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Cognitive Biases, Risk Perception, and Individual's Decision to Start a New Venture

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  • Salma Zaiane

    (Faculty of Economics and Management Sciences of Tunis, Tunis, Tunisia)

  • Fatma Ben Moussa

    (Faculty of Economics and Management Sciences of Tunis, Tunis, Tunisia)

Abstract

The purpose of this article is to investigate the relationship of overconfidence and illusion of control towards the start of new venture, taking in consideration the mediating role of risk perception in the context of Tunisia. This article examines students' responses to surveys based on a teaching case titled “Optical Distortion, Inc.” The authors tested hypotheses by correlation and regression analysis. The results show that the perception towards risk associated with new venture plays an important role in decision-making. Moreover, they find that overconfidence and illusion of control reduce risk perception associated to the decision to start a venture. While overconfidence directly affects the decision to start a venture and indirectly through its effect on reducing the risk perception, illusion of control has neither a direct nor an indirect impact on that. These results partially confirm those of Simon show that the mediation exists but partially.

Suggested Citation

  • Salma Zaiane & Fatma Ben Moussa, 2018. "Cognitive Biases, Risk Perception, and Individual's Decision to Start a New Venture," International Journal of Service Science, Management, Engineering, and Technology (IJSSMET), IGI Global, vol. 9(3), pages 14-29, July.
    • Handle: RePEc:igg:jssmet:v:9:y:2018:i:3:p:14-29
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    Cited by:

    1. Cucchiarini, Veronica & Scicchitano, Sergio & Viale, Riccardo, 2024. "The Entrepreneur's Cognitive and Behavioral Journey: Understanding Heuristics and Bias under Risk and Uncertainty," GLO Discussion Paper Series 1390, Global Labor Organization (GLO).
    2. Nishwa Iqbal Dar & Syed Zulfiqar Ali Shah & Zeeshan Ahmed, 2021. "Behavioral Cost of Managerial Decisions Under Risk Perception and Culture: A Comparative Study Between the United States and Pakistan," SAGE Open, , vol. 11(3), pages 21582440211, July.
    3. Antoine Trad, 2021. "The Business Transformation Framework and Enterprise Architecture Framework for Managers in Business Innovation: An Applied Holistic Mathematical Model," International Journal of Service Science, Management, Engineering, and Technology (IJSSMET), IGI Global, vol. 12(1), pages 142-181, January.

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