Does Self-Efficacy Affect Entrepreneurial Investment?

59 Pages Posted: 17 May 2009

See all articles by Gavin Cassar

Gavin Cassar

INSEAD

Henry L. Friedman

University of California, Los Angeles (UCLA) - Accounting Area

Multiple version iconThere are 2 versions of this paper

Date Written: May, 15 2009

Abstract

We empirically examine the effect of self-efficacy on entrepreneurial investment choices. We identify various attributes of entrepreneurial investment, and argue that higher self-efficacy is associated with more aggressive entrepreneurial investment decisions. We show that self-efficacy increases the likelihood of both being a nascent entrepreneur and creating an operating business. Self-efficacy also increases the proportion of personal wealth invested in the venture and the amount of hours per week the entrepreneur devotes to the venture. These results are significant even when controlling for other known characteristics associated with entrepreneurial investment. In contrast, we find no relationship between self-efficacy, or even risk preferences, and investment risk.

Keywords: entrepreneur, investment, risk preferences, self-efficacy, venturing

JEL Classification: D81, J20, J23, J24, M13, L20

Suggested Citation

Cassar, Gavin and Friedman, Henry L., Does Self-Efficacy Affect Entrepreneurial Investment? (May, 15 2009). Available at SSRN: https://ssrn.com/abstract=1405426 or http://dx.doi.org/10.2139/ssrn.1405426

Gavin Cassar (Contact Author)

INSEAD ( email )

Boulevard de Constance
Fontainebleau, 77305
France

HOME PAGE: http://https://www.insead.edu/faculty-research/faculty/gavin-cassar

Henry L. Friedman

University of California, Los Angeles (UCLA) - Accounting Area ( email )

D416 Anderson Complex
Los Angeles, CA 90095-1481
United States

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