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Entrepreneurial Overconfidence: Evidence from a C.A.R.T. Approach

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  • Philipp Köllinger
  • Maria Minniti
  • Christian Schade

Abstract

We use a sample of 18 countries to study what variables have a significant impact on an individual's decision to start a new business and classification and regression trees for an accurate interpretation of the data. Our results support existing literature suggesting the existence of strong country effects. In addition, we find strong evidence that perceptual variables, such as one's belief about her own skills and ability and about the risk involved in the venture, have a crucial impact on new business creation across all countries in our sample. Our findings are consistent with the idea that entrepreneurs evaluate their businesses by taking an "inside view" of their situation, overestimate their likelihood of success, and, as a result, rely significantly on perceptions rather than on objective expectations of success.

Suggested Citation

  • Philipp Köllinger & Maria Minniti & Christian Schade, 2005. "Entrepreneurial Overconfidence: Evidence from a C.A.R.T. Approach," Discussion Papers of DIW Berlin 465, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp465
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    References listed on IDEAS

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    More about this item

    Keywords

    CARTs; Entrepreneurship; Overconfidence; Self-employment;
    All these keywords.

    JEL classification:

    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • D0 - Microeconomics - - General

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