Entry into Entrepreneurship, Endogenous Adaption of Risk Attitudes and Entrepreneurial Survival

30 Pages Posted: 25 Nov 2014

See all articles by Matthias Brachert

Matthias Brachert

Halle Institute for Economic Research

Walter Hyll

Halle Institute for Economic Research

Mirko Titze

Halle Institute for Economic Research

Date Written: November 2014

Abstract

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

Brachert, Matthias and Hyll, Walter and Titze, Mirko, Entry into Entrepreneurship, Endogenous Adaption of Risk Attitudes and Entrepreneurial Survival (November 2014). SOEPpaper No. 701. Available at SSRN: https://ssrn.com/abstract=2529982 or http://dx.doi.org/10.2139/ssrn.2529982

Matthias Brachert (Contact Author)

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

Walter Hyll

Halle Institute for Economic Research ( email )

Kleine Maerkerstrasse 8

Mirko Titze

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

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