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The Influence of Entrepreneurial Risk Assessment on Venture Launch or Growth Decisions

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Abstract

Entrepreneurs are thought to engage in riskier behavior than nonentrepreneurs, yet little empirical evidence supports that intuitively appealing notion. We argue instead that differences in information, not risk aversion, may explain the decision to launch or grow a venture. We separately test risk taking propensity and risk assessment. We hypothesize that entrepreneurs will not differ from nonentrepreneurs on risk taking propensity. Additionally, we propose and test a model of risk assessment. The sample size for this exploratory study is n=53 with 30 respondents declaring themselves as entrepreneurs and 23 declaring themselves as nonentrepreneurs. The study’s design is a simulation. Each respondent is provided with data on a potential acquisition that would result in either the launch of a new venture or significant growth for an existing firm. Consistent with the hypotheses, the results show no difference between entrepreneurs and nonentrepreneurs on the risk taking measure. We also find that we can predict entrepreneurial behavior based on risk assessment. We close with a discussion of limitations and directions for future research.

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Correspondence to William I. Norton Jr..

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Norton, W.I., Moore, W.T. The Influence of Entrepreneurial Risk Assessment on Venture Launch or Growth Decisions. Small Bus Econ 26, 215–226 (2006). https://doi.org/10.1007/s11187-004-5612-y

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