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Entrepreneurial Optimism and Creative Destruction

Author

Listed:
  • Persson, Lars

    (Research Institute of Industrial Economics (IFN))

  • Seiler, Thomas

    (Stockholm School of Economics)

Abstract

We provide empirical evidence that uncertainty (rather than risk) and optimism are distinctive characteristics of high-impact entrepreneurial firms (recently listed firms) relative to old, incumbent firms. Based on this evidence, we construct an entrepreneurial entry predation model with uncertainty. We show that entrepreneurial optimism can mitigate problems associated with strong incumbents' attempts to protect markets using predatory threats. Entrepreneurial optimism can also create a strategic advantage for entrepreneurs since incumbents may react by being less aggressive in product market interactions, which will benefit not only the profitability of the entrepreneur's venture but also consumers via lower prices

Suggested Citation

  • Persson, Lars & Seiler, Thomas, 2018. "Entrepreneurial Optimism and Creative Destruction," Working Paper Series 1218, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:1218
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    Cited by:

    1. Péter Bayer & Ani Guerdjikova, 2020. "Optimism leads to optimality: Ambiguity in network formation," Working Papers hal-03005107, HAL.

    More about this item

    Keywords

    Uncertainty; Optimism; Entrepreneurial firms; Predation; Positive externalities; Automatic textual analysis;
    All these keywords.

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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