Abstract
Based on interdisciplinary research the paper proves that behavioural economics provides a significant contribution to the entrepreneurship theory and can increase the effect of policies focused on entrepreneurship motivation. The paper demonstrates that entrepreneurship is a phenomenon, which contradicts a number of neoclassical assumptions, while behavioural economics provides explanations of these deviations and embeds entrepreneurship into modified models. These new models take into account behavioural aspects of entrepreneur’s decision. The paper determines three main reasons of restrained effect of entrepreneurship policies, which are limited knowledge about existing entrepreneurship policies, underestimation of entrepreneurial sphere opportunities and importance of non-pecuniary factors in entrepreneurial decision, which are not taken into account in existing entrepreneurship determinants, used by policy makers. The paper suggests that behavioural economics approaches should be used in entrepreneurship policies as they help to deal with similar issues in other spheres.
Highlights
If we consider two time periods t = 0 and t = 1 and two possible states: Entrepreneur — E and Capitalist — C, we can say that an individual, being entrepreneur in time period 0 might become a capitalist in time period 1, depending on the amount of capital accumulated in period 1 and other factors, which include behavioral characteristics of an individual. Another dynamic perspective on entrepreneurship is presented in the Global Entrepreneurship Monitor (GEM) study, one of the worlds leading research on entrepreneurship, according to which entrepreneurship can be considered as a process which starts from opportunities and skills identification and leads entrepreneur to the stage of ownermanager of an established business
The paper has demonstrated that application of Behavioral Economics in entrepreneurship policies can increase the effect of these policies due to a number of reasons
Because entrepreneurial behavior is better explained by behavioral economics in contrast to neoclassical models, which provide contradictory explanations of entrepreneurial choice, attitude to risk and gives limited attention to non-financial motivating factors
Summary
Entrepreneurship provides significant contribution to the economic development of any country [50], and though entrepreneurship is a quickly developing research field [46] and it received sufficient attention recently [48; 49], existing theory only partly explains the phenomenon due to the absence of a clear border between entrepreneurs and other economic agents [54] and due to behavioral biases, which influence entrepreneurial behavior [4], but contradict neoclassical economic models [34]. The lack of attention to behavioral insights leads to a decreased efficiency of entrepreneurship policies due to the fact that potential entrepreneurs have a biased perception of both external and internal factors, influencing entrepreneurial decision. The paper will consider the theoretical foundation of entrepreneurship and contribution of behavioral economics to the existing theory. The paper will identify the key factors, which decrease the effect of existing entrepreneurship policies and will demonstrate how behavioral economics can help in dealing with these issues
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