ETLA Discussion Papers, The Research Institute of the Finnish Economy (ETLA) 987
There is considerable consensus in the literature that entrepreneurs are prone to unrealistic optimism. Our new field evidence from a sample of four-month-old start-ups echoes this finding: as many as 87% of new entrepreneurs expect to survive at least three years in business, whereas the actual statistical survival rate is around 60%. Our field study allows us to rule out certain previously overlooked explanations for the often-documented optimistic bias in new entrepreneurs’ judgment: It is not due to a framing effect nor driven by rash and sloppy survey responses by busy entrepreneurs. Nor can we relate it to the risk preferences of entrepreneurs or to a difficulty in understanding algebra of probability. We also study how entrepreneurs update their failure rate expectations: When prompted to rethink, 33% of the entrepreneurs update their risk beliefs. We reject the formal restrictions of a Bayesian learning model, in part because of the presence of optimistic entrepreneurs. entrepreneurship, new firms, default, expectations, survival
1. healthcare 2. food with health effects 3. energy and other biomass based applications 4. bioinformatics. These initiatives have been presented for all of the representatives of the main stakeholders related to biotechnology: 1) the industry, 2) governmental bodies, and 3) academia, both at individual and institutional level. The key question for the success of the Finnish biotechnology industry is to be able to take advantage of our domestic strengths, acknowledge our limited resources, and yet realize the global view of biotechnology. Our goal has been to connect our findings from the Finnish Biotechnology sector to the major trends recognized in the literature concerning international trade theory. Consequently, the following concepts form the basis of this strategy paper: 1. International Trade and the Comparative Advantage 2. Market Structure and Spatial Agglomeration 3. Infant Industry Argument, and 4. Cluster Dynamics.