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Entrepreneurship, as defined by Stevenson (1983) “… is the pursuit of opportunity beyond the resources you currently control”. Stevenson and Gumpert (1985, pp. 85-94) advise that the preceding definition represents both the individual as well as the society that he or she is embedded in as he or she identifies an opportunity they desire to pursue, and as an entrepreneur they thus must seek the resources from the broader society.
The approach to entrepreneurship as voiced by Stevenson and
Gumpert (1985, pp. 85-94) builds upon earlier scholars such as
Schumpeter (1934) who identified the context of the interaction of the
individual and wider society. The title of Schumpeter’s (1934) work
“The Theory of Economic Development” could almost be suited to a title
for entrepreneurship, as Harper (2003, p. 1) advises that one of the
prominent features “… of a competitive enterprise economy is the
ability of people continually to seek out and seize opportunities for
profitable new activities in local and world markets”. That statement
mirrors the definition of entrepreneurship as put forth by Stevenson
and Gumpert (1985, pp. 85-94).
French economist Say, around 1800 stated that the entrepreneur “…
shifts economic resources out of an area of lower and into an area of
higher productivity and greater yield” (Drucker, 1985, p. 21). However,
starting a new venture does not necessarily constitute
entrepreneurship, and is not limited to new and or small businesses.
Drucker (1985, p. 22) advises that entrepreneurship is indeed being
practiced by all sizes of companies and corporations, and said activity
represents the creation of something new, or different, and or the
change / transmutation of value. As such, Drucker (1985, pp. 21) cites
McDonald’s, which is an example of entrepreneurship. And while its
product did not represent anything new, the management concepts,
techniques, standardization of the product, the process of designing
systems and tools, the understanding of the work that needed to be
done, and devising working and training techniques to transmit this to
others is what defines it as being entrepreneurial (Drucker, 1985, p.
21). He also uses General Electric as an example in that the company’s
“… long history of starting new entrepreneurial businesses from
scratch, and raising them into sizable industries” is another example
of this process (Drucker, 1985, p. 23), as well as Marks and Spencer of
the United Kingdom.
Shiller (2006) advises that “Entrepreneurship is a delicate organism”,
continuing that “It needs the right environment to flourish”. Welsch
(2003, p. 4) elaborates on Shiller’s (2006) view by stating:
“1. entrepreneurship flourishes in communities where resources are mobile,
2. entrepreneurship is greater when successful members of a community
reinvest excess capital in the projects of other community members,
3. entrepreneurship flourishes in communities in which the success of
other community members is celebrated rather than derided, and
4. entrepreneurship is greater in communities that see change as positive rather than negative.”
Given the risk taking nature of entrepreneurs, an examination of the
context of this word is deemed as an important consideration before
delving into the examination of the attitudes to risk and
entrepreneurship. Inherent in the analysis of an entrepreneurial
environment is risk, but, as stated by Culp (2001. 3) “Risk is
everywhere”. Burt (2001) advises that “risk is the probability that an
event will occur” and is “… often used to express the probability that
a particular outcome will happen following a particular exposure” and
also denotes the probability, or possibility of a loss. However, there
are differing views and attitudes regarding risk, just as there are
regarding entrepreneurship. These facets shall be examined herein,
equating the various attitudes and approaches to these two areas.
Chapter 1 – Introduction
Implicit in understanding the context of attitudes to risk and
entrepreneurship, are the words that constitute this examination. The
simplistic nature of the statement belies the striations inherent in
the different contexts. Follendore (2002) in commenting on that fact
that words carry meaning, also states that words also can limit
potential meanings. As shown by the preceding brief exploration of
entrepreneurship and risk, these words have a broader dimension that
one usually associates with them in general conversation, and or use.
Termed linguistics, the meaning of words represents the context in
which they are used in combination with other words and permits us to
communicate with one another (Hill, 1969, p. 3). The character of the
word stock of English has its roots in the Grmanic tribes of the pre
roman era and consists of French, Italian and other languages that have
been incorporated into the body of words utilized by English speakers
(Leith, 1997, p. 62). The foregoing is important in understanding that
the word dictionary is 1. “a reference book containing an alphabetical
list of words, with information given for each word …” that 3. lists “…
words or other linguistics items in a particular category …” (Houghton
Mifflin, 2007). Its etymology stems from medieval Latin dictinrium, and
from Latin dicti, which is a derivative of diction (Houghton Mifflin,
2007). The weakness of the English language lies in its lexical
ambiguity. Lin and Ahrens (2001) provide a further understanding of the
importance of words that in most instances have multiple meanings, thus
the phrase lexical ambiguity. They go on to add that “… multiple
meanings associated with … (words) … can be etymologically associated
…” The words utilized in the title of this examination fall into the
category of words that have “… greater number of meanings …” thus they
are “… recognized faster than words with few meanings” (Lin and Ahrens,
2001). Dictionary meanings, as stated by Lin and Ahrens (2001) are the
form that is usually preferred by researchers as a result of their
having standardized meanings “… comprehensive, and easy to obtain”.
However, semantically speaking, the meaning of the words attitudes,
risk and entrepreneurship change depending upon the context, thus
variables are added as a result of using these words in combination,
further compounding the equation. As borne out by the limited
exploration of meanings for entrepreurship and risk. Thus in exploring
the attitudes to the preceding, this examination shall explore these
combinations and seek to find common linkages to result in an
understanding of the foregoing.
Chapter 2 – Attitude
The context of this examination, which represents an exploration
into the ‘Attitudes to risk and entrepreneurship’, embodies looking at
the relationships of these words to define the phrase and bring out its
meanings. It is the context in which these words reside, as well as the
implications thus resulting, represent the underlying precepts that
provide for a broad field of interpretations and thus variants. In
beginning with the word ‘attitudes’, Houghton Mifflin (2007) defines it
as “1. A position of the body or manner of carrying oneself, 2. a. A
state of mind or a feeling; disposition, 2. b. An arrogant or hostile
state of mind or disposition, 3. The orientation of an air or
spacecraft relative to a reference …”. Its etymology is French, from
the Italian word ‘attitudine, which was adopted from late Latin
‘aptitd’ (Houghton Mifflin, 2007).
Schneider (2006) advises that the word ‘attitudes’ consists of two
components. One represents belief, and the other represents feeling
(Schneider, 2006). Beliefs are a mental concept association that are
usually “… associated with an identity … and as Dr. Schneider (2006)
states, “… are often stereotypical”. He continues that these
stereotypical beliefs are usually stemmed in the “… sociodemographic
differences of a person … (as well as their) … personal experience”.
Thus, based upon the context as well as usage, ‘attitudes’ brings with
it the usage context as formulated within an individual’s historical
framework as well. These historical preconceptions, however slight,
represent influencing factors acting upon the individual as they
mentally traverse through their personal feelings, and beliefs
regarding the word sets that follow, thus triggering other memory
concepts, feelings and beliefs. Schneider (2006), refers to Sherif in
discussing ‘norm formation which represents the prevailing
understanding(s) associated with a particular word in contemporary
common usage. We as individuals have grown through experiences,
associations, and circumstances in our environments as impacted upon by
family, friends, acquaintances, and our abilities to cope, to develop
personalities as well as thinking patterns that are the outgrowth of
these variables. We see the environment, filter out what isn’t
relevant, evaluate what remains, then process this information through
our individual self images “… and / or sets of expectations, and /or
personal characteristics, motivational factors and life experiences …
and then we respond with either “… reflective or spontaneous behavior
…” (Rice University, 2003). The preceding would appear in a diagram as
follows:
Figure 1 – Individual Environmental Perceptions
(Rice University, 2003)
The next step in the process is the examination of individual
behavior in the context of two individuals as an interaction. Such can
consist of one of three types of interactions, as represented by
superior to subordinate, leader to peers, and leader to boss (Rice
University, 2003). The importance of these distinctions is that such
interactions often tend to influence, impact, change, and or color a
person’s perceptions, and or processing thus causing them to arrive at
differing conceptualizations.
Figure 2 – Individual Environmental Perceptions in a Two Party Relationship
(Rice University, 2003)
Under Figure 2, it illustrates the interactive effects of environmental
perceptions in a two-party relationship, and how the images of
Individual A can impact upon the perceptions of Individual B.
Another facet of how external influences can impact upon an
individual’s thinking has been put forward by Janis (1972, pp. 15-30)
who states that groupthink is the psychological drive for consensus at
any costs which suppresses disagreement, and thus prevents the
appraisal of potential alternatives in decision making groups. Thus, an
individual in a bank will have a completely different set of mental
references that will occur when he or she hears the word risk, than
will an entrepreneur. In a limited and distant way, the preceding
represents a variant of groupthink, or the thinking adopted by an
individual as represented by being part of a group or enterprise. The
symptoms can be mild to strong based upon the degree of adaptation,
position and or other factors, and can fall into any of the following
categorizations (Janis, 1972, pp. 174-195, 242-258):
1. Negative Outcomes
- The examination of only a few alternatives,
- Not being critical of the ideas of others,
- Failure to examine alternatives early,
- Failure to seek expert opinion,
- Being very selective in terms of gathering information,
- Failure to have contingency plans,
2. Symptoms
- An illusion of invulnerability,
- The rationalization of poor decisions,
- A belief in the morality of the group,
- The sharing of stereotypes that guide the decision process,
- The exercising of direct pressure on others,
- Failure to express true feelings,
- The maintenance of the illusion of unanimity,
- The use of what are termed mindguards to protect others in the group from receiving or evaluating negative information
3. Solutions
- The utilization of a policy forming group that
thus reports to a larger group, thus forcing or bringing wider thinking
latitudes into the equation,
- Having the leaders remain impartial,
- The utilization of differing policy groups to accomplish different tasks,
- The division of individuals into groups and then a discussion on
differences to open up potential alternatives and additional thinking,
- Having discussions in sub groups that report back,
- The utilization of a Devil’s advocate to call into question all of the ideas raised by the group,
- Holding second meetings to provide another opportunity for other courses of action
The idea of the preceding is to help minimize preconceived notions,
ideas, and approaches to open them up to a broader field of discussion,
ideas, alternatives, and possibilities. The foregoing is applied in
individual situations by the individual taking the time for reflective
thinking away for the instant pressures of now or of another’s
influence.
Chapter 3 - Risk
The Houghton Mifflin (2007) dictionary defines risk as “ 1. The
possibility of suffering harm or loss; danger, 2. A factor, thing,
element, or course involving uncertain danger; a hazard …”. It, risk,
represents a concept that carries with it the potential for a negative
outcome or less that desired outcome that can potentially arise from a
specific, desired or combination of actions in the present or sometime
in the future (Douglas, 1992, pp. 102-105). Viscusi (1998, p. 5)
advises that “Individual risk perceptions are often in error …”,
explaining that “… people make mistakes with respect to how they
perceive risk and behave in the presence of uncertainty”. Douglas
(1992, p. 102) states that it has been a long held belief that
individuals are risk averse, which is based upon “… the theory of
rationale choice … (that) … assumes that the individual will always
choose according to his own self-interest …” which are choices, thus a
factor of rational behavior. Adams (1995, p. 1) simplifies the
understanding of risk by personalizing it in order for us to gain a
clearer perspective. He states that each and every one of us is “… a
true risk expert …” in that “… we have been trained by practice and
experience in the management of risk” (Adams, 1995, p. 1). Risk
represents something that we as human being learn in infancy, starting
with our trial and error processes representing learning how to crawl,
walk, and then talk (Adams, 1995, p. 1). He adds to Douglas’ (1992, p.
102) statement that individuals are risk averse as he points out the
example of that although we as child tend to act out of “… curiosity
and a need for excitement … (we are ) … curbed by … “ our sense of
danger (Adams, 1995, p. 1).
The importance of investigating the components and foundations of
risk as a part of the equation of this examination is crucial to the
examination of attitudes, risk and entrepreneurship in that one needs
the foundation of the theories, and usages attributed to these words
and concepts. Risk, as a function of perceived uncertainty and danger
is also subject to prevailing public views, experience factors and
acceptance. By any account, taking a flight in a piece of metal whose
outer skin is thin, with the entire container flexing while one travels
at speeds in excess of 400 km would not only sound risky to those born
in ancient Rome, it would be viewed as insane. Thus risk is a changing
variable based upon our degrees of exposure, the exposure of others,
and its place in what we subscribe to as normal routines. Risk taking
for one used to making investments, such as a financier, stock trader
or venture capitalist, whose circle of acquaintances, friends,
upbringing, and experiences is less than it is for a doctor, lawyer,
cab driver or railroad engineer, as they lack the exposure, and mental
familiarity that underpins uncertainty, and how to deal with it. The
foregoing represents the third of Starr’s (1969, pp. 1234) three laws
describing behavioral phenomena “… 3. The acceptable level of risk is
inversely related to the number of persons exposed to that risk”. The
other two segments of this law are (1969, p. 1238):
- “1. The public is willing to accept voluntary risks about 1,000 times greater than involuntary risks.
- 2. The acceptability of risks appears to be roughly proportional to the third power of the benefits”
Starr’s (1969, p. 1238) three putative laws however have not gained
wide spread acceptance with risk specialists on all grounds, however
there are those who agree with his assertion that there is a
relationship between risk acceptability ad benefits. Otway and Chen
(1975, pp. 76-80) however found that through a replication of the
analysis that the resulting data did not support Starr’s (1969, p.
1238) assertion in qualitative formulations, and instead found that
individuals were indeed willing to accept high involuntary risks with
large benefits. Despite the findings of Otway and Chen (1975, pp.
76-80) the jury is still out regarding Starr’s (1969, p. 1238) three
putative laws. And while we have been discussing risk as on an
individual basis, risk exists in all forms, thus the exploration of it
in institutions also has relevance as it is still a human facet.
Culp (2001, p. 15) advises that we find it “… tempting to associate
definition of risk with measures of risk, such as the variance of
returns on some asset” or in order mathematical means. Culp (2001, p.
15) asserts that risk can be shown through mathematical formulas to
that”… make sense in illustrative purposes”, adding that “Risk is a
concept, not a particular statistical construct”. In further exploring
risk, Culp (2001, p. 15) adds that attempting to glean an understanding
of risk “… at the conceptual level …” is a daunting task. He states
that there is a tendency to use terms such as interest rate risk,
maturity, accident, credit and so forth, which have their applications,
and adds that the conceptualization of the “… definition of risk varies
with the perspective” (Culp, 2001, p. 15). Thus, he offers perspectives
on how risk can be defined, and the relationships between them.
Firstly, Culp (2001, p. 15) offers what he terms the “event-driven
definition of risk” which works on the principle of “… the type of
event that can result in a loss”, such as a flood or earthquake. The
second type of risk Culp (2001, p. 16) defines is ‘market risk’ that
“… arises from the event of a change in some market determined asset
price, reference rate or index”. He explains that ‘delta represents the
value that is the “exposure that deteriorates as a result of the price,
or value of some risk factor changes”, with “‘gamma’ as the risk that
delta will change when the value of an underlying risk factor changes”
and ‘rho as the “risk that the interest rates used to discount future
cash flows in present value calculations will change and impose
unexpected losses on the firm (Culp, 2001, p. 17). Culp (2001, p. 18)
defines ‘liquid risk’ as that which “occurs in the event that cash
flows, and current balances are insufficient to cover cash outflow
requirements”, and ‘credit risk’. The other types of risk Culp (2001,
pp. 18-22) defines are ‘operational risk’, and ‘legal risk’, with other
risks representing a broad array of items such as intellectual risk,
customer loss risk, and supply chain risks as a few examples.
In equating risk with the subject of this examination, risk aversion
represents the division of risk that is associated with individuals.
Culp (2001, p. 34) refers to this as “…. the shape of a utility
function dictating the degree to which an individual is risk-averse,
risk-neutral, or risk-loving”. Barrett (1993, p. 2) states that inside
of these risk categories is what he terms the ‘disaster threshold’
whereby one engages in behavior that includes risk only when it does
not touch their threshold of misfortune beyond which they will not go
as such would ”… be experienced as a disaster”. He adds that when
individuals have a preference for “… risk-aversion … (it) … displaces
the preference for rational decision making” (Barrett, 1993, p. 79).
Under this type of thinking the rule is “… to take as few risks as is
compatible with the perception of opportunities, and to expect a
corresponding attitude in others” (Barrett, 1993, p. 79).
Lane and Cherek (2000) conducted a study on risk-aversion examining the
“… role of contingencies and experimental context in human decision
making”. They subjected twelve individuals to “… a series of
conditions that provided response alternatives of a small,
high-probability reinforcer (non-risky alternative), or a larger, low
probability reinforcer (risky alternative)”. The range of the
reinforcer probabilities and amounts were utilized via a discrete trial
design that had repeated trials conducted in multiple sessions. In
comparing the results with prior data it was found that the subjects in
the study “… displayed a strong preference for the non-risky response
alternative, even when doing so resulted in lost earnings” (Lane and
Cherek, 2000). These results support decision, and risk models that
emphasize the subjective as opposed to mathematically expected value of
reinforcers, and “… the data highlight the important role of
reinforcement contingencies, and context in risk-taking behavior” (Lane
and Cherek, 2000). Risk, as explained by Adams (1995), Viscusi (1998),
Douglas (1992), Starr (1969), and others is inherent in any choice that
involves probabilistic outcomes. Lane and Cherek (2000) found that in
“… contexts with two or more response alternatives, both the
probability, and size of each alternative presumably influence
decisions”.
Lawrence (1992) concurs with Lane and Cherek (2000) in that the
choice of decision making that occurs under uncertainty usually
includes options of selecting, and or choosing to use an informational
system, and a set of probable messages that take in current decisions.
Under this type of thinking the rule is “… to take as few risks as is
compatible with the perception of opportunities, and to expect a
corresponding attitude in others” Barrett (1993, p. 79) whereby the
taking of as few risks as possible is the preference in compatibility
with opportunity perception, and the corresponding attitude of others.
Kahneman and Tversky (1979, pp. 341-350), Silberberg et al (1988, pp.
187-195), and Slovic and Lichenstein (1968, pp. 1-17) all conducted
studies in risk aversion, and noted the tendency toward a mild approach
in conditions as represented by gain versus no-gain. Kahneman and
Tversky (1979, pp. 341-350) found that under some conditions
“…equivalent outcomes with real, and hypothetical outcomes, but results
from other studies are not so straightforward, and suggest that there
may be differences in subjects’ decision making when real payoff
contingencies are implemented”. Slovic (1969) found “… when choices
were hypothetical, subjects maximized gains and discounted the
probability of loss, but were more risk averse under conditions in
which they actually played out their choices”.
In equating risk as a variable of simply participating as opposed to
gain and or loss Rachlin and Frankel (1969, pp. 444-449) found that in
the utilization of gambling situations that contained no payoffs, the
individuals involved in the study were indifferent to the response they
selected, but when the probabilities of winning, and losing were
introduced whereby monetary gains, and or losses were involved, they
were real sensitive to the choices made.
The understanding of why people make decisions in situations whereby an
alternative is the better choice based upon some attributes of values
and in others the alternative is better based upon some other attribute
represents a problem of preferential choice, and judgment in
psychology. Castellan (1993, p. 20) advises that in general, when
people are “…faced with more complex decision problems involving many
alternatives, people often adopt simplifying strategies that are much
more selective in the use of information”. He continues that
“…strategies adopted tend to be non-compensatory, in that excellent
values on some attributes cannot compensate for poor values on other
attributes” (Castellan, 1993, p. 20). He elaborates on the foregoing by
making reference to a number of job applicants with basically the same
qualifications, however, the interviewer might decide that a published
article background is a determining factor which he utilizes to aid in
the decision process. The preceding represents a simplification
strategy for getting through, and or making a decision, which is termed
heuristics for choice, which can change based upon the conditions.
Tversky ( 1972, pp. 281-299) referred to such a strategy as an
elimination-by-aspects process. Heuristics such as the equal weighting
rule, majority of confirming dimensions, and lexicographic represent
differing methods for simplifying processing in the making of choices
(Castellan, 1993, p. 20). The preceding represents a factor of risk as
individuals work through their own history and experience base as well
as any applicable organizational or society rules in reaching a risk
based decision.
The equal weighting strategy simplifies the decision making process
by virtue of ignoring information concerning the relative importance of
each attribute (Castellan, 1993, p. 21). In the confirming decisions
heuristic, the general process entails the processing of pairs of
alternatives whereby “…values for each of the two alternatives are
compared on each attribute, and the alternative with a majority of
winning (better) attribute values is retained ….” (Castellan, 1993, p.
21). In this manner “…processing is simplified by requiring only
ordinal judgments of which alternative is better on an attribute,
rather than assessments of the degree to which one alternative is
better than the other … (thereby the) … process of pairwise comparison
is repeated until all alternatives have been evaluated, and the final
winning alternative identified” (Castellan, 1993, p. 21). In the final
heuristic, lexicographic choice works by “…first determining the most
important attribute, and then examining the values of all alternatives
on that attribute. The alternative with the best value on the most
important attribute is selected” (Castellan, 1993, p. 21). In cases of
ties, the second most important attribute is considered and the process
repeated until the decision making tie is eliminated.
The foregoing are aspects in risk decision making that some
individuals use in arriving at their choices, and are usually reserved
for more long term risk analysis decision making such as investment,
business decisions, long term purchases of higher monetary value and so
forth. These types of risk taking processes are also associated with
entrepreneurs.
Chapter 4 – Entrepreneurship
The Houghton Mifflin dictionary (2007) defines entrepreneur as “A
person who organizes, operates and assumes the risk for a business
venture”. An entrepreneur represents an individual who is usually of
high aptitude, who possesses certain characteristics that are found in
only a small portion of people in general, who pioneers change
(QuickMBA, 2007). The more popular definition that is thought of by
society when this word is mentioned, is of a person who wants to work
for themselves. The origin of entrepreneur is French, based on the word
‘entreprendre, which means ‘to undertake’.
Entrepreneurship represents the practice of beginning new companies,
and or organizations as usually represented by a new business as a
result of new opportunities that have, or are presenting themselves.
Such naturally entails elements of risk. The equation of risk in
entrepreneurship is represented by the specter of failure, which can be
a result of a multitude of business, supply, sales, market condition,
financing, timing, competitive, new innovations, cost, locale, and
other problems that are all interweaved to result in a complex series
of risks that must be examined, explored, decided upon, and dealt with
correctly to minimize failure, which does not necessarily translate
into success. Stevenson (1983), as previously referred to, describes
entrepreneurship represents “… the pursuit of opportunity beyond the
resources you currently control”, which he further amplifies with
Gumpert (Stevenson and Gumpert, 1985, pp. 85-94) that entrepreneurship
represents both the individual as well as the society that he or she is
embedded in as he or she identifies an opportunity they desire to
pursue and as an entrepreneur they thus must seek the resources from
the broader society.
Given all of the research, and studies devoted to entrepreneurship
no universal theory has been generated, as various disciplines have
their “…own unique way of viewing entrepreneurship which remains
relatively unaffected by the perspectives of other disciplines …”
(Gartner, 2001). All of the foregoing have been engaged in as a part of
the purpose of this study, which is to equate attitudes toward risk and
entrepreneurship. The three critical words that comprise this
examination have extremely broad interpretations as well as context
that are dependant upon when, and how they are used. For Drucker (1985,
p. 28) entrepreneurship is about risk. But his view does not take the
skew of said risk being negative or positive, but rather that risk is
inherent with the concept as it, risk, is inherent with business in
general, simply that entrepreneurial risk is a different form. Thus,
the attitudes concerning risk and entrepreneurship are individual and
dependant upon the prevailing social circle, or societal views that can
take on any the differing contextual concepts of any of the words in
arriving at a mental conceptualization of what these words mean in
combination. He describes entrepreneurship as “… ‘risky’ mainly because
so few of the so-called entrepreneurs know what they are doing
(Drucker, 1985, p. 29). And continues that they “… lack the methodology
… (and) …violate elementary and well known rules (Drucker, 1985, p.
29). Thus Drucker (1985) is seemingly saying that the high degree of
complexity inherent in entrepreneurship, as either demands or requires
an individual who is usually of high aptitude, who possess certain
characteristics that are found in only a small portion of people in
general, who pioneers change (QuickMBA, 2007).
The attention being devoted to an examination of entrepreurship is
deemed as an important part of the risk attitude equation in that like
risk, and attitude, it, entrepreurship, entails a large number of
variants in how they are viewed contextually. Drucker (1985, p. 30)
aids in providing clarity by advising that entrepreneurship requires
innovation, as it “… is the specific instrument …” of the process. It
represents the factor “…that endows resources with a new capacity to
create wealth …” (Drucker, 1985, p. 30). He explains that innovation
“… creates a resource …” and that a resource represents something that
has no value until a need, and use is found for it, and thus endows it
with an economic value (Drucker, 1985, p. 30). To illustrate, he points
to various plants, rock, and minerals that went unused for centuries
until a use were found for them. Owing to this view, Drucker (1985, p.
33) advises that innovation represents an economic term, in this
context, as opposed to a social or technical one. He adds that it,
innovation, “…can be defined the way J. B. Say defined
entrepreneurship, as changing the yield of resources ...” as well as
being “… defined in demand terms rather than in supply terms, that is,
as changing the value and satisfaction obtained from resources by the
consumer …” (Drucker, 1985, p. 33).
Francis and Demiralp (2006) address the issue of entrepreeurship in
the context of “Wealth, Entrepreneurship and Occupational Experience”
citing that as a factor of the probability of becoming an entrepreneur,
one is likely to be male, a member of the Caucasian race, in the upper
middle age bracket, and married. They cite that the theoretical aspects
of the preceding profile represent facets such as risk aversion, along
with entrepreneurial ability, as mentioned by Drucker (1985, p. 30) “…
and the desire to be one’s own boss” (Francis and Demiralp, 2006).
Francis and Demiralp’s (2006) study found that risk taking, and
entrepreurship is a factor of prior risks, and experiences, as
summarized below:
1. People aspiring to be entrepreneurs are not likely to be disauded as a result of having a lack of sufficient assets,
2. Assets, which are an important variable in entrepreururial activity, does not impact the decision to become an entreprenuer.
3. The
desire for autonomy, along with risk taking behavior as well as ability
were important factors in the decision reached by individuals to become
entrepreneurs.
4. In general, those people that became entrepreneurs had a history of
poor wage / work experience which consisted of them having lower wages
than they either felt they were capable of, or offerred as well as them
having longer periods between work, and a high frequency of job
changes.
The foregoing indicates that risk is lessened as a person
experiences more of it through frustration, periods of monetary
uncertainty, and a lack of funds. The preceding support the views, and
findings as made by Rachlin and Frankel (1969, pp. 444-449) where they
used the instance of a gambling situation to test risk aversion, and
found that when situations contained no payoffs, the individuals
involved in the study were indifferent to the response they selected in
terms of risk. The preceding seemingly corresponds to the findings of
Francis and Demiralp’s (2006) in that in the instance of low wage jobs,
long unemployment spells, and or high job changes, the individual sees
more risk in these types of situations than in one that they seemingly
have more control. Culp (2001, p. 34) referred to this type of
situation as risk aversion being a product of risk as associated with
the person, which Barrett (1993, p. 2) explains as the ‘disaster
threshold’ “…whereby one engages in behavior that includes risk only
when it does not touch their threshold of misfortune beyond which they
will not go as such would ”… be experienced as a disaster.
Carland et al(2001) in their study of entrepreneurship, point to three characteristics they uncovered through research:
1. A propensity for risk taking
In reaching this conclusion,
Carland et al (2001) point to an article by Palmer (1971, p. 78) who
oberved that risk assessment, and risk taking represent primary
entrepreneurial elements. However, this view is not universal, as
Brockhaus (1980, pp. 509-520) in his research indicated that he could
not find or correlate any significant additional risk taking on the
part of entrepreneurs. However, there are others who see the situation
in the same manner as Carland et al (2001) as well as Palmer (1971, p.
78). The assertion that a higher propensity for risk taking, and risk
assessment is present in entrepreneurs is shared by Sexton and Bowman
(1986, pp. 40-57) which Carland et al (2001) cited, as well as McGrath
et al (1992, pp. 115-135).
2. Preference for Innovation
Timmons (1978, pp. 5-17), Briockhaus (1982) and Gartner (1990, pp.
15-28) identify innovation as an important characteristics that
entrepreuers have, and or cause, with creativity and innovation cited
as inherent facets of being an entrepreneur. In the same view, Olsen
(1985, pp. 25-31) credits invention as having a similar role as
innovation in the role of entrepreneurship, which Carland et al (1984,
pp. 354-359) in another article, indicate is a critical factor that
marks a difference between managers and the owners of small businesses.
3. Achievement
Carland et al (2001) in citing work done by Hornaday and Bunker (1970,
pp. 47-54), DeCarlo and Lyons (1979, pp. 22-29) and Begley and Boyd
(1986, pp. 99-108) indicate that research has shown there is a positive
relationship between achievement as a motivational factor in
entrepreneurship. Johnson (1990, pp. 39-54), as cited by Carland et al
(2001) adds that in his research such a link, achievement, with respect
to it being an important component of entrepreneurship was not
established, however, he did add that achievement is a facet of the
characteristics of entrepreneurs and suggested that more definitive
work in this area was needed.
Carland et al (2001) referred to the Jackson Personality Inventory,
a personality test that uncovers important personality as follows:
Figure 3 – Jackson Personality Inventory
(Sigma Assessment Systems, 2007)
Complexity
Breath of Interest
Innovation
Tolerance
Socialability
Social Confidence
Energy Level
Empathy
Anxiety
Cooperativeness
Social Astuteness
Risk Taking
Organization
Traditional Values
Responsibility
Analyical
Extroverted
Emotional
Opportunistic
Dependable
Carland et al (2001) refer a sampling of 211 American owners of
small businesses, and 424 Finnish small business owners, with the
sampling characetristics and results shown on the following Tables:
Table 1 – Sample Demographics (Part 1)
(Carland, 2001)
(May not add to 100% due to missing responses)
American Finnish
Type of Business
Retail 38% 18%
Service 44% 44%
Wholesale 3% 4%
Construction 9% 15%
Manufacturing 4% 15%
Annual Sales
$100,000 or less 36% 34%
$100,000 to $250,000 19% 16%
$250,000 to $500,000 9% 14%
$1,000,000 and over 14% 15%
Number of Employees
10 or less 84% 78%
11 to 25 8% 10%
26 to 50 5% 2%
51 or more 2% 2%
Business Form
Proprietorship 51% 25%
Partnership 13% 38%
Corporation 36% 38%
Table 1 – Sample Demographics (Part 2 – continuation)
(Carland, 2001)
(May no add to 100% due to missing responses)
American Finnish
Age of Business
Over 10 years 54% 50%
5 to 10 years 38% 32%
1 to 4 years 4% 17%
Sex of Respondent
Male 68% 75%
Female 32% 25%
Age of Respondent
25 to 35 years 23% 15%
36 to 45 years 35% 29%
46 to 55 years 24% 41%
Over 55 years 13% 13%
Education of Respondent
12 years or less 33% 73%
12 to 15 years 27% 9%
16 years 23% 3%
More than 16 years 13% 9%
Table 2 – Study Results – Descriptive Statistics
CEI = Carland Entrepreneurship Index
INN = Jackson Preference for Innovation Score
ACH = Jackson Need for Achievement Score
Risk = Jacksn Risk Taking Propensity Score
CEI ACH INN RISK
American Sample
Mean Score 20.5 12.3 13.7 9.5
Variance 30.1 7.7 19.1 27.0
Standard Deviation 5.5 2.8 4.4 5.2
Minimum Score 6 3 1 0
Maximum Score 35 16 20 19
Number of Cases 209 209 209 209
CEI ACH INN RISK
Finnish Sample
Mean Score 18.3 10.6 13.3 7.3
Variance 26.2 5.8 18.3 16.0
Standard Deviation 5.1 2.4 4.3 4.0
Minimum Score 4 4 1 0
Maximum Score 31 16 20 19
Number of Cases 434 434 434 434
CEI ACH INN RISK
Combined Sample
Mean Score 19.0 11.1 13.5 8.0
Variance 28.4 7.0 18.5 20.6
Standard Deviation 5.3 2.7 4.3 4.5
Minimum Score 4 3 1 0
Maximum Score 35 16 20 19
Number of Cases 643 643 643 643
The next Table represents an empircal analysis of the correlation
between scores representing the four instruments utilized in the
survey. It shows that the correlations achieved were high between the
two samples:
Table 3 – Correlation Matrix
CEI = Carland Entrepreneurship Index
INN = Jackson Preference for Innovation Score
ACH = Jackson Need for Achievement Score
Risk = Jacksn Risk Taking Propensity Score
CEI ACH INN RISK
American Sample
CEI 1.00
ACH 0.45 1.00
INN 0.55 0.45 1.00
RISK 0.58 0.28 0.55 1.00
Finnish Sample CEI ACH INN RISK
CEI 1.00
ACH 0.50 1.00
INN 0.54 0.44 1.00
RISK 0.60 0.40 0.51 1.00
Combined Sample CEI ACH INN RISK
CEI 1.00
ACH 0.51 1.00
INN 0.54 0.43 1.00
RISK 0.60 0.39 0.52 1.00
Table 4 indicates that the Americans generated scores that were
significantly higher for Entrepreneurship Index, achievement and risk
taking propensity.
Table 4 – Analysis of Variance
Between American and Finnish Responses
Note: Dependent Variable: CEI, Carland Entrepreneurship Index Squared Multiple R: .04
Source
Nationality
Error Sum of Squares
665.18
17595.82 DF
1
641 Mean-Square
665.18
27.45 F-Ratio
24.23 P
.000
Note: Dependent Variable: Need for Achievement Squared Multiple R: .09
Source
Nationality
Error Sum of Squares
413.17
4110.95 DF
1
641 Mean-Square
413.17
6.41 F-Ratio
64.42 P
.000
Source
Nationality
Error Sum of Squares
15.95
11881.62 DF
1
641 Mean-Square
15.95
18.54 F-Ratio
0.86 P
.354
Source
Nationality
Error Sum of Squares
686.63
12515.24 DF
1
641 Mean-Square
686.63
19.53 F-Ratio
35.17 P
.000
T-Test Between Groups with Significant F-Ratios
The Carland Entrepreneurship Index
Group
American
Finnish Mean
20.46
18.29 N
209
434 SD
5.49
5.12 T
4.80 P
.000
The Jackson Need for Achievement Score
Group
American
Finnish Mean
12.30
10.59 N
209
434 SD
2.78
2.40 T
7.63 P
.000
The Jackson Risk Taking Propensity Score
Group
American
Finnish Mean
9.53
7.33 N
209
434 SD
5.19
3.99 T
5.42 p
.000
Table 5 indicates a strong relationship between the American and
Finnish samplings regarding R2 scores representing 46% and 48%
respectively.
Table 5 – Regression Analysis
American Sample
Note: Dependent Variable: CEI Squared Multiple R: .457
Variable
Constant
Ach Score
Innovation Score
Risk Taking Score Coefficient
.794
0.476
0.287
0.408 Std Error
1.331
0.114
0.083
0.065 Std Coef of Tolerance
0.0 0.000
0.241 0.7985
0.228 0.6072
0.386 0.7005 T
5.103
4.190
3.456
6.281 P
.000
.000
.001
.000
Source
Regression
Residual Sum of Squares
2.859.142
3398.838 DF
3
205 Mean-Square
953.047
16.580 F
57.483 P
.000
Finnish Sample
Note: Dependent Variable: CEI Squared Multiple R: .475
Variable
Constant
Ach Score
Innovation Score
Risk Taking Score Coefficient
5.425
0.526
0.282
0.483 Std Error
0.846
0.085
0.051
0.054 Std Coef of Tolerance
0.0 0.0000
0.247 0.7650
0.236 0.6751
0.377 0.6993 T
6.411
6.187
5.543
9.025 P
.000
.000
.000
.000
Source
Regression
Residual Sum of Squares
5389.787
5948.049 DF
3
430 Mean-Square
1796.596
13.833 F
129.88 P
.000
Combined Sample
Note: Dependent Variable: CEI Squared Multiple R: .487
Variable
Constant
Ach Score
Innovation Score
Risk Taking Score Coefficient
5.759
0.523
0.280
0.453 Std Error
0.696
0.065
0.043
0.040 Std Coef of Tolerance
0.0 0.0000
0.260 0.7746
0.261 0.226 0.6733
0.262 0.385 0.6984 T
8.309
8.082
6.544
11.361 P
.000
.000
.000
.000
Source
Regression
Residual Sum of Squares
8886.173
9374.825 DF
3
639 Mean-Square
2962.058
14.671 F
201.90 P
.000
Table 6 represents a new regression analysis that utilises the
combined scores illustrating the effect on the Carland Entrepreneurship
Index was not distorted. R2 scores remain for the American, Finnish and
Combined Sample at 46%, 47% and 48%, respectively.
Table 6 – Regression Analyis
Utilising a Combined Independent Variable
Note: Dependent Variable: CEI American Sample Squared Multiple R: .453
Variable
Constant
Combined Scores Coefficient
7.176
0.374 Std Error
1.053
0.029 Std Coef of Tolerance
0.0 0.0000
0.673 .100E+01 T
6.815
13.095 P
.000
.000
Source
Regression
Residual Sum of Squares
2835.331
3422.650 DF
1
207 Mean – Square
2835.331
16.535 F
171.48 P
.000
Note: Dependent Variable: CEI Finnish Sample Squared Multiple R: .467
Variable
Constant
Combined Scores Coefficient
5.609
0.406 Std Error
0.677
0.021 Std Coef of Tolerance
0.000 0.0000
0.683 .100E+01 T
8.288
19.439 P
.000
.000
Source
Regression
Residual Sum of Squares
5290.197
6047.639 DF
1
432 Mean – Square
5290.197
13.999 F
377.89 P
.000
Note: Dependent Variable: CEI Combined Sample Squared Multiple R: .479
Variable
Constant
Combined Scores Coefficient
5.975
0.399 Std Error
0.558
0.016 Std Coef of Tolerance
0.0 0.0000
0.692 .100E+01 T
10.714
24.271 P
.000
.000
Source
Regression
Residual Sum of Squares
8745.046
9515.952 DF
1
641 Mean – Square
8745.046
14.845 F
589.07 P
.000
It should be noted that the above study represents a sampling of
small business owners in the United States and Finland which, moreso
for the United States, is out of skew with regard the total universe of
small business owners. As such, the sampling size is subject to an
error rate that exceeds 10%. Termed ‘random sampling’ , which is also
known as probability sampling, the risk is that the sample size may not
be large enough to adequately represent the population being tested as
a whole (Deming, 1950, pp. 76-78). In order to correct for sampling
size a standard random sampling equation needs to be employed, which
was not the case in the sutdy indicated, thus the results could have
been skewed by a few respondents (Deming, 1950, pp. 76-78). Allowing
for this limitation of the study, it nevertheless does provide valuable
information concerning:
1. A propensity for risk taking
2. Preference for innovation, and
3. Achievement
The study did show that Americans are more risk takers than their
Finnish counterparts, with the Finnish just as strongly oriented toward
innovation as Americans, with achievement not representing as strong a
motivational factor in the Finns (Carland, 2001). Risk, has many
definitions, based upon the mode of reference that is being utilized to
contextualise it. The Stanford Encyclopedia of Philosophy (2007) states
that risk can be effectively categorised into five definitions based
upon their use across a broad range of disciplines:
1. Risk, as an unwanted event that may occur or may not occur,
2. Risk, as the cause and or contributor to an unwanted event that may occur or may not occur,
3. Risk, as the probability of an unwanted event may occur or may not occur,
4. Risk, as the statistical value expectation of an unwanted event that may occur or may not occur,
5. Risk, as a factor of a decision that is made under conditions that have known probabilities.
It is important not to confuse risk with uncertainty as they mean
different things. Risk represents a strong objective component (truth),
whereas uncertainty is subjective (belief) (Stanford Encyclopedia of
Philosophy, 2007). An example of the foregoing are when one does not
know if a snake is poisonous. That is uncertainty. In the field of risk
sciences, there are objective and subjective risk (Stanford
Encyclopedia of Philosophy, 2007). Objective risk refers to the
frequent probability interpretation, with subjective risk representing
a more problematic aspect as it is more ambiguous (Stanford
Encyclopedia of Philosophy, 2007)..
Chapter 5 – Survey
As part of the examination of attitudes to risk a primary survey
was conducted utilizing the questions as indicated in Survey 1, which
represents the same questionnaire given to students as well as
employees, totaling 200 for each category, thus representing 400 in
all. The purpose of the survey was a test to determine the risk
attitudes of these groups.
Said survey generated the following responses for the indicated questions.
Table 7 – Primary Risk Attitude Survey of Students and Employees
(Part 1 of 3)
Age 20 to 30 31 to 40 41 to 50 51 to 66
Number in Group 58 56 49 17
Males 43 44 35 3
Females 15 12 14 14
White British 32 46 40 34
White Other 3 12 2 1
Black African 8 2 5 1
Black African 3
Black Caribbean 1
Black Other
Indian 5 2 1
Pakistani 1
Bangladeshi
Chinese
Black British
Other 10 2 1
Education
No Formal Qualifications 2
NVQ/City & Guilds 1 4 6 3
GNVQ 5 6 13 4
HNC/HND/SHNC/SHND 46 41 29 24
GCSE/O-Level/Scottish O grade 6 5 1 4
A-Level/Scottish Higher
Married
Yes 17 20 11 10
No 41 36 38 27
Self Employed
Yes 11 13 12 8
No 11 15 13 12
Possibly 26 13 15 4
Don’t Know 6 3 2
Have already 4 12 8 13
Table 7 – Primary Risk Attitude Survey of Students and Employees
(Continued Part 2 of 3)
Age 20 to 30 31 to 40 41 to 50 51 to 66
Occupation Code
Have parents been self employed
Yes 43 31 30 16
No 15 25 19 21
Self employed earnings
₤ per week
₤ per month
₤ per year
Risk Attitude Questions
Accident/illness/medical policy
Yes 35 18 16 15
No 23 38 33 22
Smoke
Yes 24 44 41 32
No 15 12 8 5
Travel insurance
Yes 16 6 5 7
No 41 50 44 30
Credit card interest
Yes 38 31 31 26
No 20 25 18 11
Stocks, share or unit trusts
Yes 46 47 31 24
No 12 9 18 13
Football pools or lottery
Yes 11 3 7 5
No 47 53 42 32
Personal savings account
Yes 53 52 46 36
No 5 4 3 1
Pedestrian crossings
Yes 39 35 20 19
No 19 21 29 18
Table 7 – Primary Risk Attitude Survey of Students and Employees
(Continued Part 3 of 3)
Age 20 to 30 31 to 40 41 to 50 51 to 66
Attitude to statements
Bank manager
Strongly Agree 5 7 5 2
Slightly Agree 12 3 3 6
Neither 8 8 7 5
Slightly Disagree 11 13 14 6
Strongly Disagree 22 24 20 18
Risk situations
Strongly Agree 20 11 12 6
Slightly Agree 18 26 14 14
Neither 7 8 11 6
Slightly Disagree 9 7 10 6
Strongly Disagree 4 4 2 5
Debt
Strongly Agree 5 7 10 4
Slightly Agree 13 14 13 8
Neither 9 6 6 2
Slightly Disagree 17 11 7 7
Strongly Disagree 14 18 13 16
Uncertainty
Strongly Agree 6 6 5 3
Slightly Agree 14 15 7 4
Neither 10 8 7 10
Slightly Disagree 22 19 18 13
Strongly Disagree 6 8 12 7
₤1,000 in 2005 scenario
₤1,050
Better 15 32 20 21
Worst 26 7 11 4
Same 17 17 18 12
₤1,100
Better 27 21 15 13
Worst 5 15 15 12
Same 26 20 20 12
₤1,000
Better 25 33 24 23
Worst 7 9 5 7
Same 26 14 20 7
₤1,200
Better 9 12 10 9
Worst 37 35 25 19
Same 12 9 14 9
₤950
Better 41 44 31 25
Worst 6 2 4 6
Same 11 10 14 6
The preceding Table 7, in three parts, shows a marked similarity across
all questions regarding responses. Educationally, most respondents fell
into the HNC/HND/SHNC/SHND category with most indicating that they are
either not married or living with someone. Either being self employed
or thinking it might be an option in the future was indicated over the
options of no, don’t know or have already showing at least an interest
in this direction as a thought by the respondents. In most instants,
specially among the 20 to 30 age group, their parents had been self
employed, and this group showed less of a risk leaning regarding having
an accident/illness or medical insurance policy, smoking, travel
insurance, all practical and or common sense facets, but they exhibited
more risky or progressive behavior in stocks, but not football polls
and the lottery. All of the age groups scored high on having personal
savings and indicate they would not have problems speaking to a bank
manager about a loan as well as enjoying the risk of situations that
many consider challenging along with not having a fear of being in debt
and being able to handle uncertainty. The preceding shows consistency
concerning confidence and a belief in themselves.
Chapter 6 – Conclusion
Attitudes toward risk and entrepreneurship, if one is to be or
become an entrepreneur need to show some commonality with regard to
managing risk through understanding it as an event or events that can
happen at anytime to anyone, anywhere (Culp, 2001, p. 3). The preceding
entrepreneurial trait of understanding that they will be dealing with
more risk than those that are employed seemingly indicates that
“individual risk perceptions are often in error …”, explaining that “…
people make mistakes with respect to how they perceive risk and behave
in the presence of uncertainty” (Viscusi, 1998, p. 5). The preceding
goes against the traits of the majority of the population that Douglas
(1992, p. 102) states are risk averse as a result of the theory of
rationale choice which is based upon the fact that when given, or they
have the choice, people will act in their own self interests. Barrett
(1993, p. 79) also agrees with the assertion of Douglas (1992, p. 102),
as do Kahneman and Tversky (1979, pp. 341-350), Silberberg et al (1988,
pp. 187-195) and Slovic and Lichenstein (1968, pp. 1-17). Culp (2001.
p. 15) advises that risk is a concept that varies depending upon the
perspective, consisting of:
- event driven risk,
- market risk,
- liquid risk,
- operational risk, and
- legal risk
Having a strong belief in one’s ability to manage, face and deal
with various degrees and instances of risk on almost a daily basis is a
fact of life for entrepreneurs. Drucker (1985, p. 29) describes
entrepreneurship as ‘risky’ in that few entrepreneurs know what they
are doing as well as lacking the methodology, and well rounded
business, social and personal skills. And while tests to determine
one’s entrepreneurial abilities are not conclusive, they do provide a
guide via which to make an assessment.
All of these tests indicate a number of commonalities:
Table 8 – Online Entrepreneurial Tests
Test Category
Self-starter Yes Yes Not indicated as a definitive category but is seemingly covered under leadership and high energy level
Feelings toward other people Yes Yes Not specifically indicated, however is a part of leading others
Ability to lead others Yes Yes Yes
Taking responsibility Yes Yes Yes
Good organizer Yes Yes Not caterorgised
Good Worker Yes Yes Not caterorgised
Good at making decisions Yes Yes Yes
People can trust what you say Yes Yes Not caterorgised
Get things done to the end Yes Yes Not caterorgised
Keeping records Yes Yes Yes
The study of entrepreurship conducted by Carland et al (2001) uncovered
three main characteristics as a result of their research:
1. propensity for risk taking,
2. perference for innovation,
3. achievement.
Carland et al (2001) in their study, utilized the Jackson
Personality Inventory which represents a personality test geared to
uncovering important facets such as leadership, dependability,
self-displine and whether one has the ability to make a good impression
on others. In terms of entrepreuerial abilities and or traits, it
lists:
1. analyical, which includes innovation
2. extroverted, which includes social confidence and scoialability, which relates to leadership
3. emotional, which includes coppoerativeness, a needed trait to get people to work, cooperate and see things your way
4. Opportunitistics, which includes risk taking, and
5. dependable, which includes organization and responsibility.
These aspects compare with the traits indicated on the online
entrepreurial tests as well as traits and attitbutes as indicated by
Culp (2001), Drucker (1985), Francis and Demiralp (2006), McGrath et al
(1992, pp. 115-135), Timmons (1978, pp. 5-17), Briockhaus (1982) and
Gartner (1990, pp. 15-28). In their survey of American and Finnish
small business owners found that Americans are more risk takers than
their Finnish counterparts, with the Finnish just as strongly orietned
toward innovation as Americans, with achievement not representing as
strong a motivational factor in the Finns (Carland, 2001). The
attitudes to risk and entrepreurship are based upon perspective, which
the Carland (2001) study shows means conceptually the same thing across
differing cultures.
Appendices
1. Questionnaire on Risk Attitudes for Dissertation
Research
I am currently a final year Economics student at Royal Holloway
College, University of London, and am working on my dissertation to
investigate the relationship between entrepreneurship and risk
attitudes.
This questionnaire will take you approximately 2 minutes to fill in.
The survey is mainly to find out risk attitudes of people from
different background. The information collected will remain totally
anonymous and confidential. Please fill in all the required details.
Effort and time spent on completing it is greatly appreciated.
Basic Details (please tick the box where appropriate)
1. Age:
2. Are you: Male Female
3. What do you consider to be your race or cultural origin?
White British Black Other Black British
White Irish Indian Other
White Other Pakistani
Black African Bangladeshi
Black Caribbean Chinese
4. Please tick all the qualification that you have:
No formal qualifications GCSE/O-Level/Scottish O grade
NVQ/City & Guilds A-Level/Scottish Higher
GNVQ Degree
HNC/HND/SHNC/SHND Other
5. Subject of your degree: (if you have one)
6. Are you married or living with someone as ‘married’? Yes No
7. Do you think you will ever become self-employed in your career?
Yes No Possibly Don’t know Have already
8. Looking at the occupation codes (see back page) please indicate which category corresponds to your occupation.
Occupation Code: (2 digit code)
9. Have either of your parents ever been self-employed? Yes No
10. How much would you have to be sure of earning to induce you to
become self employed rather than employed? Please fill in one of the
following:
₤ per week or
₤ per month or
₤ per year
Risk Attitude Related Questions
1. Please tick Yes or No
Yes No
a) Do you have a personal accident/illness or medical insurance policy?
b) Do you smoke?
c) Do you usually take out travel insurance when you travel abroad?
d) Have you incurred interest charges on credit cards in the last year?
e) Have you ever bought any stocks, share or unit trusts?
f) Do you regularly do the football pools or the lottery?
g) Do you have a personal savings account?
h) Do you walk out of your way to cross roads at pedestrian crossings?
2. Please tick the boxes best describing your attitude to the statements.
Strongly Slightly Neither Slightly Strongly
Agree Agree Disagree Disagree
a) I would not feel comfortable speaking to a
bank manager about getting a business loan.
b) I enjoy the risk of situation that many consider
challenging.
c) I am not scared of being in debt.
d) I’m not the sort of person who handles
uncertainty well.
3. Someone offers you a bet. You will win a net amount of ₤1,000 for
probability 50% or end up losing the initial bet for 50%. Please tick
the maximum amount that you are prepared to pay for this gamble.
Will not participate ₤200 ₤800
₤50 ₤400 ₤1,000
₤100 ₤600 ₤1,100
4. If you are given ₤1,000 in 2005 and five of your friends (A, B,
C, D and E) are given the following amounts in 2006. How would you
consider your situation compare to theirs? Are you better off, worse
off or the same?
Better Worse Same
A ₤1,050
B ₤1,100
C ₤1,000
D ₤1,200
E ₤ 950
This is the end of the questionnaire.
Thank you for your patience.
2. Questionnaire on Risk Attitudes for Dissertation
Research
I am currently a final year Economics student at Royal Holloway and am
working on my dissertation to investigate the relationship between
entrepreneurship and risk attitudes.
This questionnaire will take you approximately 2 minutes to fill in.
The survey is mainly to find out risk attitudes of people from
different background. The information collected will remain totally
confidential and be only for academic purposes. Please fill in all the
required details. Effort and time spent on completing it is greatly
appreciated.
Basic Details (please tick the box where appropriate)
1. Age:
2. Are you: Male Female
3. What do you consider to be your race or cultural origin?
White British Black Other Black British
White Irish Indian Other
White Other Pakistani
Black African Bangladeshi
Black Caribbean Chinese
4. Please tick all the qualification(s) that you have:
No formal qualifications GCSE/O-Level/Scottish O grade
NVQ/City & Guilds A-Level/Scottish Higher
GNVQ Degree
HNC/HND/SHNC/SHND
Other
5. Subject of your degree:
6. Are you married or living with someone as ‘married’? Yes No
7. Do you think you will ever become self-employed in your career?
Yes No Possibly Don’t know Have already
8. Have either of your parents ever been self-employed? Yes No
9. By the age of 30, how much do you expect to be earning gross per year?
As self-employed ₤ As employed ₤
Risk Attitude Related Questions
1. Please tick Yes or No Yes No
a) Do you have a personal accident/illness or medical insurance policy?
b) Do you smoke?
c) Do you usually take out travel insurance when you travel abroad?
d) Have you incurred interest charges on credit cards in the last year?
e) Do you regularly do the football pools or the lottery?
f) Do you have a personal savings account?
g) Have you used a slot/fruit machine in the last week?
h) Do you walk out of your way to cross roads at pedestrian crossings?
i) Have you ever participated in any of the following sports?
handgliding, parascending, parachuting, bungee-jumping, climbing,
flying or motor racing
2. Please tick the boxes best describing your attitude to the statements.
Strongly Slightly Neither Slightly Strongly
Agree Agree Disagree Disagree
a) I would not feel comfortable speaking to a
bank manager about getting a business loan.
b) I enjoy the risk of situation that many consider
challenging.
c) I am not scared of being in debt.
d) I’m not the sort of person who handles
uncertainty well.
3. Someone offers you a bet. You will win a net amount of ₤1,000
with probability 0.5 or end up losing the initial bet and your stake
with probability 0.5. Please tick the maximum amount you are prepared
to pay for this gamble.
Will not participate ₤200 ₤800
₤50 ₤400 ₤1,000
₤100 ₤600 ₤1,100
4. If you are given ₤1,000 in Dec 2005 and five of your friends (A,
B, C, D and E) are given the following amounts in Dec 2006. How would
you consider your situation compare to theirs? Are you better off,
worse off or the same?
Better Worse Same
A ₤1,050
B ₤1,100
C ₤1,000
D ₤1,200
E ₤ 950
This is the end of the questionnaire.
Thank you for your patience.
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