Irrational Exuberance, Entrepreneurial Finance and Public Policy

Coelho, Marta Pereira; Meza, David de; Reyniers, Diane J.

doi:10.1023/b:itax.0000033985.96539.65

Cited by 42 publications

(26 citation statements)

References 52 publications

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“…Accordingly, potential entrepreneurs may well be affected by "overconfidence", generating excess of entry, which in turn leads to infant mortality and entrepreneurial disillusion (see Dosi and Lovallo, 1998; for an experimental economics exercise see Camerer and Lovallo, 1999). Parker (2006) discusses both the psychology literature that gives reasons for expecting entrepreneurs to be especially prone to unrealistic over-optimism and previous empirical evidence showing that optimism is significantly and positively associated with the propensity to be an entrepreneur (see De Meza, 2002;Åstebro, 2003;Coelho, de Meza and Reyniers, 2004).…”

Section: From Macroeconomic Outcomes To Microfoundations Of New Firm mentioning

confidence: 99%

Entrepreneurship and the process of firms' entry, survival and growth

Santarelli¹,

Vivarelli²

2007

Industrial and Corporate Change

389

244

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes.You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. licence. www.econstor.eu IZA DP No. 2475 Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated Entrepreneurship and the Process of Firms' Entry, Survival and Growth Enrico Santarelli Marco Vivarelli D I S C U S S I O N P A P E R S E R I E SThe Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public.IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. ABSTRACT Entrepreneurship and the Process of Firms' Entry, Survival and GrowthThis survey paper aims at critically discussing the recent literature on firm formation and survival and the growth of new-born firms. The basic purpose is to single out the microeconomic entrepreneurial foundations of industrial dynamics (entry and exit) and to characterise the founder's ex-ante features in terms of likely ex-post business performance. The main conclusion is that entry of new firms is heterogeneous with innovative entrepreneurs being found together with passive followers, over-optimist gamblers and even escapees from unemployment. Since founders are heterogeneous and may make "entry mistakes", policy incentives sh...

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Section: From Macroeconomic Outcomes To Microfoundations Of New Firm mentioning

confidence: 99%

Entrepreneurship and the process of firms' entry, survival and growth

Santarelli¹,

Vivarelli²

2007

Industrial and Corporate Change

389

244

View full text Add to dashboard Cite

show abstract

“…The issue is particularly poignant in the case of minority and disadvantaged groups. Consequently, policies directed towards increasing lending, in particular those focused on excluded borrowers, such as loan guarantee schemes, may be particularly harmful (M. P. Coelho, de Meza, & Reyniers, 2004). The same is true of bankruptcy laws which neglect that they are ruling a population of over-optimistic entrepreneurs.…”

Section: Implications For Government Policy and The Extension Of Lendmentioning

confidence: 99%

Unrealistic Optimism: Still a Neglected Trait

Coelho

2009

J Bus Psychol

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Unrealistic optimism is all around us, and it is a well documented psychological phenomenon. It has important implications in many economic and managerial contexts, yet economists, managers and policy makers still ignore it or fail to understand its characteristics. Here we investigate the psychology of over-optimism and bring to bear substantial psychological evidence that most people are prone to groundless optimism when faced with economic and management decisions. Although the policy and welfare implications of such a widespread phenomenon are vast, we argue that they have been neglected by policy makers. We end by challenging the current public policy trend of extending lending to business start-ups, on the grounds that it may create a real road to ruin.

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“…Furthermore, the over-investment problem is exacerbated if entrepreneurs are overoptimistic, of which there is strong supporting evidence (Arabsheibani et al, 2000;de Meza 2002;Astebro, 2003;Coelho et al, 2004;Coelho, 2004 (Phillips and Kirchhoff, 1989). And relationships often fracture under the strain of extremely long work hours that many entrepreneurs have to devote to their businesses.…”

Section: Should Governments Encourage or Discourage Entrepreneurship?mentioning

confidence: 99%

The Economics of Entrepreneurship: What We Know and What We Don’t

Parker

2005

FNT in Entrepreneurship

123

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This introductory, non-technical, article offers a reflective overview of what Economics adds to our understanding of entrepreneurship. It is designed primarily to showcase to young entrepreneurship scholars several interesting research questions and a toolbox of methods to answer them. First, I will illustrate the kinds of questions that can be posed and answered using Economics. Then I will present and discuss a selective list of "canonical" theoretical and empirical models that form the intellectual bedrock of the Economics of Entrepreneurship. After that, I present and discuss some well-established theoretical contributions and empirical findings that have been generated by the approach. I conclude by discussing aspects of "What we don't know" − and should. This part of the article identifies several ideal future trends in research that build on and complement the foundations of entrepreneurship that are delineated in the main body of the article.

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Irrational Exuberance, Entrepreneurial Finance and Public Policy

Cited by 42 publications

References 52 publications

Entrepreneurship and the process of firms' entry, survival and growth

Entrepreneurship and the process of firms' entry, survival and growth

Unrealistic Optimism: Still a Neglected Trait

The Economics of Entrepreneurship: What We Know and What We Don’t

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