Students of Entrepreneurship: Sorting, Risk Behaviour and Implications for Entrepreneurship Programmes

Despite the wide adoption of entrepreneurship programmes by higher education institutions, little is known about how such programmes help students cultivate rationality in decision making. This is surprising, since individuals are bounded rational and prone to systematic biases in high-risk business processes, including entrepreneurship. This article suggests that entrepreneurship programmes should include curricula that furnish awareness of the cognitive mechanisms involved in biased decision making with financial risk. In support of our proposition, this article builds on data from a laboratory-based money games experiment in which students who enrol in entrepreneurship programmes are compared with students who do not in their risk behaviour. We show when, why and how students suffer from specific biases – namely, the prior gain effect and the degree-of-risk effect – that are relevant in environments characterised by high financial risk, and specifically in entrepreneurship. These insights challenge the adequacy of entrepreneurship programme curricula in addressing bounded-rational decision making, as topics such as risk and biased decision making are often overlooked. Second, we discuss possible ways to create such awareness in entrepreneurship learning and education.