Risk attitudes and entrepreneurial motivations: Evidence from transition economies

- Most of literature on risk treats entrepreneurs, or self-employed, as a homogeneous group.
- It is important to distinguish between those who want to be entrepreneurs and those who have to be.
- More risk tolerant individuals tend to become self-employment by choice than by necessity.
- The most risk-intolerance individuals are most likely to opt for salaried employment.

Most studies on risk attitudes of entrepreneurs do not distinguish between those who want to be self-employed and those who have to run their own business for survival, or entrepreneurs by choice vs. by necessity. We examine the relationship between individual risk preferences and likelihood of entrepreneurial entry among these two groups in a cross section of countries with transition economies. We obtain robust results that those with higher degree of risk tolerance are more likely to be self-employed by choice.