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Title:"I think I can, I think I can": Overconfidence and Entrepreneurial Behavior PDF Logo
Authors:Koellinger, Philipp
Minniti, Maria
Schade, Christian
Issue Date:2005
Series/Report no.:DIW-Diskussionspapiere 501
Abstract:Many firms fail shortly after inception. Yet individuals continue starting businesses. Prewar economists such as Keynes invoked animal spirits and stressed psychological factors in their explanations of economic behavior. Using a large sample obtained from surveys conducted in 18 countries, we study what variables have a significant impact on an individual?s decision to start a business. We find strong evidence that subjective, and often biased, perceptions have a crucial impact on new business creation across all countries in our sample. Our findings are consistent with the idea that individuals rely significantly on their perceptions rather than on objective probabilities, evaluate their businesses prospects by taking an overconfident ?inside view? of their situation, and, as a result, overestimate their likelihood of success.
Subjects:Entrepreneurship
Self-Employment
Perceptions
Perceptual Variables
Overconfidence
JEL:J29
D01
M13
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des DIW
DIW-Diskussionspapiere

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