Risk Attitudes of Nascent Entrepreneurs: New Evidence from an Experimentally-Validated Survey

23 Pages Posted: 26 Jun 2006

See all articles by Marco Caliendo

Marco Caliendo

University of Potsdam; Institute for the Study of Labor (IZA)

Frank M. Fossen

University of Nevada, Reno; IZA Institute of Labor Economics

Alexander Kritikos

Europa-Universitaet Viadrina - Fakultat fur Wirtschaftswissenschaften; German Institute for Economic Research (DIW Berlin); IZA Institute of Labor Economics

Date Written: June 2006

Abstract

The influence of risk aversion on the decision to become self-employed is a much discussed topic in the entrepreneurial literature. Conventional wisdom asserts that the role model of an entrepreneur requires to make risky decisions in uncertain environments and hence that more risk-averse individuals are less likely to become an entrepreneur. Empirical tests of this assumption are scarce however, mainly because reliable measures for risk-aversion are not available. We base our analysis on the most recent waves of the German Socio-Economic Panel (SOEP) which allow us to use experimentally-validated measures of risk attitudes. Most importantly and in contrast to previous research, we are able to examine whether the decision of starting a business is influenced by objectively measurable risk attitudes at the time when this decision is made. Our results show that in general individuals with lower risk aversion are more likely to become self-employed. Sensitivity analysis reveals, however, that this is true only for people coming out of regular employment, whereas for individuals coming out of unemployment or inactivity risk attitudes do not seem to play a role in the decision process.

Keywords: risk attitudes, entrepreneurship, self-employment

JEL Classification: D81, J23, M13

Suggested Citation

Caliendo, Marco and Fossen, Frank M. and Kritikos, Alexander S., Risk Attitudes of Nascent Entrepreneurs: New Evidence from an Experimentally-Validated Survey (June 2006). IZA Discussion Paper No. 2168. Available at SSRN: https://ssrn.com/abstract=912217

Marco Caliendo (Contact Author)

University of Potsdam ( email )

August-Bebel Strasse 89
Potsdam, 14482
Germany
+49(0)331/9773225 (Phone)
+49(0)331/9773210 (Fax)

HOME PAGE: http://www.uni-potsdam.de/en/empwifo/news.html

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Frank M. Fossen

University of Nevada, Reno ( email )

1664 N. Virginia Street
Reno, NV 89557-0030
United States

HOME PAGE: http://business.unr.edu/faculty/ffossen/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=2906

Alexander S. Kritikos

Europa-Universitaet Viadrina - Fakultat fur Wirtschaftswissenschaften ( email )

15230 Frankfurt (Oder)
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
156
Abstract Views
1,148
rank
204,823
PlumX Metrics