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Most New Businesses Fail, but Mine Won’t…Right?

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  • Eric Shaunn Mattingly
  • Trayan Kushev

Abstract

Building on expectancy theory, we study why entrepreneurs form positive beliefs about, and subsequent commitments to, entrepreneurial actions despite the negative mean outcome observed in the history of entrepreneurial efforts. We test our model using structural equation modelling on a sample of 1,185 entrepreneurs derived from the Panel Study of Entrepreneurial Dynamics II (PSED II) database. We find that the perceived gap between the value of an opportunity and opportunity cost positively influences both entrepreneurial expectancy and entrepreneurial intensity. Further, we find that the strength of these relationships is contingent upon uncertainty preference. Together, these findings contribute to literature on expectancy theory, increase our understanding of the role of uncertainty in entrepreneurial cognition and suggest that entrepreneurs’ cognition may be more rational than surface level appearances suggest.

Suggested Citation

  • Eric Shaunn Mattingly & Trayan Kushev, 2016. "Most New Businesses Fail, but Mine Won’t…Right?," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 25(1), pages 70-88, March.
    • Handle: RePEc:sae:jouent:v:25:y:2016:i:1:p:70-88
    DOI: 10.1177/0971355715616480
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    References listed on IDEAS

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    Cited by:

    1. Eric Shaunn Mattingly & Trayan N. Kushev & Manju K. Ahuja & Dalong Ma, 2016. "Switch or persevere? The effects of experience and metacognition on persistence decisions," International Entrepreneurship and Management Journal, Springer, vol. 12(4), pages 1233-1263, December.

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