Risk, Uncertainty and Entrepreneurship: Evidence From a Large Lab-in-the-Field Experiment

We measure differences in attitudes towards risk and uncertainty between entrepreneurs, managers and employees in a large scale experiment. Theory predicts that entrepreneurs are a distinct breed in terms of their more positive attitude towards risk and uncertainty. Many empirical studies have tested this prediction, employing various measures of risk (i.e. experimental and survey based) and uncertainty, various definitions of the entrepreneur and different control groups. Their results are mixed. Our large scale lab-in-the-field-experiment combines most of the design features of previous studies: an incentivized experimental and a survey based measure of risk, measures of related measures of uncertainty, i.e., ambiguity aversion and loss aversion, various control groups (including managers) and definitions of (successful) entrepreneurs. Thus, we can reconcile the previous mixed results. Based on experimental measures, entrepreneurs and managers have similar attitudes towards risk (but are both less risk averse than employees). In their own perception, though, entrepreneurs are also less risk averse than managers. Their lower self-assessed risk aversion is associated with a lower objectively measured loss aversion than managers have.