DP16559 Entrepreneurial Motive, Ambiguity Attitudes and Willingness to Compete

Author(s): Michelle Brock, Melanie Koch
Publication Date: September 2021
Keyword(s): ambiguity aversion, decision-making under uncertainty, entrepreneurship
JEL(s): D81, D91, O15
Programme Areas: Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16559

Different entrepreneurial motivations can lead to different business outcomes. The origins of these difference in outcomes are not well understood so far. In this study, we use a lab-in-the-field experiment to analyze how two distinct types of entrepreneurs handle the uncertainty of competition. Our subject pool includes people with real entrepreneurial experience, who either started a business out of necessity or who took an optional business opportunity. We test a treatment that boosts feelings of competence and whether ambiguity aversion or a-insensitivity moderate the treatment effect on willingness to compete. Our results indicate that necessity entrepreneurs are more likely to adjust their decision-making following the treatment. A-insensitivity, as opposed to ambiguity aversion, plays an important role in differentiating their responses from that of opportunity entrepreneurs.