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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 - Universität Zürich [Zürich] = University of Zurich)

  • Ramana Nanda

    (Harvard University)

  • 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-02002736, HAL.
    • Handle: RePEc:hal:wpaper:hal-02002736
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    JEL classification:

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

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