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An experimental analysis of risk and entrepreneurial attitudes of university students in the USA and Brazil

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Abstract

There is a long-standing debate about whether entrepreneurs and non-entrepreneurs differ in risk aversion levels. The paper addresses international differences in risk and entrepreneurial attitudes of university students, specifically in the USA and Brazil. This paper also aims to add to the ongoing debate surrounding the risk attitudes of entrepreneurial persons when compared to non-entrepreneurial persons. The data from the paper was generated from an economic experiment. The economic experiment included a sample of students from both the USA and Brazil. Subjects completed a shortened version of the Entrepreneurial Attitude Orientation (EAO) and then participated in an investment game. Subjects in the USA were found to be more entrepreneurial than the sample in Brazil. This held true for two separate definitions of entrepreneurial. There was no difference in the investment decisions between subjects from the two countries. Also, entrepreneurial subjects invested a higher percentage of their money in a risky asset. This is one of the first papers to present results from an internationally conducted economic experiment testing for differences in risk aversion levels between entrepreneurial and non-entrepreneurial individuals.

Abstracto

Existe un debate antiguo sobre si los emprendedores y las personas que no son emprendedoras difieren en su nivel de aversión a tomar riesgos. Este artículo aborda las diferencias internacionales en las actitudes empresariales y la toma de riesgos de los estudiantes universitarios, especialmente en los Estados Unidos y en Brasil. Este artículo aporta también un nuevo enfoque al debate en desarrollo sobre las actitudes de los emprendedores frente a la toma de riesgos en comparación con las actitudes de individuos que no son emprendedores. La información fue generada a partir de un experimento económico llevado a cabo en los Estados Unidos y en Brasil. Los sujetos completaron una versión abreviada de Entrepreneurial Attitude Orientation (EAO) y luego participaron en un juego de inversión. Los sujetos estadounidenses resultaron ser más emprendedores que los del grupo de muestra brasileño. Esto fue cierto para dos definiciones diferentes de lo que significa ser emprendedor. No hubo ninguna diferencia en las decisiones de inversión entre los sujetos de los dos países. Asimismo, los emprendedores invirtieron un porcentaje más alto de dinero en un valor arriesgado. Este es uno de los primeros artículos que presenta los resultados de un experimento económico internacional que examina las diferencias en los niveles de aversión de toma de riesgos entre individuos emprendedores e individuos que no lo son.

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Author information

Authors and Affiliations

  1. Department of Economics, Armstrong State University, 11935 Abercorn Street, Savannah, GA, 31419, USA

    Dennis Barber III

Authors
  1. Dennis Barber III
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Correspondence to Dennis Barber III.

Additional information

Summary Highlights

Contributions: This paper contributes to the debate surrounding international entrepreneurial attitudes and risk attitudes. The paper employs a unique research methodology when approaching this topic. An economic experiment is used to empirically test for differences in risk attitudes based on entrepreneurial attitudes.

Research questions/purpose: There are two primary purposes of this study. One is to investigate whether individuals with entrepreneurial attitudes are more likely to invest in a risky asset when compared to subjects with non-entrepreneurial attitudes. The second is to determine if individuals in the USA were more or less entrepreneurial than subjects in Brazil and if they demonstrated differing risk attitudes.

Results/findings: The findings suggest that the US subjects were more entrepreneurial than those in Brazil, and this held true for two different specifications of the entrepreneurial variable. Individuals in Brazil and the USA did not differ in their risk-taking behavior. Finally, entrepreneurial individuals were more willing to invest at a higher rate into a risky asset when compared to non-entrepreneurial subjects.

Limitations: There are a couple of limitations due to the research methodology and sample population. First, all subjects in the experiments, in both the USA and Brazil, were university students. This leads to difficulty in generalizing the results to the general public. Also, the sample size was limited to 78 in the USA and 54 in Brazil. Finally, the study measured entrepreneurial attitudes among individuals who were not actually entrepreneurs. The instrument used, the Entrepreneurial Attitude Orientation, has predictive validity; however, it has not been testing for temporal predictive validity.

Theoretical implications and recommendations: Theory suggests that risk-taking is a component of entrepreneurial orientation. This paper adds to this theory by finding support for a positive relationship between financial risk-taking and entrepreneurial attitudes.

Practical implications and recommendations: The practical implications are relevant primarily for policy makers. The individual-level, microdata gives insight into the differences in risk-taking between entrepreneurial and non-entrepreneurial individuals.

Appendix

Appendix

Entrepreneurial attitude orientation

Subjects demonstrated their agreement with the following statements by choosing 1–10, where 1 is “Strongly Disagree” and 10 for “Strongly Agree”:

  1. 1.

    I often approach business tasks in unique ways.

  2. 2.

    I enjoy being the catalyst for change in business affairs.

  3. 3.

    I believe that when pursuing business goals or objectives, the final result is far more important than following accepted procedures.

  4. 4.

    I don’t hesitate to take control in unstructured situations.

  5. 5.

    I enjoy being able to use old business concepts in new ways.

  6. 6.

    It is important to continually look for new ways to do things in business.

  7. 7.

    I believe that in order to succeed, one must conform in accepted business practices.

  8. 8.

    I’ve often created the business opportunities I have taken advantage of.

  9. 9.

    I am ultimately responsible for my own business success.

  10. 10.

    My knack for dealing with people has enabled me to create many of my business opportunities.

  11. 11.

    It is exciting to aggressively pursue business opportunities.

  12. 12.

    I get a sense of accomplishment from the pursuit of my business opportunities.

  13. 13.

    I believe it is more important to think about future possibilities than past accomplishments.

  14. 14.

    I feel real satisfaction when my work is among the best there is.

  15. 15.

    I often sacrifice in order to take advantage of business opportunities.

  16. 16.

    I never put important matters off until a more convenient time.

  17. 17.

    I feel very self-conscious when making business proposals.

  18. 18.

    I feel uncomfortable when I’m unsure of what my business associates think of me.

  19. 19.

    I spend a lot of time looking for someone who can tell me how to solve all my business problems.

  20. 20.

    I always try to make friends with people who may be useful in my business.

  21. 21.

    I feel self-conscious when I am with very successful business people.

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Barber, D. An experimental analysis of risk and entrepreneurial attitudes of university students in the USA and Brazil. J Int Entrep 13, 370–389 (2015). https://doi.org/10.1007/s10843-015-0161-9

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