The Impact of Risk Attitudes on Entrepreneurial Survival
University of Potsdam; Institute for the Study of Labor (IZA)
Frank M. Fossen
Free University of Berlin (FUB) - Department of Business and Economics; German Institute for Economic Research (DIW Berlin); Institute for the Study of Labor (IZA)
Europa-Universitaet Viadrina - Fakultat fur Wirtschaftswissenschaften; German Institute for Economic Research (DIW Berlin); Institute for the Study of Labor (IZA)
IZA Discussion Paper No. 3525
Risk attitudes have an impact on not only the decision to become an entrepreneur but also the survival and failure rates of entrepreneurs. Whereas recent research underpins the theoretical proposition of a positive correlation between risk attitudes and the decision to become an entrepreneur, the effects on survival are not as straightforward. Psychological research posits an inverse U-shaped relationship between risk attitudes and entrepreneurial survival. On the basis of recent waves of the German Socio-Economic Panel (SOEP), we examine the extent to which risk attitudes influence survival rates of entrepreneurs. The empirical results confirm that persons whose risk attitudes are in the medium range survive significantly longer as entrepreneurs than do persons with particularly low or high risks.
Number of Pages in PDF File: 24
Keywords: entrepreneurship, risk attitudes, survival and failure
JEL Classification: D81, J23, M13working papers series
Date posted: June 9, 2008
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