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Trust, Positive Reciprocity, and Negative Reciprocity: Do These Traits Impact Entrepreneurial Dynamics?

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Author Info

  • Marco Caliendo
  • Frank M. Fossen
  • Alexander S. Kritikos

Abstract

Experimental evidence reveals that there is a strong willingness to trust and to act in both positively and negatively reciprocal ways. So far it is rarely analyzed whether these variables of social cognition influence everyday decision making behavior. We focus on entrepreneurs who are permanently facing exchange processes in the interplay with investors, sellers, and buyers, as well as needing to trust others and reciprocate with their network. We base our analysis on the German Socio-Economic Panel and recently introduced questions about trust, positive reciprocity, and negative reciprocity to examine the extent that these variables influence the entrepreneurial decision processes. More specifically, we analyze whether i) the willingness to trust other people influences the probability of starting a business; ii) trust, positive reciprocity, and negative reciprocity influence the exit probability of entrepreneurs; and iii) willingness to trust and to act reciprocally influences the probability of being an entrepreneur versus an employee or a manager. Our findings reveal that, in particular, trust impacts entrepreneurial development. Interestingly, entrepreneurs are more trustful than employees, but much less trustful than managers.

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Bibliographic Info

Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 348.

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Length: 34 p.
Date of creation: 2010
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp348

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Keywords: Entrepreneurship; trust; reciprocity;

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References

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  1. Butler, Jeffrey V. & Giuliano, Paola & Guiso, Luigi, 2009. "The Right Amount of Trust," IZA Discussion Papers 4416, Institute for the Study of Labor (IZA).
  2. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 1997. "Reciprocity as a Contract Enforcement Device: Experimental Evidence," Econometrica, Econometric Society, vol. 65(4), pages 833-860, July.
  3. Caliendo, Marco & Fossen, Frank M. & Kritikos, Alexander S., 2006. "Risk Attitudes of Nascent Entrepreneurs: New Evidence from an Experimentally Validated Survey," Discussion Papers 252, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
  4. Ernst Fehr & Urs Fischbacher & Bernhard von Rosenbladt & Jürgen Schupp & Gert G. Wagner, 2002. "A Nation-Wide Laboratory: Examining Trust and Trustworthiness by Integrating Behavioral Experiments into Representative Surveys," Discussion Papers of DIW Berlin 319, DIW Berlin, German Institute for Economic Research.
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  8. Blanchflower, David G & Oswald, Andrew J, 1998. "What Makes an Entrepreneur?," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 26-60, January.
  9. Marco Caliendo & Frank Fossen & Alexander S. Kritikos, 2008. "The Impact of Risk Attitudes on Entrepreneurial Survival," Working Papers 012, Hanseatic University, Germany, Department of Economics.
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  11. Kritikos, Alexander & Bolle, Friedel, 2001. "Distributional concerns: equity- or efficiency-oriented?," Economics Letters, Elsevier, vol. 73(3), pages 333-338, December.
  12. Marco Caliendo & Alexander S. Kritikos, 2007. "Is Entrepreneurial Success Predictable?: An Ex-ante Analysis of the Character-Based Approach," Discussion Papers of DIW Berlin 684, DIW Berlin, German Institute for Economic Research.
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  14. Dohmen, Thomas J. & Falk, Armin & Huffman, David & Sunde, Uwe, 2008. "Representative trust and reciprocity: Prevalence and determinants," Munich Reprints in Economics 20057, University of Munich, Department of Economics.
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  19. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP): Scope, Evolution and Enhancements," SOEPpapers on Multidisciplinary Panel Data Research 1, DIW Berlin, The German Socio-Economic Panel (SOEP).
  20. Altmann, Steffen & Dohmen, Thomas & Wibral, Matthias, 2008. "Do the reciprocal trust less?," Economics Letters, Elsevier, vol. 99(3), pages 454-457, June.
  21. Friedel Bolle, 1998. "Rewarding Trust: An Experimental Study," Theory and Decision, Springer, vol. 45(1), pages 83-98, August.
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Citations

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Cited by:
  1. Caliendo, Marco & Fossen, Frank M. & Kritikos, Alexander S., 2011. "Personality characteristics and the decision to become and stay self-employed," Discussion Papers 2011/9, Free University Berlin, School of Business & Economics.
  2. Marco Caliendo & Frank Fossen & Alexander Kritikos & Miriam Wetter, 2014. "The Gender Gap in Entrepreneurship: Not Just a Matter of Personality," CESifo Working Paper Series 4803, CESifo Group Munich.
  3. Fritsch, Michael & Kritikos, Alexander S. & Pijnenburg, Katharina, 2013. "Business Cycles, Unemployment and Entrepreneurial Entry: Evidence from Germany," IZA Discussion Papers 7852, Institute for the Study of Labor (IZA).
  4. Caliendo, Marco & Kritikos, Alexander S., 2011. "Searching for the Entrepreneurial Personality: New Evidence and Avenues for Further Research," IZA Discussion Papers 5790, Institute for the Study of Labor (IZA).

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