Entrepreneur’s perceived risk and risk-taking behavior in the small-sized creative businesses of tourism sector during COVID-19 pandemic

Iin Agustina,Mohd Na’Eim Bin Ajis,Hafid Aditya Pradesa

doi:10.31106/jema.v18i2.12563

Abstract

The small-sized creative business in the tourism sector has been suffering risks of bankruptcy since the outbreak of coronavirus disease (COVID-19). Drawing on the basic theory of reasoned action, this study aims to investigate entrepreneur risk perceptions affect their risk-taking behavior. This study only focuses on the determinants of risk-taking, with regards to the perspective from an entrepreneurial lens in perceiving business, product, and profit risk during the COVID-19 pandemic. A quantitative approach using a structured questionnaire survey was utilized to attain the study objective. The dataset consists of 177 valid responses by the owner of the small-sized creative business of Indonesia’s tourism sector (mainly in handicraft and fashion categories). Correlation analysis and partial least square (PLS) modeling were employed to examine the causal relationship between constructs. Our empirical findings revealed that while entrepreneurs' perceived risk on business and product aspects was the most significant aspect that could affect their risk-taking behavior, entrepreneurs' perceived risk on profit aspects have an insignificant influence on their risk-taking behavior. It implies that the higher the level of business and product insecurity perceptions (as long as it can generate profitability and ensure business sustainability), the higher the level of risk-taking of entrepreneurs.

Highlights

Since early 2020, the rise of the pandemic outbreak has had a tremendous impact on whole countries
The result of the study revealed that among the three aspects of risk perception assessed by entrepreneurs, there are only two aspects that were proven to have an influence on the degree of entrepreneurial risk-taking namely business insecurity and product insecurity
It implies that the higher the level of business and product insecurity perceptions, the higher the level of risk-taking of entrepreneurs

Summary

Introduction

Since early 2020, the rise of the pandemic outbreak has had a tremendous impact on whole countries. The deepening multiple pandemic effects in many countries has resulted in a general trend of increasingly restrictive policies toward many aspects of society (Agustin, 2021; Tahar et al, 2021). It brings an increasing understanding of risk, as evidenced by several recent studies reviewing the perceived risk of COVID-19 that is experienced by people in several regions of the world (Dryhurst et al, 2020; Huynh, 2020). It is crucial to understand the role of entrepreneur subjectivity in perceiving risk so that it can be future guidance to understand the reason behind their risk-taking or avoidance behavior (Dislich et al, 2010). The subjective perception and relative optimism of entrepreneurs are closely related to the basis of judgmental decision-making and entrepreneur characteristics (Cheung et al, 2013)

Objectives

Findings

Discussion

Conclusion