Luck and Entrepreneurial Success
University of Berne - Institute for Financial Management; PPCmetrics AG
Claudio F. Loderer
University of Berne - Institute for Financial Management; European Corporate Governance Institute (ECGI)
INSEAD - Finance
October 2, 2012
How much of entrepreneurial performance is sheer luck compared to talent, experience, education, and hard work? Since luck is difficult to measure objectively, we ask a large number of entrepreneurs. Accordingly, luck accounts for less than one third of performance variation. This self-reported assessment is affected but its magnitude cannot be explained by personal characteristics such as illusion of control. Luck, however, plays a significant role in individual management activities such as finding the appropriate business idea and choosing the right moment to enter a market. The perceived importance of luck in performance shapes actual decisions, including the entrepreneurial decision itself, the choice of financial leverage, and the choice of the industry in which to operate. What entrepreneurs believe is luck correlates with the unexplained variation in a model of entrepreneurial performance. The evidence also shows that experience, education, and hard work, the pillars of high work ethic, pay off.
Number of Pages in PDF File: 33
Keywords: luck, start-ups, entrepreneur, factors of success, performance
JEL Classification: G3, G02, M13working papers series
Date posted: November 5, 2011 ; Last revised: October 10, 2012
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