Where is the Risk? Availability, Anchoring, and Framing Effects on Entrepreneurial Risk Taking
Frontiers of Entrepreneurship Research 2007
15 Pages Posted: 6 Dec 2007
Although research has emphasized cognition and the use of heuristics and biases by entrepreneurs, the process by which available information influences one's decision to start a business has yet to be clarified. In this study, we test a model where changes in the available information concerning a new venture impact the perceived risk associated with this venture - ultimately affecting the decision to start it. In our model, two important heuristics influence risk perception and bias decision making: availability and anchoring. Moreover, we suggest that these heuristics have opposite effects, depending on whether the available information is framed in positive or negative terms. Results reveal how different combinations of judgmental heuristics and problem framing may stimulate or inhibit entrepreneurial behavior.
JEL Classification: M13
Suggested Citation: Suggested Citation