Entrepreneurial Overconfidence: Evidence from a C.A.R.T. Approach

Philipp Köllinger, Maria Minniti and Christian Schade
Authors registered in the RePEc Author Service: Philipp Koellinger

No 465, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We use a sample of 18 countries to study what variables have a significant impact on an individual's decision to start a new business and classification and regression trees for an accurate interpretation of the data. Our results support existing literature suggesting the existence of strong country effects. In addition, we find strong evidence that perceptual variables, such as one's belief about her own skills and ability and about the risk involved in the venture, have a crucial impact on new business creation across all countries in our sample. Our findings are consistent with the idea that entrepreneurs evaluate their businesses by taking an "inside view" of their situation, overestimate their likelihood of success, and, as a result, rely significantly on perceptions rather than on objective expectations of success.

Keywords: CARTs; Entrepreneurship; Overconfidence; Self-employment (search for similar items in EconPapers)
JEL-codes: D0 J4 (search for similar items in EconPapers)
Pages: 26, 3 p.
Date: 2005
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