Seeking the Roots of Entrepreneurship: Insights from Behavioral Economics

22 Pages Posted: 26 Jul 2015 Last revised: 12 Sep 2015

See all articles by Thomas B. Astebro

Thomas B. Astebro

HEC Paris - Economics and Decision Sciences

Holger Herz

University of Fribourg - Department of Economics

Ramana Nanda

Harvard University - Entrepreneurial Management Unit

Roberto A. Weber

University of Zurich - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: May 28, 2014

Abstract

In this article, we critically evaluate what the existing research shows regarding the individual determinants of entrepreneurship. We begin by documenting a set of facts that seem to pose a challenge for interpretations of entrepreneurship based on the standard expected utility framework. Drawing on research in behavioral economics we then review three sets of possible interpretations — risk aversion, overconfidence, and non-pecuniary, taste-based factors — for understanding the empirical facts related to the entry into, and persistence in entrepreneurship. The central thesis of this article is that while all these candidate explanations have merit and can account for some aspects of the facts above, there is little evidence of a “smoking gun” that can completely account for all the puzzling patterns we observe.

Keywords: entrepreneurship, risk aversion, overconfidence, taste

JEL Classification: L26

Suggested Citation

Astebro, Thomas B. and Herz, Holger and Nanda, Ramana and Weber, Roberto A., Seeking the Roots of Entrepreneurship: Insights from Behavioral Economics (May 28, 2014). HEC Paris Research Paper No. SPE-2015-1101. Available at SSRN: https://ssrn.com/abstract=2635874 or http://dx.doi.org/10.2139/ssrn.2635874

Thomas B. Astebro (Contact Author)

HEC Paris - Economics and Decision Sciences ( email )

Jouy-en-Josas Cedex, 78351
France

HOME PAGE: http://www.hec.edu/Faculty-Research/Faculty-Directory/ASTEBRO-Thomas

Holger Herz

University of Fribourg - Department of Economics ( email )

Fribourg
Switzerland

Ramana Nanda

Harvard University - Entrepreneurial Management Unit ( email )

Boston, MA 02163
United States

HOME PAGE: http://www.people.hbs.edu/rnanda

Roberto A. Weber

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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