Entrepreneurs Facing Risk: Cognitive Biases and Conditional Choices

Publikation: Bidrag til konferencePaperForskningpeer review

Resumé

Theory conjectures that entrepreneurs are more likely than others to make risky choices. However, the empirical evidence is mixed. This paper offers new insights into entrepreneurs’ tendencies to make risky choices, by investigating the circumstances in which entrepreneurs are more/less likely to choose risk vis-à-vis certainty. Drawing on prospect theory, we formulate hypotheses about the greater likelihood that entrepreneurs (compared to others) will choose risk immediately after a positive gain, but will shy away from risk compared to others as the degree of risk increases. The hypotheses are tested using data collected in laboratory-based real money games experiments. We find support for our hypotheses, indicating that entrepreneurs’ bias towards risk is circumstantial. These results have fundamental implications for our understanding of factors guiding entrepreneurial choices under risk - not only for the entrepreneurs but also for their stakeholders.
Theory conjectures that entrepreneurs are more likely than others to make risky choices. However, the empirical evidence is mixed. This paper offers new insights into entrepreneurs’ tendencies to make risky choices, by investigating the circumstances in which entrepreneurs are more/less likely to choose risk vis-à-vis certainty. Drawing on prospect theory, we formulate hypotheses about the greater likelihood that entrepreneurs (compared to others) will choose risk immediately after a positive gain, but will shy away from risk compared to others as the degree of risk increases. The hypotheses are tested using data collected in laboratory-based real money games experiments. We find support for our hypotheses, indicating that entrepreneurs’ bias towards risk is circumstantial. These results have fundamental implications for our understanding of factors guiding entrepreneurial choices under risk - not only for the entrepreneurs but also for their stakeholders.

Konference

KonferenceThe DRUID 20th Anniversary Conference 2016
Nummer38
LokationCopenhagen Business School
LandDanmark
ByKøbenhavn
Periode13/06/201615/06/2016
AndetThe DRUID Society Conference 2016
SponsorCopenhagen Business School
Internetadresse

Emneord

  • Risk
  • Entrepreneur
  • Money games
  • Lab experiment
  • Prior gain effect
  • Risk propensity effect

Citer dette

Zichella, G., & Reichstein, T. (2016). Entrepreneurs Facing Risk: Cognitive Biases and Conditional Choices. Afhandling præsenteret på The DRUID 20th Anniversary Conference 2016, København, Danmark.
Zichella, Giulio ; Reichstein, Toke. / Entrepreneurs Facing Risk : Cognitive Biases and Conditional Choices. Afhandling præsenteret på The DRUID 20th Anniversary Conference 2016, København, Danmark.36 s.
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Zichella, G & Reichstein, T 2016, 'Entrepreneurs Facing Risk: Cognitive Biases and Conditional Choices' Paper fremlagt ved The DRUID 20th Anniversary Conference 2016, København, Danmark, 13/06/2016 - 15/06/2016, .

Entrepreneurs Facing Risk : Cognitive Biases and Conditional Choices. / Zichella, Giulio; Reichstein, Toke.

2016. Afhandling præsenteret på The DRUID 20th Anniversary Conference 2016, København, Danmark.

Publikation: Bidrag til konferencePaperForskningpeer review

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Zichella G, Reichstein T. Entrepreneurs Facing Risk: Cognitive Biases and Conditional Choices. 2016. Afhandling præsenteret på The DRUID 20th Anniversary Conference 2016, København, Danmark.