Is Entrepreneurial Intention an Antidote to Ambiguity Aversion?

Abstract

Many entrepreneurial decisions involve substantial ambiguity. Using contemporary decision theories, I elicit ambiguity attitudes, without estimating utility functions or risk attitudes. The experiment features two main conditions that are quantitatively equivalent, but differ in their textual framing. In the chance frame, likelihood of success depends on environmental contingencies, whereas in the skill frame, entrepreneurial skill can influence the likelihood of success. I control for participants' entrepreneurial intention and relative overconfidence. Key findings indicate that, first, in both conditions, ambiguity attitudes depend on likelihood of success. Second, in the chance frame, participants predominantly exhibit ambiguity aversion, whereas in the skill frame, ambiguity seeking prevails. Third, relative overconfidence, orthogonal to entrepreneurial intention, does not explain the observed differences in ambiguity attitudes between skill and chance frames. Finally, entrepreneurial intention is relevant to the skill frame only, in which setting it significantly reinforces ambiguity seeking. Hence, entrepreneurial intention offsets ambiguity aversion in the pertinent context.