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Risk aversion in Entrepreneurship Panels: Measurement Problems and Alternative Explanations

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  • Christian Hamböck
  • Christian Hopp
  • Cigdem Keles
  • Rudolf Vetschera

Abstract

In this study, we investigate the pitfalls associated with measuring risk aversion within studies of entrepreneurial behavior. First, we raise substantial concerns as to whether standard questions employed can be used to infer risk aversion among nascent entrepreneurs. In our work we show that the US, Canadian and Swedish panel study datasets do not offer evidence that entrepreneurs are more risk averse than non‐entrepreneurs. In fact, we show that the measurements used for risk aversion in these studies are not compatible with classic expected utility theory. Furthermore, our analysis reveals that probability weighting may even counteract the respondent's risk attitude. Therefore, inferring the respondent's risk attitude from choices in the panel study datasets can be misleading in the presence of probability weighting. We therefore suggest that alternative theories of decision making under risk, like prospect theory, are relevant and should be taken into account in future studies on entrepreneurship. Copyright © 2017 John Wiley & Sons, Ltd.

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  • Christian Hamböck & Christian Hopp & Cigdem Keles & Rudolf Vetschera, 2017. "Risk aversion in Entrepreneurship Panels: Measurement Problems and Alternative Explanations," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(7), pages 1046-1057, October.
    • Handle: RePEc:wly:mgtdec:v:38:y:2017:i:7:p:1046-1057
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    Cited by:

    1. Malin Arve & Claudine Desrieux & Romain Espinosa, 2023. "Entrepreneurial intention and resilience: An experiment during the Covid‐19 lockdown," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 698-715, March.
    2. Andrea C. Hupman & Jay Simon, 2023. "The Legacy of Peter Fishburn: Foundational Work and Lasting Impact," Decision Analysis, INFORMS, vol. 20(1), pages 1-15, March.
    3. Rajeev K. Goel & Devrim Göktepe-Hultén, 2018. "What drives academic patentees to bypass TTOs? Evidence from a large public research organisation," The Journal of Technology Transfer, Springer, vol. 43(1), pages 240-258, February.

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