Entrepreneurship: cause and consequence of financial optimism

Christopher Dawson, David de Meza, Andrew Henley, G. Reza Arabsheibani

Research output: Contribution to journalArticle

14 Citations (Scopus)

Abstract

Extant evidence that the self-employed overestimate their returns by a greater margin than employees is consistent with two mutually inclusive possibilities. Self-employment may foster optimism or intrinsic optimists may be drawn to self-employment. Previous research is generally unable to disentangle these effects because of reliance on cross-sectional data. Using longitudinal data, this paper finds that employees who will be self-employed in the future overestimate their short-term financial wellbeing by more than those who never become self-employed. Optimism is higher still when self-employed. These results suggest that the greater optimism of the self-employed reflects both psychological disposition and environmental factors. By providing greater scope for optimism, self-employment entices the intrinsically optimistic.
Original languageEnglish
Pages (from-to)717-742
Number of pages26
JournalJournal of Economics and Management Strategy
Volume23
Issue number4
Early online date25 Oct 2014
DOIs
Publication statusPublished - 2014

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