Using cognitive theory to explain entrepreneurial risk-taking: Challenging conventional wisdom

Palich, Leslie E.; Bagby, Drew

doi:10.1016/0883-9026(95)00082-j

Cited by 731 publications

(526 citation statements)

References 27 publications

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“…For instance, at the end of the '90s, in the UK the incidence of people starting a firm not because of a market opportunity but just because they had no better choice was about 22% (see Small Business Service, 2001, p.6). In previous studies by one of the 11 Whether entrepreneurs are more likely to engage in risky behaviour (see Palich and Bagby, 1995) is a controversial issue and empirical evidence is inconclusive. For example, in a recent paper, Norton and Moore (2006) conclude that entrepreneurs do not differ from non-entrepreneurs as regards their risk-taking propensity.…”

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

398

253

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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

398

253

View full text Add to dashboard Cite

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“…Testing not only the responses of non-entrepreneurs might be considered important as professionals could be expected to be more acquainted than non-entrepreneurs with investment tasks and to rely on different decision heuristics and strategies (Busenitz and Lau, 1996;Busenitz and Barney, 1997;Parlich and Bagby, Page 5 of 50 A c c e p t e d M a n u s c r i p t…”

Section: Introductionmentioning

confidence: 99%

Holding on for too long? An experimental study on inertia in entrepreneurs’ and non-entrepreneurs’ disinvestment choices

Sandri

Schade

Mußhoff

et al. 2010

Journal of Economic Behavior & Organization

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Disinvestment, in the sense of project termination and liquidation of assets including the cession of a venture, is an important realm of entrepreneurial decision-making. This study presents the results of an experimental investigation modeling the choice to disinvest as a dynamic problem of optimal stopping in which the patterns of decisions are analyzed with entrepreneurs and non-entrepreneurs. Our experimental results reject the standard net present value approach as an account of observed behavior. Instead, most individuals seem to understand the value of waiting. Their choices are weakly related to the disinvestment triggers derived from a formal optimal stopping benchmark consistent with real options reasoning. We also observe a pronounced 'psychological inertia', i.e., most individuals hold on to a losing project for even longer than real options reasoning would predict. The study provides evidence for entrepreneurs and nonentrepreneurs being quite similar in their behavior.

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“…Making abundant those resources to sustain a startup is of critical importance for the potential entrepreneur's level of confidence. It is important to reemphasize that entrepreneurs are not necessarily rational since they often choose to play a game where the chances for lost are relatively high (Keh et al, 2002;Palich and Badgy, 1995). They form their own perceptions (i.e.…”

Section: Discussionmentioning

confidence: 99%

“…Clearly, such an approach offers meaningful insights. However, it tends to ignore the reality that individuals make decisions based on their perceptions of opportunities and threats under risky and uncertain conditions (Keh, Foo, and Lim, 2002;Palich, and Badgy, 1995;Tversky, and Kahneman, 1974). Hence, some decisions may not adhere to economic assumptions of rationality.…”

Section: Introductionmentioning

confidence: 99%

How Perceptions of the Global Economic Slowdown Impact and Local Risks Adversely Affect Perceived Opportunities and Subsequent Startup Activities

Robinson¹,

Grayson²

2014

BMR

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The Great Recession which began in 2008 is the worst global recession since World War II. Arguably, this global economic slowdown began with failures in financial regulation and housing policies. Undisputable are the adverse effects of this global financial crisis. Worldwide wealth was destroyed. Unemployment rose precipitously. Small businesses and medium businesses found it difficult to access funding sources. Large businesses reduced investments. However, little has been empirically established regarding the effects of the global slowdown on entrepreneurial startups. This study applies a cognitive lens to examine the effects of the perceived global slowdown impact along with the effects of perceived local risks on startup activities when mediated by perceived opportunities. All hypothesized relationships are found to be significant. Equally important, perceived opportunity is found to fully mediate the relationship between perceived global slowdown impact and startup activity. It is also found to partially mediate the relationship between perceived local risks and startup activities. Hence, this manuscript establishes the basis for beginning to understand how the perceived global slowdown impact is relevant for global startup activity.

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Using cognitive theory to explain entrepreneurial risk-taking: Challenging conventional wisdom

Cited by 731 publications

References 27 publications

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

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

Holding on for too long? An experimental study on inertia in entrepreneurs’ and non-entrepreneurs’ disinvestment choices

How Perceptions of the Global Economic Slowdown Impact and Local Risks Adversely Affect Perceived Opportunities and Subsequent Startup Activities

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