Abstract
In a large survey (n = 1928), we examine whether entrepreneurs differ in their decision-making style from managers and employees. Besides two self-reported measures taken from psychology, we build on Rubinstein (Quarterly Journal of Economics 131: 859–890, 2016) by including two behavioral measures derived from response times and the nature of the strategic choices made. Supporting conventional wisdom, entrepreneurs report a stronger Faith in Intuition than others. Their actual choices are partly in line with this: entrepreneurs make indeed more intuitive choices than managers, but are equally intuitive as employees. At the same time, entrepreneurs have response times and a self-reported Need for Cognition that exceeds those of employees. Together, these findings tentatively suggest that entrepreneurs start from a stronger predisposition to choose the intuitive action, but share with managers that they take more time to think things over and thereby are more inclined to move away from their instant intuitive choice.
Highlights
People differ in the way they make strategic decisions
Entrepreneurs appear less biased than other strategic decision-makers; Burmeister and Schade (2007) for instance find that entrepreneurs are less susceptible to a status quo bias than start-up bankers are
For the self-reported measures, we find that entrepreneurs have a significantly higher score on Faith in Intuition than all others, while managers have the highest score on Need for Cognition
Summary
People differ in the way they make strategic decisions. Some primarily follow their “gut” feeling and decide based on their intuition what seems best. The above theoretical considerations illustrate why empirically documenting the potentially different decision-making style of entrepreneurs seems worthwhile; it might in the end turn out helpful in understanding the entrepreneurial earnings puzzle, i.e., the empirical observation that people enter and persist in entrepreneurship despite low average returns with high risk (variance). In their careful review of the behavioral drivers into entrepreneurship, Astebro et al (2014) discuss the evidence for three behavioral forces: risk preferences, overconfidence, and nonpecuniary benefits like a preference for autonomy.
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