Entry into Entrepreneurship, Endogenous Adaption of Risk Attitudes and Entrepreneurial Survival
30 Pages Posted: 25 Nov 2014
Date Written: November 2014
Empirical studies use the assumption of stability in individual risk attitudes when searching for a relationship between attitude to risk and the decision to become and survive as an entrepreneur. We show that risk attitudes do not remain stable but face endogenous adaption when starting a new business. This adaption is associated with entrepreneurial survival. The results show that entrepreneurs with low risk tolerance before entering self-employment and increased risk tolerance when self-employed have a higher probability of survival than similar entrepreneurs experiencing a decrease in the willingness to take risks. We find the opposite results for entrepreneurs who express a higher willingness to take risks before becoming self-employed: in this case, a decrease in tolerance of risk is correlated with an increasing survival probability.
Keywords: Endogenous attitudes, Risk attitudes, Entrepreneurial survival, SOEP
JEL Classification: D03, D81, M13
Suggested Citation: Suggested Citation