Luck and Entrepreneurial Success

62 Pages Posted: 8 Aug 2014

See all articles by Diego Liechti

Diego Liechti

University of Berne - Institute for Financial Management

Claudio F. Loderer

University of Berne - Institute for Financial Management; European Corporate Governance Institute (ECGI)

Urs Peyer

INSEAD - Finance

Multiple version iconThere are 2 versions of this paper

Date Written: August 6, 2014

Abstract

How much of entrepreneurial performance is sheer luck compared to talent, experience, education, and hard work? We define luck as unexpected performance and look for an answer in a large survey of entrepreneurs. Accordingly, luck ranks last in importance among various success factors and accounts for less than one third of performance variation. This ranking is unaffected by past performance and many personality traits, including self-attribution and illusion of control. Luck matters, however, in activities such as finding the appropriate business idea or choosing the right moment to enter a market. More important, luck perceptions shape decisions. For example, individuals who believe luck is important are reluctant to become entrepreneurs. Consistent with the definition, what entrepreneurs believe is luck correlates with the unexplained variation in a standard econometric model of performance. Estimates of that model also show that hard work does affect performance. So do talent, education, and, especially, experience.

Keywords: luck, start-ups, entrepreneur, factors of success, performance

JEL Classification: G3, G02, M13

Suggested Citation

Liechti, Diego and Loderer, Claudio F. and Peyer, Urs C., Luck and Entrepreneurial Success (August 6, 2014). Swiss Finance Institute Research Paper No. 14-51. Available at SSRN: https://ssrn.com/abstract=2476839 or http://dx.doi.org/10.2139/ssrn.2476839

Diego Liechti

University of Berne - Institute for Financial Management ( email )

Engehaldenstrasse 4
Bern, CH-3012
Switzerland

HOME PAGE: http://www.ifm.unibe.ch

Claudio F. Loderer (Contact Author)

University of Berne - Institute for Financial Management ( email )

Engehaldenstrasse 4
Bern, CH-3012
Switzerland
+41 31 631 37 75 (Phone)
+41 31 631 84 21 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Urs C. Peyer

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4178 (Phone)
+33 1 6072 4045 (Fax)

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