Entrepreneurs Under Uncertainty: An Economic Experiment in China

Abstract

T his study reports findings from the first large-scale experiment investigating whether entrepreneurs differ from other people in their willingness to expose themselves to various forms of uncertainty. A stratified random sample of 700 chief executive officers from the Yangzi delta region in China is compared to 200 control group members. Our findings suggest that in economic decisions, entrepreneurs are more willing to accept strategic uncertainty related to multilateral competition and trust. However, entrepreneurs do not differ from ordinary people when it comes to nonstrategic forms of uncertainty, such as risk and ambiguity.

Risk and time preferences of entrepreneurs: evidence from a Danish field experiment

“…Holm, Opper and Nee [2013] use a randomly selected sample of entrepreneurs from local business registers in the Yangzi delta region in China. The sample contains 700 entrepreneurs who have been in business for at least three years and employ at least 10 salaried workers, and the control group consists of 200 individuals selected randomly from household registers in the same region.…”

“…One decision task is then picked at random and the preferred lottery in the selected decision task is played out for actual payment. This elicitation method has been applied to study entrepreneurs by Elston, Harrison and Rutström [2005], Holm, Opper and Nee [2013] and Sandri, Schade, Musshoff and Odeling [2010].…”

“…They find that full-time entrepreneurs have significantly lower aversion to risk than part-time entrepreneurs and non-entrepreneurs, and that part-time entrepreneurs are not significantly different in terms of risk attitudes than nonentrepreneurs. Holm, Opper and Nee [2013] and Sandri, Schade, Musshoff and Odeling [2010] are agnostic about parametric specifications of utility and probability weighting functions, and use the number of safe choices in the MPL as the dependent variable. and 580 Chinese yuan, and are in the same range as the median daily income for the entrepreneurs in the sample.…”

Estimating Risky Behavior with Multiple-Item Risk Measures: An Empirical Examination

“…For example, risk tolerance explains undiversified portfolio holdings (Moskowitz and Vissing-Jörgensen, 2002). However, in a recent study, Holm et al (2013) find that entrepreneurs in China do not generally differ from other people when it comes to behavior under uncertainty.…”

The Origins and Extent of Entrepreneurial Action-Orientedness: An Experimental Study

“…These studies have usually employed as control groups employees (Hartog et al, 2010;Van Praag et al, 2013;Shyti and Paraschiv, 2014) or the population at large (Holm et al, 2013). We use a sample of employees.…”