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Perceptions, Expectations, and Entrepreneurship: The Role of Extreme Events

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Author Info

  • Tilman Brück
  • Fernanda Llussá
  • José Tavares

Abstract

We provide, for the first time, comparative evidence of the impact of various types of extreme events - natural disasters, terrorism, and violent conflicts - on the perceptions of entrepreneurs concerning some key entrepreneurial issues - such as fear of failure in starting a business venture, whether individuals expect that good opportunities are likely to emerge in the next six months, and the expected level of competition stemming from creating new ventures. The occurrence of extreme events is likely to be exogenous to the perceptions affecting it so that we can identify a causal link from events to entrepreneurs and their perceptions. Using individual-level data from 43 countries from the period 2002 to 2005, we find that neither indicator of the intensity of extreme events has a significant impact on entrepreneurial activity, when country characteristics are not controlled for. Once invariant country characteristics are taken into account, we find that Terrorist Attacks have a positive and significant impact on business creation, Natural Disasters have a positive and negative impact on entrepreneurial activity, and Violent Conflict has no significant effect. These results are consistent with differential impacts of extreme events on perception variables such as Fear of Failure, Expected Business Opportunities, and Expected Level of Competition. Our results suggest that extreme events, while costly at the aggregate level, may induce a positive response in terms of entrepreneurial activity in specific circumstances. There is hence scope for entrepreneurs, and policies supporting them, to create growth from the ruins of extreme events.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.369420.de/diw_econsec0041.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Economics of Security Working Paper Series with number 41.

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Length: 18 p.
Date of creation: 2010
Date of revision:
Handle: RePEc:diw:diweos:diweos41

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  1. Cagatay Bircan & Tilman Brück & Marc Vothknecht, 2010. "Violent conflict and inequality," Brooks World Poverty Institute Working Paper Series 12910, BWPI, The University of Manchester.
  2. John Bennett & Saul Estrin, 2007. "Informality as a Stepping Stone: Entrepreneurial Entry in a Developing Economy," CEDI Discussion Paper Series 07-11, Centre for Economic Development and Institutions(CEDI), Brunel University.
  3. Rachida Justo & Cristina Cruz & Julio Orlando De Castro & Alicia Coduras, 2006. "Entrepreneurs´ perceptions of success: examining differences across gender and family status," Working Papers Economia wp06-07, Instituto de Empresa, Area of Economic Environment.
  4. Bozzoli, Carlos & Brück, Tilman & Muhumuza, Tony, 2011. "Does war influence individual expectations?," Economics Letters, Elsevier, vol. 113(3), pages 288-291.
  5. Carlos Bozzoli & Tilman Bruck & Simon Sottsas, 2010. "A Survey Of The Global Economic Costs Of Conflict," Defence and Peace Economics, Taylor and Francis Journals, vol. 21(2), pages 165-176.
  6. M. Voorst & E. Nillesen & Philip Verwimp & E. Bulte & Robert Lensink & D. van Soest, 2010. "Does conflict affect preferences? Results from field experiments in Burundi," Working Papers ECARES 2010_006, ULB -- Universite Libre de Bruxelles.
  7. Carlos Bozzoli & Tilman Brück & Nina Wald, 2011. "Self-Employment and Conflict in Colombia," Discussion Papers of DIW Berlin 1098, DIW Berlin, German Institute for Economic Research.
  8. Llussá, Fernanda & Tavares, José, 2007. "Economics and Terrorism: What We Know, What We Should Know and the Data We Need," CEPR Discussion Papers 6509, C.E.P.R. Discussion Papers.
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Cited by:
  1. Michael Brzoska & Raphael Bossong & Eric van Um, 2011. "Security Economics in the European Context: Implications of the EUSECON Project," Economics of Security Working Paper Series 58, DIW Berlin, German Institute for Economic Research.

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