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Seeking the Roots of Entrepreneurship: Insights from Behavioral Economics

Author

Listed:
  • Thomas Astebro

    (Joseph L. Rotman School of Management - University of Toronto)

  • Holger Herz

    (UZH - University of Zürich [Zürich])

  • Ramana Nanda

    (Harvard University [Cambridge])

  • Roberto Weber

Abstract

In this article, we critically evaluate what the existing research shows regarding the individual determinants of entrepreneurship. We begin by documenting a set of facts that seem to pose a challenge for interpretations of entrepreneurship based on the standard expected utility framework. Drawing on research in behavioral economics we then review three sets of possible interpretations — risk aversion, overconfidence, and non-pecuniary, taste-based factors — for understanding the empirical facts related to the entry into, and persistence in entrepreneurship. The central thesis of this article is that while all these candidate explanations have merit and can account for some aspects of the facts above, there is little evidence of a "smoking gun" that can completely account for all the puzzling patterns we observe.

Suggested Citation

  • Thomas Astebro & Holger Herz & Ramana Nanda & Roberto Weber, 2015. "Seeking the Roots of Entrepreneurship: Insights from Behavioral Economics," Working Papers hal-02002731, HAL.
  • Handle: RePEc:hal:wpaper:hal-02002731
    Note: View the original document on HAL open archive server: https://hal-hec.archives-ouvertes.fr/hal-02002731
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    References listed on IDEAS

    as
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    10. Shane, Scott, 2009. "Fool's Gold: The Truth Behind Angel Investing in America," OUP Catalogue, Oxford University Press, number 9780195331080.
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    Cited by:

    1. Kornai, János, 2015. "Milyen is hát a tőke a 21. században?. Megjegyzések Piketty könyvéhez
      [So what is capital in the 21st century?. Notes on Piketty s book]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 909-942.
    2. Javier Mejia, 2018. "Social Networks and Entrepreneurship. Evidence from a Historical Episode of Industrialization," Working Papers 20180020, New York University Abu Dhabi, Department of Social Science, revised Sep 2018.
    3. Dell’Era, Michele & Opromolla, Luca David & Santos-Pinto,, 2018. "A General Equilibrium Theory of Occupational Choice under Optimistic Beliefs about Entrepreneurial Ability," CEPR Discussion Papers 13225, C.E.P.R. Discussion Papers.
    4. Zoltan Acs & Thomas Åstebro & David Audretsch & David T. Robinson, 2016. "Public policy to promote entrepreneurship: a call to arms," Small Business Economics, Springer, vol. 47(1), pages 35-51, June.
    5. 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.
    6. Matthew Roskruge & Jacques Poot & Laura King, 2016. "Social capital, entrepreneurship and living standards: differences between migrants and the native born," Chapters,in: Handbook of Social Capital and Regional Development, chapter 9, pages 221-254 Edward Elgar Publishing.
    7. Royal, Andrew & Tasoff, Joshua, 2017. "When higher productivity hurts: The interaction between overconfidence and capital," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 67(C), pages 131-142.
    8. repec:kap:jbuset:v:156:y:2019:i:2:d:10.1007_s10551-017-3560-0 is not listed on IDEAS
    9. Valerie Revest & Alessandro Sapio, 2016. "The creation function of a junior listing venue: An empirical test on the Alternative Investment Market," LEM Papers Series 2016/32, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    10. Vera Rocha & Mirjam van Praag & Anabela Carneiro, 2015. "Deviating from the benchmarks: Human capital inputs and the survival of new startups," CEF.UP Working Papers 1502, Universidade do Porto, Faculdade de Economia do Porto.
    11. Holm, Håkan J. & Nee, Victor & Opper, Sonja, 2016. "Strategic Decisions: Behavioral Differences Between CEOs and Others," Working Papers 2016:35, Lund University, Department of Economics.
    12. Kevin J. Boudreau, 2018. "Amateurs Crowds & Professional Entrepreneurs as Platform Complementors," NBER Working Papers 24512, National Bureau of Economic Research, Inc.
    13. Miglo, Anton, 2018. "Crowdfunding Under Market Feedback, Asymmetric Information And Overconfident Entrepreneur," MPRA Paper 89015, University Library of Munich, Germany.
    14. repec:kap:sbusec:v:49:y:2017:i:4:d:10.1007_s11187-017-9853-y is not listed on IDEAS
    15. Sari Pekkala Kerr & William R. Kerr & Ramana Nanda, 2015. "House Money and Entrepreneurship," Harvard Business School Working Papers 15-069, Harvard Business School.
    16. repec:eee:eecrev:v:111:y:2019:i:c:p:53-69 is not listed on IDEAS
    17. Victor Aguirregabiria & Jihye Jeon, 2018. "Firms' Beliefs and Learning: Models, Identification, and Empirical Evidence," Working Papers tecipa-620, University of Toronto, Department of Economics.
    18. Sari Pekkala Kerr & William R. Kerr & Tina Xu, 2017. "Personality Traits of Entrepreneurs: A Review of Recent Literature," NBER Working Papers 24097, National Bureau of Economic Research, Inc.
    19. Chang, Simon & Zhang, Xiaobo, 2015. "Mating competition and entrepreneurship," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 292-309.
    20. Thomas Åstebro, 2017. "The private financial gains to entrepreneurship: Is it a good use of public money to encourage individuals to become entrepreneurs?," Small Business Economics, Springer, vol. 48(2), pages 323-329, February.
    21. repec:eee:enepol:v:126:y:2019:i:c:p:88-98 is not listed on IDEAS
    22. Hyytinen, Ari & Pajarinen, Mika & Rouvinen, Petri, 2015. "Does innovativeness reduce startup survival rates?," Journal of Business Venturing, Elsevier, vol. 30(4), pages 564-581.
    23. Hanspal, Tobin, 2016. "The effect of personal financing disruptions on entrepreneurship," SAFE Working Paper Series 161, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
    24. repec:eee:joepsy:v:67:y:2018:i:c:p:177-190 is not listed on IDEAS

    More about this item

    Keywords

    entrepreneurship; risk aversion; overconfidence; taste;

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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