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Risk, Balanced Skills and Entrepreneurship

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  • Chihmao Hsieh

    (University of Amsterdam)

  • Simon C. Parker

    (University of Western Ontario)

  • C. Mirjam van Praag

    (University of Amsterdam)

Abstract

This paper proposes that risk aversion encourages individuals to invest in balancedskill profiles, making them more likely to become entrepreneurs. By not havingtaken this possible linkage into account, previous research has underestimated the impactsboth of risk aversion and balanced skills on the likelihood individuals chooseentrepreneurship. Data on Dutch university graduates provides evidence which supportsthis contention. It thereby raises the possibility that even risk-averse peoplemight be suited to entrepreneurship; and it may also help explain why prior researchhas generated mixed evidence about the effects of risk aversion on selection into entrepreneurship.

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File URL: http://papers.tinbergen.nl/11178.pdf
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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 11-178/3.

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Date of creation: 19 Dec 2011
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Handle: RePEc:dgr:uvatin:20110178

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Web page: http://www.tinbergen.nl

Related research

Keywords: entrepreneurship; jack-of-all-trades; risk; human capital; occupational choice;

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References

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  1. Ramana Nanda & Jesper B. Sørensen, 2010. "Workplace Peers and Entrepreneurship," Management Science, INFORMS, vol. 56(7), pages 1116-1126, July.
  2. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-48, August.
  3. Silva, Olmo, 2006. "The Jack-of-All-Trades Entrepreneur: Innate Talent or Acquired Skill?," IZA Discussion Papers 2264, Institute for the Study of Labor (IZA).
  4. Thomas Hellmann, 2007. "When Do Employees Become Entrepreneurs?," Management Science, INFORMS, vol. 53(6), pages 919-933, June.
  5. Joop Hartog & Mirjam van Praag & Justin van der Sluis, 2008. "If you are so smart, why aren't you an entrepreneur? Returns to cognitive and social ability: Entrepreneurs versus employees," Jena Economic Research Papers 2008-084, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  6. Dolton, Peter J & Makepeace, G H, 1990. "Self Employment among Graduates," Bulletin of Economic Research, Wiley Blackwell, vol. 42(1), pages 35-53, January.
  7. Thomas Astebro & Peter Thompson, 2007. "Entrepreneurs: Jacks of all Trades or Hobos?," Working Papers 0705, Florida International University, Department of Economics.
  8. Brown, Sarah & Dietrich, Michael & Ortiz-Nuñez, Aurora & Taylor, Karl, 2011. "Self-employment and attitudes towards risk: Timing and unobserved heterogeneity," Journal of Economic Psychology, Elsevier, vol. 32(3), pages 425-433, June.
  9. Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
  10. Dohmen, Thomas J. & Falk, Armin & Huffman, David & Sunde, Uwe, 2012. "The intergenerational transmission of risk and trust attitudes," Munich Reprints in Economics 20051, University of Munich, Department of Economics.
  11. Cramer, J. S. & Hartog, J. & Jonker, N. & Van Praag, C. M., 2002. "Low risk aversion encourages the choice for entrepreneurship: an empirical test of a truism," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 29-36, May.
  12. Parker, Simon C., 2008. "Entrepreneurship among married couples in the United States: A simultaneous probit approach," Labour Economics, Elsevier, vol. 15(3), pages 459-481, June.
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