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Risk as a Threat, Risk as a Missing Opportunity, the Owner Finance and Entrepreneurship

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  • Fourati Hedia

    (Is a doctor in finance at Faculty of Economics and Management, University of Sfax Tunisia, Sfax, Tunisia)

  • Affes Habib

    (Assistant professor and director of accounting department at the Faculty of Economics and Management, University of Sfax Tunisia, Sfax, Tunisia)

Abstract

The purpose of this paper is to investigate the extent to which the attitude toward the risk predicts a new venture creation. Using a sample of 1,214 novice entrepreneur and a multidimensional scale of the entrepreneurial risk perception, we study if the perception of the personal and the financial risk of failure and the global risk as a missing opportunity may predict decision making. More precisely, we expect that the entrepreneurs playing with other people’s money or their external debts (vs. their own or personal saving) will be high-risk taking (low-risk taking). Thus, they are more likely to choose new venture opportunity and they downplay potential loss financially and personally (focus more on potential loss financially and personally). Our empirical investigation reveals three dimensions of risk attitude regarding the multidimensional risk perception and the source of funding. We also found that the source of new venture funding ‘the entrepreneur’s own money’ versus that of the investors influenced our subjects attitude toward risk. Perhaps, the “house money effect” was not convenient for some entrepreneur in spite of the risk as an opportunity and the external funds, the entrepreneur didn’t create a new venture. We explain this result by the similarity in the manager and the entrepreneur’s decisions, as they would sometimes choose to be pioneering risk takers; even though the funds they would risk are typically not their own.

Suggested Citation

  • Fourati Hedia & Affes Habib, 2014. "Risk as a Threat, Risk as a Missing Opportunity, the Owner Finance and Entrepreneurship," Entrepreneurship Research Journal, De Gruyter, vol. 4(4), pages 1-15, October.
  • Handle: RePEc:bpj:erjour:v:4:y:2014:i:4:p:15:n:2
    DOI: 10.1515/erj-2013-0069
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    References listed on IDEAS

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    1. Reynolds, Paul D. & Curtin, Richard T., 2008. "Business Creation in the United States: Panel Study of Entrepreneurial Dynamics II Initial Assessment," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 4(3), pages 155-307, January.
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    5. Hean Tat Keh & Maw Der Foo & Boon Chong Lim, 2002. "Opportunity Evaluation under Risky Conditions: The Cognitive Processes of Entrepreneurs," Entrepreneurship Theory and Practice, , vol. 27(2), pages 125-148, April.
    6. Simon, Mark & Houghton, Susan M. & Aquino, Karl, 2000. "Cognitive biases, risk perception, and venture formation: How individuals decide to start companies," Journal of Business Venturing, Elsevier, vol. 15(2), pages 113-134, March.
    7. Gideon D. Markman & David B. Balkin & Robert A. Baron, 2002. "Inventors and New Venture Formation: the Effects of General Self–Efficacy and Regretful Thinking," Entrepreneurship Theory and Practice, , vol. 27(2), pages 149-165, April.
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    Cited by:

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