Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • Article
  • Journal of Economic Perspectives

Seeking the Roots of Entrepreneurship: Insights from Behavioral Economics

By: Thomas Astebro, Holger Herz, Ramana Nanda and Roberto A. Weber
  • Format:Print
ShareBar

Abstract

There is a growing body of evidence that many entrepreneurs seem to enter and persist in entrepreneurship despite earning low risk-adjusted returns. This has lead to attempts to provide explanations—using both standard economic theory and behavioral economics—for why certain individuals may be attracted to such an apparently unprofitable activity. Drawing on research in behavioral economics, in the sections that follow, we review three sets of possible interpretations for understanding the empirical facts related to the entry into, and persistence in, entrepreneurship. Differences in risk aversion provide a plausible and intuitive interpretation of entrepreneurial activity. In addition, a growing literature has begun to highlight the potential importance of overconfidence in driving entrepreneurial outcomes. Such a mechanism may appear at face value to work like a lower level of risk aversion, but there are clear conceptual differences—in particular, overconfidence likely arises from behavioral biases and misperceptions of probability distributions. Finally, nonpecuniary taste-based factors may be important in motivating both the decisions to enter into and to persist in entrepreneurship.

Keywords

Entrepreneurship; Personal Characteristics; Attitudes; Behavior

Citation

Astebro, Thomas, Holger Herz, Ramana Nanda, and Roberto A. Weber. "Seeking the Roots of Entrepreneurship: Insights from Behavioral Economics." Journal of Economic Perspectives 28, no. 3 (Summer 2014): 49–70.
  • Read Now

About The Author

Ramana Nanda

Entrepreneurial Management
→More Publications

More from the Authors

    • September 2022
    • Journal of Monetary Economics

    House Prices, Home Equity and Entrepreneurship: Evidence from U.S. Census Micro Data

    By: Sari Pekkala Kerr, William R. Kerr and Ramana Nanda
    • 2022
    • Faculty Research

    Are Transformational Ideas Harder to Fund? Resource Allocation to R&D Projects at a Global Pharmaceutical Firm

    By: Joshua Krieger and Ramana Nanda
    • Journal of Financial Economics

    Financing Constraints, Home Equity and Selection into Entrepreneurship

    By: Thais Laerkholm Jensen, Søren Leth-Petersen and Ramana Nanda
More from the Authors
  • House Prices, Home Equity and Entrepreneurship: Evidence from U.S. Census Micro Data By: Sari Pekkala Kerr, William R. Kerr and Ramana Nanda
  • Are Transformational Ideas Harder to Fund? Resource Allocation to R&D Projects at a Global Pharmaceutical Firm By: Joshua Krieger and Ramana Nanda
  • Financing Constraints, Home Equity and Selection into Entrepreneurship By: Thais Laerkholm Jensen, Søren Leth-Petersen and Ramana Nanda
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College