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The Influence of Entrepreneurial Risk Assessment on Venture Launch or Growth Decisions

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  • William Norton

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  • William Moore

    ()

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    Abstract

    Entrepreneurs are thought to engage in riskier behavior than nonentrepreneurs, yet little empirical evidence supports that intuitively appealing notion. We argue instead that differences in information, not risk aversion, may explain the decision to launch or grow a venture. We separately test risk taking propensity and risk assessment. We hypothesize that entrepreneurs will not differ from nonentrepreneurs on risk taking propensity. Additionally, we propose and test a model of risk assessment. The sample size for this exploratory study is n=53 with 30 respondents declaring themselves as entrepreneurs and 23 declaring themselves as nonentrepreneurs. The study’s design is a simulation. Each respondent is provided with data on a potential acquisition that would result in either the launch of a new venture or significant growth for an existing firm. Consistent with the hypotheses, the results show no difference between entrepreneurs and nonentrepreneurs on the risk taking measure. We also find that we can predict entrepreneurial behavior based on risk assessment. We close with a discussion of limitations and directions for future research. Copyright Springer 2006

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    File URL: http://hdl.handle.net/10.1007/s11187-004-5612-y
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    Bibliographic Info

    Article provided by Springer in its journal Small Business Economics.

    Volume (Year): 26 (2006)
    Issue (Month): 3 (04)
    Pages: 215-226

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    Handle: RePEc:kap:sbusec:v:26:y:2006:i:3:p:215-226

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    Web page: http://www.springerlink.com/link.asp?id=100338

    Related research

    Keywords: entrepreneurship; launch or growth decisions; risk assessment; risk taking propensity; M13;

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    References

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    1. Norton, William I, Jr & Moore, William T, 2002. " Entrepreneurial Risk: Have We Been Asking the Wrong Question?," Small Business Economics, Springer, vol. 18(4), pages 281-87, June.
    2. Smith, Ken G. & Gannon, Martin J. & Grimm, Curtis & Mitchell, Terence R., 1988. "Decision making behavior in smaller entrepreneurial and larger professionally managed firms," Journal of Business Venturing, Elsevier, vol. 3(3), pages 223-232.
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    Citations

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    Cited by:
    1. Caliendo, Marco & Fossen, Frank M. & Kritikos, Alexander S., 2008. "The Impact of Risk Attitudes on Entrepreneurial Survival," IZA Discussion Papers 3525, Institute for the Study of Labor (IZA).
    2. Enrico Santarelli & Hien Tran, 2013. "The interplay of human and social capital in shaping entrepreneurial performance: the case of Vietnam," Small Business Economics, Springer, vol. 40(2), pages 435-458, February.
    3. Alessandro Arrighetti & Luca Caricati & Fabio Landini & Nadia Monacelli, 2013. "Explaining entrepreneurial orientation among university students: Evidence from italy," Working Papers 1301, c.MET-05 - Centro interuniversitario di Economia Applicata alle Politiche per L'industria, lo Sviluppo locale e l'Internazionalizzazione.
    4. Pei-Chou Lin & Deng-Shing Huang, 2008. "Technological Regimes and Firm Survival: Evidence Across Sectors and Over Time," Small Business Economics, Springer, vol. 30(2), pages 175-186, February.
    5. Enrico Santarelli & Marco Vivarelli, 2007. "Entrepreneurship and the process of firms’ entry, survival and growth," Industrial and Corporate Change, Oxford University Press, vol. 16(3), pages 455-488, June.
    6. van Praag, Mirjam & Versloot, Peter H., 2007. "What Is the Value of Entrepreneurship? A Review of Recent Research," IZA Discussion Papers 3014, Institute for the Study of Labor (IZA).
    7. Pei-Chou Lin & Deng-Shing Huang, 2006. "Technological Regimes and Firm Survival: Evidence across Sectors and over Time," IEAS Working Paper : academic research 06-A012, Institute of Economics, Academia Sinica, Taipei, Taiwan.
    8. Block, Joern & Sandner, Philipp & Spiegel, Frank, 2009. "Do risk attitudes differ within the group of entrepreneurs?," MPRA Paper 17587, University Library of Munich, Germany.
    9. repec:dgr:uvatin:2009070 is not listed on IDEAS
    10. Melissa Baucus & William Norton & David Baucus & Sherrie Human, 2008. "Fostering Creativity and Innovation without Encouraging Unethical Behavior," Journal of Business Ethics, Springer, vol. 81(1), pages 97-115, August.
    11. Terrence Sebora & Sang Lee & Nittana Sukasame, 2009. "Critical success factors for e-commerce entrepreneurship: an empirical study of Thailand," Small Business Economics, Springer, vol. 32(3), pages 303-316, March.
    12. Heinrichs, Simon & Walter, Sascha, 2013. "Who Becomes an Entrepreneur? A 30-Years-Review of Individual-Level Research and an Agenda for Future Research," EconStor Preprints 68590, ZBW - German National Library of Economics.

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