Working Paper: CEPR ID: DP16559
Authors: Michelle Brock; Melanie Koch
Abstract: Different entrepreneurial motivations can lead to different business outcomes. The origins of these difference in outcomes are not well understood so far. In this study, we use a lab-in-the-field experiment to analyze how two distinct types of entrepreneurs handle the uncertainty of competition. Our subject pool includes people with real entrepreneurial experience, who either started a business out of necessity or who took an optional business opportunity. We test a treatment that boosts feelings of competence and whether ambiguity aversion or a-insensitivity moderate the treatment effect on willingness to compete. Our results indicate that necessity entrepreneurs are more likely to adjust their decision-making following the treatment. A-insensitivity, as opposed to ambiguity aversion, plays an important role in differentiating their responses from that of opportunity entrepreneurs.
Keywords: ambiguity aversion; decision-making under uncertainty; entrepreneurship
JEL Codes: D81; D91; O15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ambiguity aversion (D81) | willingness to compete (necessity entrepreneurs) (P12) |
| entrepreneurial motives (necessity) (L26) | willingness to compete (L13) |
| entrepreneurial motives (opportunity) (L26) | willingness to compete (L13) |
| treatment (boost feelings of competence) (M54) | willingness to compete (necessity entrepreneurs) (P12) |
| treatment (boost feelings of competence) (M54) | willingness to compete (opportunity entrepreneurs) (L26) |
| ainsensitivity (J65) | willingness to compete (necessity entrepreneurs) (P12) |
| treatment (boost feelings of competence) (M54) | decision-making (necessity entrepreneurs) (D87) |
| treatment (boost feelings of competence) (M54) | decision-making (opportunity entrepreneurs) (L26) |