Abstract
Entrepreneurs derive lower risk-adjusted returns than non-entrepreneurs, but are compensated through non-pecuniary benefits. This chapter reports on findings from survey evidence. The main findings are as follows: A key non-pecuniary benefit to entrepreneurs is achieving greater control over their working environment. Doing so leads entrepreneurs to report achieving higher affect and well-being than non-entrepreneurs. Entrepreneurs report that they are more skilled socially than non-entrepreneurs. This might provide a partial explanation for why entrepreneurs have a higher marriage rate and larger families than non-entrepreneurs. Entrepreneurs exhibit greater dispositional optimism than non-entrepreneurs. However, in the study sample, the difference is not statistically significant. In terms of preference for lottery-like outcomes, entrepreneurs find prospects offering high returns with low probability attractive, but regard control of their environment as more important than the preference for positive skewness.
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Notes
- 1.
The average return to all private equity is actually similar to that of the public market equity index. However, the risk is higher. Survival rates of private firms are only around 34% over the first 10 years of the firm’s life.
- 2.
Although the results described below feature demographic effects, meaning that gender and age are germane, demographic effects do not subsume the entrepreneurial effect.
- 3.
Interestingly, the correlation between AF and WB scores is above 50% for both groups, a point to which I return below.
- 4.
The supplementary survey is based on responses from 40 people who classify themselves as entrepreneurs. The total number of responses was 48.
- 5.
Among the CIE respondents, 7% classify themselves as non-entrepreneurs. On every psychological dimension analyzed, the differences between entrepreneurs and these non-entreprenerus strongly conform to the general pattern.
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Acknowledgments
I thank my colleagues Jerry Burger and David Caldwell for their help with the psychological surveys used in this work. I thank Kevin Holmes, Center for Innovation and Entrepreneurship at Santa Clara University for his help in locating entrepreneurs willing to complete the survey, and for his assistance in running the survey. Financial support for this research comes from a Santa Clara University Leavey Grant.
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Shefrin, H. (2011). Insights into the Psychological Profiles of Entrepreneurs. In: Advances in Entrepreneurial Finance. Springer, New York, NY. https://doi.org/10.1007/978-1-4419-7527-0_9
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