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The Influence of Entrepreneurial Risk Assessment on Venture Launch or Growth Decisions

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  • William Norton

    ()

  • William Moore

    ()

Abstract

Entrepreneurs are thought to engage in riskier behavior than nonentrepreneurs, yet little empirical evidence supports that intuitively appealing notion. We argue instead that differences in information, not risk aversion, may explain the decision to launch or grow a venture. We separately test risk taking propensity and risk assessment. We hypothesize that entrepreneurs will not differ from nonentrepreneurs on risk taking propensity. Additionally, we propose and test a model of risk assessment. The sample size for this exploratory study is n=53 with 30 respondents declaring themselves as entrepreneurs and 23 declaring themselves as nonentrepreneurs. The study’s design is a simulation. Each respondent is provided with data on a potential acquisition that would result in either the launch of a new venture or significant growth for an existing firm. Consistent with the hypotheses, the results show no difference between entrepreneurs and nonentrepreneurs on the risk taking measure. We also find that we can predict entrepreneurial behavior based on risk assessment. We close with a discussion of limitations and directions for future research. Copyright Springer 2006

Suggested Citation

  • William Norton & William Moore, 2006. "The Influence of Entrepreneurial Risk Assessment on Venture Launch or Growth Decisions," Small Business Economics, Springer, vol. 26(3), pages 215-226, April.
  • Handle: RePEc:kap:sbusec:v:26:y:2006:i:3:p:215-226
    DOI: 10.1007/s11187-004-5612-y
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    References listed on IDEAS

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    1. Smith, Ken G. & Gannon, Martin J. & Grimm, Curtis & Mitchell, Terence R., 1988. "Decision making behavior in smaller entrepreneurial and larger professionally managed firms," Journal of Business Venturing, Elsevier, vol. 3(3), pages 223-232.
    2. Norton, William I, Jr & Moore, William T, 2002. "Entrepreneurial Risk: Have We Been Asking the Wrong Question?," Small Business Economics, Springer, vol. 18(4), pages 281-287, June.
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    Citations

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    Cited by:

    1. Maria Claudia Angel Ferrero & Véronique Bessière, 2016. "From Lab to Venture: Cognitive Factors Influencing Researchers' Decision to Start a Venture," Journal of Enterprising Culture (JEC), World Scientific Publishing Co. Pte. Ltd., vol. 24(02), pages 101-131, June.
    2. Peter van der Zwan & Ingrid Verheul & Roy Thurik & Isabel Grilo, 2009. "Entrepreneurial Progress: Climbing the Entrepreneurial Ladder in Europe and the US," Tinbergen Institute Discussion Papers 09-070/3, Tinbergen Institute, revised 17 Mar 2010.
    3. C. Praag & Peter Versloot, 2007. "What is the value of entrepreneurship? A review of recent research," Small Business Economics, Springer, vol. 29(4), pages 351-382, December.
    4. Enrico Santarelli & Marco Vivarelli, 2007. "Entrepreneurship and the process of firms’ entry, survival and growth," Industrial and Corporate Change, Oxford University Press, vol. 16(3), pages 455-488, June.
    5. Pei-Chou Lin & Deng-Shing Huang, 2008. "Technological Regimes and Firm Survival: Evidence Across Sectors and Over Time," Small Business Economics, Springer, vol. 30(2), pages 175-186, February.
    6. Martijn Adriaan Boermans & Daan Willebrands, 2017. "Entrepreneurship, risk perception and firm performance," International Journal of Entrepreneurship and Small Business, Inderscience Enterprises Ltd, vol. 31(4), pages 557-569.
    7. Theresa Michl & Stefan Taing, 2010. "An Economic and Neuroscientific Comparison of Strategic Decision-making," Chapters,in: Neuroeconomics and the Firm, chapter 10 Edward Elgar Publishing.
    8. Enrico Santarelli & Hien Tran, 2013. "The interplay of human and social capital in shaping entrepreneurial performance: the case of Vietnam," Small Business Economics, Springer, vol. 40(2), pages 435-458, February.
    9. Caliendo, Marco & Fossen, Frank & Kritikos, Alexander, 2010. "The impact of risk attitudes on entrepreneurial survival," Journal of Economic Behavior & Organization, Elsevier, vol. 76(1), pages 45-63, October.
    10. Terrence Sebora & Sang Lee & Nittana Sukasame, 2009. "Critical success factors for e-commerce entrepreneurship: an empirical study of Thailand," Small Business Economics, Springer, vol. 32(3), pages 303-316, March.
    11. repec:wsi:jdexxx:v:22:y:2017:i:03:n:s1084946717500212 is not listed on IDEAS
    12. Heinrichs, Simon & Walter, Sascha, 2013. "Who Becomes an Entrepreneur? A 30-Years-Review of Individual-Level Research and an Agenda for Future Research," EconStor Preprints 68590, ZBW - German National Library of Economics.
    13. Block, Joern & Sandner, Philipp & Spiegel, Frank, 2009. "Do risk attitudes differ within the group of entrepreneurs?," MPRA Paper 17587, University Library of Munich, Germany.
    14. Alessandro Arrighetti & Luca Caricati & Fabio Landini & Nadia Monacelli, 2013. "Explaining entrepreneurial orientation among university students: Evidence from italy," Working Papers 1301, c.MET-05 - Centro Interuniversitario di Economia Applicata alle Politiche per L'industria, lo Sviluppo locale e l'Internazionalizzazione.
    15. Melissa Baucus & William Norton & David Baucus & Sherrie Human, 2008. "Fostering Creativity and Innovation without Encouraging Unethical Behavior," Journal of Business Ethics, Springer, vol. 81(1), pages 97-115, August.
    16. Pei-Chou Lin & Deng-Shing Huang, 2006. "Technological Regimes and Firm Survival: Evidence across Sectors and over Time," IEAS Working Paper : academic research 06-A012, Institute of Economics, Academia Sinica, Taipei, Taiwan.

    More about this item

    Keywords

    entrepreneurship; launch or growth decisions; risk assessment; risk taking propensity; M13;

    JEL classification:

    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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