Entrepreneurial Optimism and Survival

Abstract

This paper uses entrepreneurs’ survival expectations around the time of market entry and subsequent venture exits to study entrepreneurial optimism. Using data on a large number of nascent entrepreneurs in the US and start-ups in Finland, we find that new entrepreneurs survival beliefs are on average optimistic but heterogeneous: Some are excessively optimistic, whereas a small subset holds unbiased beliefs. Entrepreneurial optimism is increasing in the relative (interpersonal) optimism and decreasing in entrepreneurs level of education and industry experience in both countries. At least in Finland, those holding optimistic views are more likely to transit into entrepreneurship.

Keywords: entrepreneurship, survival, optimism, overestimation

JEL Classification: D21, L20