Do You Need to be Risk-Tolerant to Become an Entrepreneur? The Importance of the Reference Point

Lucio Fuentelsaz, Maicas Juan P. and Montero Javier ()
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Maicas Juan P.: Department of Management, University of Zaragoza, Gran Via 2, Zaragoza, 50005, Spain
Montero Javier: Department of Management, University of Zaragoza, Gran Via 2, Zaragoza, 50005, Spain

Entrepreneurship Research Journal, 2022, vol. 12, issue 4, 471-500

Abstract: The creation of new ventures involves a great deal of risk and uncertainty. However, research has been theoretically divergent and empirically inconclusive about the influence of individuals’ risk tolerance on entrepreneurial entry. In this paper, we argue that this relationship is contingent on the reference point of individuals, taking into account the human capital and the opportunity cost of individuals when they decide to start a venture. This approach allows us to clarify some of the previous mixed results in the literature. We use a sample of almost 600,000 individuals from 90 countries that have participated in the Global Entrepreneurship Monitor project between 2010 and 2014. Our results show that individuals with previous experience as entrepreneurs do not need to be so risk-tolerant to set up their own venture, while individuals with a job and/or a high educational level need to be especially risk-tolerant to become entrepreneurs.

Keywords: entrepreneurial entry; GEM; human capital; opportunity costs; risk tolerance (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1515/erj-2019-0292

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