Optimistic views essential for self-employed

By Economica Wednesday, 13 September 2006

Optimism and entrepreneurship are often said to go hand in hand.

This study of British self-employment supports this view, finding that entrepreneurs are more likely to be optimistic than employees, a characteristic that helps them overcome the uncertainties of a business start-up, as well as doubts about their own talent.

And in what might be further evidence of entrepreneurs' enhanced self-belief, a possible link between optimism and start-up size is identified. But optimism is also found to decline with experience, suggesting entrepreneurs become more realistic as they learn.

In attempting to promote enterprise societies, European economies have sought to boost young people's belief in their own abilities to run businesses, but the danger is of over-optimism not backed up by talent.

A better purpose of entrepreneurship education might be to help nascent entrepreneurs more accurately forecast their future performance - and so reduce uncertainty. This approach could even include persuading some not to become entrepreneurs.

The effects of experience on entrepreneurial optimism and uncertainty,
Stuart Fraser and Francis J Greene,
Economica, Vol 73 No 290, May 2006

Review by Steve Lodge