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Personality traits, subjective learning, and entrepreneurial decision making

Author

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  • Konon, Alexander
Abstract
We present a dynamic occupational choice model with a learning algorithm simultaneously capable to explain entrepreneurial entry, exit, and survival. According to our model, those individuals decide to become entrepreneurs who expect their productivity to be highest when managed by themselves. As we further assume that individuals have incomplete information about their own non-cognitive skills, which are relevant for entrepreneurial processes, entrepreneurial entry in our model is driven by overconfidence in the own skills---in line with earlier empirical findings. After entry, entrepreneurs receive noisy feedback from the market. Depending on a set of traits different from those driving the entry process into the market, entrepreneurs decide to either stay or leave the market. Our learning-based model generates survival rates decreasing at decreasing rates and captures findings on the earnings puzzle according to which median entrepreneurs do not earn more than median wage workers.

Suggested Citation

  • Konon, Alexander, 2015. "Personality traits, subjective learning, and entrepreneurial decision making," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112805, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc15:112805
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    References listed on IDEAS

    as
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    1. László Szerb & Zsófia Vörös, 2021. "The changing form of overconfidence and its effect on growth expectations at the early stages of startups," Small Business Economics, Springer, vol. 57(1), pages 151-165, June.

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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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