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Aspirations, Prospect Theory and entrepreneurship: evidence from Colombia

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Abstract

In this article, we test the main hypotheses of the behavioral theory of entrepreneurship, namely that risk preferences are reference dependent, that entrepreneurs are not ambiguity averse and that aspirations act as a reference point in the sense postulated by Prospect Theory. We use an experimental methodology to elicit risk preferences, and we manipulate aspirations by means of a psychological priming technique to guarantee exogenous variation of the independent variable. We also assess the relationship between risk preferences and correlates at the firm and individual level. Although causality cannot be established, as expected the risk preferences are mainly related with individual characteristics. If we look at the relationship between biases and firm performance, we see some effect of loss aversion in interaction with personality traits (locus of control) and level of risk propensity. Our experimental fieldwork has been conducted in Colombia.

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Notes

  1. See Taylor and Brown (1988), Palich and Bagby (1995), Baron (1998), Sarasvathy et al. (1998), Camerer and Lovallo (1999), Barberis and Thaler (2003), Forbes (2005); Hayward et al. (2006), Lowe and Ziedonis (2006), Wu and Knott (2006), Dushnitsky (2010), Ucbasaran et al. (2010), Salamouris (2013).

  2. By incentive compatibility, we mean that a person should not lose a day of work to participate in the experiment. Since the respondent is choosing both the place and the moment of the interview (which usually took place during lunch breaks or late in the evening), incentive compatibility is never an issue.

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Acknowledgments

We would like to thank Marithza Sandoval, Pablo Vallejo, Hugo Diaz and Alexandra Montoya for comments on a previous version of this work. We appreciate the comments and suggestions by an anonymous referee, which helped us to improve the present version of the paper. We acknowledge comments and suggestions on the protocol by Gianluca Grimalda and Juan Camilo Cardenas. We also thank Patricio Dalton for the locus of control scale in Spanish. All the remaining errors are ours. Data gathering has been conducted by Ivan González (Master Thesis in Consumer Psychology). We thank FU Konrad Lorenz for its support.

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Authors and Affiliations

  1. Universidad Nacional de Colombia, Carrera 30, No 45-03, Bogotá, Colombia

    Francesco Bogliacino

  2. Fundación Universitaria Konrad Lorenz, Bogotá, Colombia

    Iván González-Gallo

Authors
  1. Francesco Bogliacino
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  2. Iván González-Gallo
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Correspondence to Francesco Bogliacino.

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Bogliacino, F., González-Gallo, I. Aspirations, Prospect Theory and entrepreneurship: evidence from Colombia. Int Rev Econ 62, 271–290 (2015). https://doi.org/10.1007/s12232-015-0229-9

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