Abstract
We study how social interactions influence entrepreneurs’ risk-taking decisions. We conduct two risk-taking experiments with young Ugandan entrepreneurs. Between the two experiments, the entrepreneurs participate in a networking activity where they build relationships and discuss with each other. We collect data on peer network formation and on participants’ choices before and after the networking activity. We find that participants tend to make more (less) risky choices in the second experiment if the peers they discuss with make on average more (less) risky choices in the first experiment. This suggests that even short term social interactions may affect risk-taking decisions. We also find that participants who make (in)consistent choices in the experiments tend to develop relationships with individuals who also make (in)consistent choices, even when controlling for observable variables such as education and gender, suggesting that peer networks are formed according to unobservable characteristics linked to cognitive ability.
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