) 529–537 531

The current study looked for differences in sensation seeking, openness and impul-

sivity. Zuckerman (1979) defines sensation seeking as the need for varied, novel and

complex experiences, with a willingness to take physical and psychological risks for

the sake of those experiences. Individuals with high sensation seeking levels often

have risky or stressful occupations such as air-traffic controllers and pilots (Muso-lino & Hertenson, 1977; Zuckerman, 1983) and take part in high-risk recreation

(Schrader & Wann, 1999). Harlow and Brown (1990) showed in a simulation study

that sensation seekers tend to make risky financial investments. This finding was also

noted by Zuckerman (1983) and Wong and Carducci (1991), although most research

linking sensation seeking to financial risk has concentrated on gambling behaviour

(e.g. Anderson & Brown, 1984).

Three of the four sub-scales from Zuckerman, Eysenck, and Eysenck�s (1978) sen-sation seeking scale (SSV) appeared to be relevant to risky investments: disinhibi-tion, boredom susceptibility and experience seeking.

Researchers regularly use the NEO Personality Inventory, containing the five fac-

tors of extraversion, neuroticism, agreeableness, conscientiousness and openness. Of

these openness, �a receptiveness to new ideas, approaches and experiences� (McCrae

& Costa, 1990, p. 41), seemed the most relevant for the present study.

Impulsive people are known to seek out risky activities (Kowert & Hermann,

1997). The present study measured individuals� impulsiveness by including questions

from the EASI III Questionnaire (Buss & Plomin, 1975).Finally, it seemed likely that there would be differences in general attitudes and

beliefs about e-commerce between the investors, so these attitudes were also investi-

gated.

2. Method

2.1. Participants

The participants were 185 males and 54 females who had invested in one of three

companies based in Christchurch, New Zealand. These people were selected for par-

ticipation because they held shares in a private e-commerce company, EStar Online;

a public e-commerce company, Eforce Ltd.; or an established public electronics com-

pany, PDL Holdings Ltd.

Only individual (i.e. not corporate) investors were included in the present study.

The participants were obtained by sampling all or part of the share registries of thethree companies. Independence of the groups was assured by identifying and exclud-

ing the answers of 12 individuals who had invested in more than one of the compa-

nies.

Because EStar Online was a private company with a small number of sharehold-

ers, questionnaires were mailed to all of the company�s 126 individual investors. Of

the 126 questionnaires delivered to investors, 43 were completed and returned. The

EStar sample contained 36 males and 7 females, who ranged in age from 22 to 72

years with a mean age of 43.1 years.


Two hundred and fifty surveys were mailed to a random sample of investors (total

1500) in Eforce Ltd. Of the 102 participants who returned the survey, 77 were male

and 25 were female, and their ages ranged from 23 to 89 years with a mean of 52.5

years.

Similarly, 280 of the 1800 individual investors in PDL Holdings Ltd. were sentsurveys. Ninety-four of these shareholders returned the survey, 72 of whom were

male and 22 female. These participants were aged between 18 and 87 years with a

mean age of 58.32 years.

The overall response rate was 36.4%.

2.2. Questionnaire

The participants from each company received virtually the same questionnaire.The first part asked for background and demographic information. The remaining

items were mixed up so that the participants were unable to distinguish which scale

they were from. Each item consisted of a statement which was responded to on a

scale from 1 (strongly disagree) through 4 (neither disagree nor agree) to 7 (strongly

agree).

Three sub-scales measuring experience seeking, disinhibition, and boredom sus-

ceptibility were taken from Zuckerman et al.�s (1978) SSS-V. Each sub-scale con-

tained six statements.Two sub-scales of openness, feelings and actions were taken from Costa and

McCrae�s (1998) NEO Personality Inventory (eight statements each).

The 10 items of the impulsivity scale were taken from Buss and Plomin�s EASI III

questionnaire.

The items making up the attitudes to e-commerce scale are shown in Table 1.

Prior to the present study, 50 University of Canterbury students were presented 19

items and principal components analysis undertaken on their responses. The 10

items chosen for the present study were those with the loadings greater than 0.55on the single factor identified in this exercise.

Table 1

Factor loadings for the attitude to e-commerce scale

Questions Factor loadings

I am happy to purchase low cost products over the Internet, e.g. books, CDs 0.84

I have access to a computer with an Internet server 0.83

In the future, I expect to purchase products through the Internet 0.82

I will probably purchase at least three things through the Internet this year 0.78

Shopping over the Internet is a natural progression from store shopping 0.77

I am willing to purchase high cost products over the Internet, e.g. computer

equipment

0.75

I feel secure about using a credit card to purchase goods off the Internet 0.72

Consumers can save money by purchasing online 0.68

The personal details provided when purchasing goods are secure on the Internet 0.61

E-commerce will be a more accepted method of commerce in the future 0.58


All scales were constructed by simply adding up the ratings from the appropriate

items. Possible scores could thus range from 6 to 42 (experience seeking, disinhibi-

tion, and boredom susceptibility), 8 to 56 (the two openness measures), or 10 to

70 (impulsivity and attitude to e-commerce).

3. Results

Participants in this study were diligent in completing the questionnaires. Only a

small portion of the returned questionnaires containing any missing answers (8%)

and the missing data were usually with respect to the investor�s demographics, par-

ticularly age and income. Only 2% of the questionnaires missed any answers on any

of the personality scales or the attitudes to e-commerce scale. These questionnaireswere excluded from the personality analysis.

A statistically significant main effect for age was found on the decision to invest in

the different types of companies, F ð2; 236Þ ¼ 16:589, p < 0:001. Post-hoc testing

using Tukey�s Honestly Significant Difference Test revealed that the age of the inves-

tors in PDL (M ¼ 58:32, SD¼ 13.86) was significantly higher (p < 0:05) than that of

the investors in the e-commerce companies, EStar (M ¼ 43:14, SD¼ 14.95) and

Eforce (M ¼ 52:53, SD¼ 14.61) whose ages were in turn significantly different from

each other. This result recalls earlier findings that people become less likely to takerisks as they age (e.g. Kogan & Wallach, 1964; MacCrimmon & Wehrung, 1986).

Possible differences in the gender composition, reported income, education level,

and marital status of investors in the three different companies were looked for,

but no significant (p < 0:05) differences were found.

A principal components factor analysis was performed on the 10 statements cho-

sen for the attitudes to e-commerce scale. A screen test indicated the existence of one

major factor, accounting for 55.2% of the variance in the statements. Table 1 shows

that all the items on the attitude towards e-commerce scale loaded highly on the fac-tor. The scale had good reliability (Cronbach a ¼ 0:91). Total scores on the attitude

to e-commerce scale were obtained by simply adding up the 10 ratings (giving a pos-

sible range from 7 to 70). Responses to the attitude to e-commerce scale were signif-

icantly correlated (Pearson, two-tailed, p < 0:001) with disinhibition (r ¼ 0:41),susceptibility to boredom (0.36), experience seeking (0.22), openness of actions

(0.19), openness of feelings (0.28) and impulsivity (0.40).

Table 2 shows the means and standard deviations for the personality variables

and attitude towards e-commerce for each of the three investor samples. The avail-able norms for the personality scales are also included. (Note: These were appropri-

ately transformed where the item scale was changed to 1 to 7 for our study.) Finally

the table shows the results of analyses of variance and Tukey post-hoc testing on the

differences between the investors in EStar, Eforce and PDL Holdings Ltd.

The main results are clear and consistent. Investors in the e-commerce companies

scored higher on disinhibition, susceptibility to boredom, experience seeking, open-

ness of both feelings and action, and impulsivity, both as compared to investors in

PDL Holdings and as compared to scale norms for the general population. Close

Table 2

Average personality and attitude scores for the three groups of investors

Mean SD Tukey�s post-hoc test F ð2; 236ÞDisinhibition

EStar Online (A) 29.95 5.58 A–B* A–C*

Eforce Ltd. (B) 26.68 6.71 B–C*

PDL Holdings Ltd. (C) 21.07 5.79 36.70***

Norms 21.3

Boredom susceptibility

EStar Online (A) 27.65 4.58 A–B– A–C*

Eforce Ltd. (B) 27.06 6.78 B–C*


Norms 18.3

Experience seeking


Eforce Ltd. (B) 28.71 6.17 B–C*


Norms 22.2

Openness-feelings


Eforce Ltd. (B) 40.28 7.44 B–C–

PDL Holdings Ltd. (C) 37.97 7.10 4.32**

Norms 35.0

Openness-actions

EStar Online (A) 36.33 5.57 A–B* A–C*

Eforce Ltd. (B) 40.54 4.88 B–C*


Norms 35.0

Impulsivity


Eforce Ltd. (B) 40.19 7.87 B–C*


Norms 35.0

E-commerce attitude


Eforce Ltd. (B) 45.84 14.64 B–C*

PDL Holdings Ltd. C 32.29 12.90 39.89***

Notes: Post-hoc testing used Tukey�s Honestly Significant Difference Test: This test was performed to

identify significant differences between (i) the investors in the two e-commerce companies (A–B), and (ii)

the investors in the e-commerce companies and those in PDL Holdings (A–C; B–C). (*) Significant

(p < 0:05) difference between investors; (–) no significant difference.

One-way Analysis of Variance: Significance values are for the main effects of company. (**) p < 0:01, (***)

p < 0:001.

Norms: Disinhibition, experience seeking and boredom susceptibility norms were adapted from Table 6 in

Zuckerman et al. (1978) from the average of the male and female scores (multiplied by 6 because we used 6

items); openness (feelings and actions) from Costa and McCrae�s NEO-PI; impulsivity from Buss and

Plomin�s EAST III.



examination of the table shows, moreover, that many of the differences between the

groups were quite substantial. For example, EStar investors� average disinhibition

score was more than a standard deviation higher than either the norm or the PDL

investors� average.A possible confounding factor in these results is that of age: investors in the

e-commerce companies were significantly younger than those in the established elec-

tronics company. Hence the different analyses of variance were all repeated as ana-

lyses of covariance with age as the covariate. The analysis of covariance found no

significant differences between the companies for the openness-feelings scale

(F ð2; 234Þ ¼ 2:96, n.s.), but significant differences of a similar magnitude to those

shown in Table 2 were found for all the other personality variables and the attitudes

to e-commerce scale.

The size of the differences shown in Table 2 suggests that it might be possible toobtain reasonable discrimination between investors in the e-commerce companies

and investors in PDL on the basis of these and the demographic variables. Accord-

ingly, a discriminant function analysis was performed. For this analysis, investors in

the two e-commerce companies were pooled together and compared with PDL inves-

tors. The analysis found that openness of actions (standardized coefficient¼ 0.53),

attitude towards e-commerce (0.41), impulsivity (0.32), disinhibition (0.22), and

age ()0.22) were significantly (p < 0:05) important variables in the discriminant

function. This function correctly classified individuals who invested in e-commerceshares 88.2% of the time and individuals who invested in PDL Holdings 81.1% of

the time. Thus, the variables had good predictive power.

4. Discussion

This study showed that investors in two New Zealand e-commerce companies

were significantly younger, more disinhibited, more susceptible to boredom, moreexperience-seeking, more open, and more impulsive than investors in a more conven-

tional company. In general, the investors in PDL Holdings had personality scale

scores which were relatively close to established norms for these scales, while the

e-commerce investors were often markedly different. Thus, our average e-commerce

investor was different to the average person as well as to the control group of inves-

tors in this study.

In addition, the e-commerce investors had more positive attitudes to e-commerce

generally, and these attitudes in turn were correlated with the personality variables.More positive attitudes to e-commerce were associated with greater disinhibition,

susceptibility to boredom, experience seeking, openness and impulsivity.

The differences found were not merely of statistical significance. As Table 2 shows,

on some personality dimensions the average e-commerce investor was quite different

from the average PDL investor or the scale norms. Moreover, the discriminant func-

tion analysis showed that reasonably good prediction of who was an e-commerce in-

vestor and who a PDL investor could be obtained from knowing the individual�s age,personality scores, and attitude to e-commerce.


The personality differences found were all in the direction predicted from other

studies of how risk-taking propensities relate to personality. Thus, the study shows

that the financial risk-taking of e-commerce investors has psychological similarities

to risk-taking found in other situations. The study also demonstrates that factors

other than the merits of the investment itself can be important in investment deci-sions.

Acknowledgements

We are grateful for the cooperation of EStar Online, Eforce Ltd., and PDL Hold-

ings, and for helpful suggestions from Dean Owen and an anonymous reviewer.

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The personality of e-commerce investors

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