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Aspirations, prospect theory and entrepreneurship: Evidence from Colombia

Author

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  • Francesco Bogliacino
  • Iván González Gallo

Abstract

In this article we test the main hypotheses of the behavioural theory of entrepreneurship, namely that risk preferences are reference-dependent, that entrepreneurs are not ambiguity-averse and that aspirations act as a reference point in the sense postulated by Prospect Theory. We use an experimental methodology to elicit risk preferences and we manipulate aspirations by means of a psychological priming technique to guarantee exogenous variation of the independent variable. We also assess the relationship between risk preferences and correlates at the firm and individual level. Although causality cannot be established, as expected the risk preferences are mainly related with individual characteristics. If we look at the relationship between biases and firm performance we see some effect of loss aversion in interaction with personality traits (locus of control) and level of risk propensity. Our experimental fieldwork has been conducted in Colombia.

Suggested Citation

  • Francesco Bogliacino & Iván González Gallo, 2015. "Aspirations, prospect theory and entrepreneurship: Evidence from Colombia," Econógrafos, Escuela de Economía 022947, Universidad Nacional de Colombia, FCE, CID.
    • Handle: RePEc:col:000176:022947
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    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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