The Relationship between Dispositional Optimism and Business Recovery during the COVID-19 Pandemic
24 Pages Posted: 22 Nov 2020 Last revised: 28 Nov 2020
Date Written: November 19, 2020
The spread of COVID-19 creates unprecedented challenges for the business sector. What affects the ability of entrepreneurs to face these challenges? In this paper, we study how dispositional optimism shaped entrepreneurs’ actions and beliefs during the first wave of the COVID-19 outbreak. Survey evidence from 1,632 UK firms shows that entrepreneurs who score high on dispositional optimism were more likely to innovate and make organizational changes to their firms. This finding is robust to controlling for differences in business revenues during COVID-19 and for a large set of firm- and individual-level controls. Next, our data show that optimistic entrepreneurs hold more positive expectations about their ability to withstand the COVID-19 shock, and expect a more generous rebound for the whole UK economy. Expanding to the entrepreneurship setting a large literature on personality and individual health, our study suggests that dispositional optimism helps explain which firms will prosper and which others will struggle in the wake of the COVID-19 pandemic.
Keywords: Dispositional Optimism, Entrepreneurship, COVID-19, Expectations
JEL Classification: L25, L26
Suggested Citation: Suggested Citation