Risk aversion in Entrepreneurship Panels: Measurement Problems and Alternative Explanations

Hamböck, Christian; Hopp, Christian; Keles, Cigdem; Vetschera, Rudolf (2017). Risk aversion in Entrepreneurship Panels: Measurement Problems and Alternative Explanations Managerial and Decision Economics, 38(7), pp. 1046-1057. Wiley 10.1002/mde.2844

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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.

Item Type:	Journal Article (Original Article)
Division/Institute:	Business School > Business Foundations and Methods
Name:	Hamböck, Christian; Hopp, Christian0000-0002-4095-092X; Keles, Cigdem and Vetschera, Rudolf
ISSN:	01436570
Publisher:	Wiley
Language:	English
Submitter:	Christian Hopp
Date Deposited:	22 Sep 2020 09:05
Last Modified:	10 Oct 2021 02:18
Publisher DOI:	10.1002/mde.2844
ARBOR DOI:	10.24451/arbor.11993
URI:	https://arbor.bfh.ch/id/eprint/11993