Risk Taking Propensity of Entrepreneurs

Abstract

The entrepreneurial literature traditionally considers risk taking an important distinguishing element in entrepreneurship. This study examines risk taking propensity of founders or managers of new ventures. Upon examination of competing definitions of entrepreneur, this analysis defines an entrepreneur as major owner and manager of a business venture who is not employed elsewhere. Risk taking is considered the perceived probability of receiving rewards associated with success of a proposed situation required before embarking on a venture. Three levels of risk taking (low, intermediate or moderate, and high) could affect decision to start a business venture. Risk taking was measured using Wallach and Kogan choice dilemmas questionnaire (CDQ). Studied were entrepreneurs, promoted managers, and new (or transferred) managers of firms located in St. Louis in 1975; 31 questionnaires were used for each group. The results are not statistically different. Entrepreneurs and managers are found to have same risk taking propensity. Because previous studies of risk preferences examined limited samples, CDQ scores were also compared against a sample representing general population. Found that risk taking propensity of entrepreneurs is same as that for general population. Results also show that entrepreneurs, managers, and general population all have a propensity for moderate risk. Overall, general risk taking does not distinguish entrepreneurs from non-entrepreneurs. (TNM)

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