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Risk, Balanced Skills and Entrepreneurship

  • Hsieh, Chihmao


    (University of Amsterdam)

  • Parker, Simon C.


    (Western University, Canada)

  • van Praag, Mirjam C.


    (Copenhagen Business School)

This paper proposes that risk aversion encourages individuals to invest in balanced skill profiles, making them more likely to become entrepreneurs. By not having taken this possible linkage into account, previous research has underestimated the impacts both of risk aversion and balanced skills on the likelihood individuals choose entrepreneurship. Data on Dutch university graduates provides evidence which supports this contention. It thereby raises the possibility that even risk-averse people might be suited to entrepreneurship; and it may also help explain why prior research has generated mixed evidence about the effects of risk aversion on selection into entrepreneurship.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6200.

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Length: 29 pages
Date of creation: Dec 2011
Date of revision:
Handle: RePEc:iza:izadps:dp6200
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  1. Ramana Nanda & Jesper B. Sørensen, 2010. "Workplace Peers and Entrepreneurship," Management Science, INFORMS, vol. 56(7), pages 1116-1126, July.
  2. Dohmen, Thomas & Falk, Armin & Huffman, David B. & Sunde, Uwe, 2006. "The Intergenerational Transmission of Risk and Trust Attitudes," IZA Discussion Papers 2380, Institute for the Study of Labor (IZA).
  3. Thomas Hellmann, 2007. "When Do Employees Become Entrepreneurs?," Management Science, INFORMS, vol. 53(6), pages 919-933, June.
  4. Hartog, Joop & van Praag, Mirjam C. & van der Sluis, Justin, 2008. "If You Are So Smart, Why Aren't You an Entrepreneur? Returns to Cognitive and Social Ability: Entrepreneurs versus Employees," IZA Discussion Papers 3648, Institute for the Study of Labor (IZA).
  5. Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
  6. Silva, Olmo, 2007. "The Jack-of-All-Trades entrepreneur: Innate talent or acquired skill?," Economics Letters, Elsevier, vol. 97(2), pages 118-123, November.
  7. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-48, August.
  8. Yakov Amihud & Baruch Lev, 1981. "Risk Reduction as a Managerial Motive for Conglomerate Mergers," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 605-617, Autumn.
  9. Parker, Simon C., 2008. "Entrepreneurship among married couples in the United States: A simultaneous probit approach," Labour Economics, Elsevier, vol. 15(3), pages 459-481, June.
  10. Cramer, J. S. & Hartog, J. & Jonker, N. & Van Praag, C. M., 2002. "Low risk aversion encourages the choice for entrepreneurship: an empirical test of a truism," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 29-36, May.
  11. Åstebro, Thomas & Thompson, Peter, 2011. "Entrepreneurs, Jacks of all trades or Hobos?," Research Policy, Elsevier, vol. 40(5), pages 637-649, June.
  12. Wagner, Joachim, 2003. "Are Nascent Entrepreneurs Jacks-of-All-Trades? A Test of Lazear's Theory of Entrepreneurship with German Data," IZA Discussion Papers 911, Institute for the Study of Labor (IZA).
  13. Dolton, Peter J & Makepeace, G H, 1990. "Self Employment among Graduates," Bulletin of Economic Research, Wiley Blackwell, vol. 42(1), pages 35-53, January.
  14. Brown, Sarah & Dietrich, Michael & Ortiz-Nuñez, Aurora & Taylor, Karl, 2011. "Self-employment and attitudes towards risk: Timing and unobserved heterogeneity," Journal of Economic Psychology, Elsevier, vol. 32(3), pages 425-433, June.
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