Does Entrepreneurial Experience Affect Risk and Ambiguity Attitudes? An Experimental Study

Abstract

Entrepreneurs often confront uncertainty and ambiguity, or situations with unknown probabilities concerning the success of a venture. Through an online experiment we investigate ambiguity attitudes of entrepreneurs and non-entrepreneurs in occupational choice decisions, using risk as a bench- mark. We consider richer domains of ambiguity involving different levels of likelihood and different degrees of ambiguity. Findings suggest that both entrepreneurs and non-entrepreneurs are risk seeking for unlikely outcomes and risk averse likely outcomes, a behavioral pattern consistent with Prospect Theory. We observe that under both risk and ambiguity, entrepreneurs exhibit more optimism than non-entrepreneurs. Entrepreneurs give more pessimistic evaluations under ambiguity compared to risk, exhibiting ambiguity aversion throughout the probability range; non- entrepreneurs do not discriminate between risk and ambiguity, exhibiting neutral ambiguity attitudes. Serial and novice entrepreneurs have indistinguishable risk profiles. However, entrepreneurial experience contributes to lowering ambiguity aversion and the more experienced entrepreneurs exhibit neutral attitudes towards ambiguity; yet, novice entrepreneurs exhibit ambiguity aversion, giving more pessimistic evaluations for future prospects.

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