The risk‐seeking propensity of Indian entrepreneurs: A study using GEM data

• Date: 01 May 2020
• Author: Surender Mor,Ritu Chhikara,Sonu Madan
• Published date: 01 May 2020
• DOI: http://doi.org/10.1002/jsc.2330

RESEARCH ARTICLE

The risk-seeking propensity of Indian entrepreneurs: A study

using GEM data

Surender Mor

1

| Sonu Madan

2

| Ritu Chhikara

3

1

Department of Economics, B.P.S. Women

University, Sonipat, India

2

C.R.S. University, Jind, India

3

B.M.L. Munjal University, Gurugram, India

Correspondence

Surender Mor, Department of Economics, BPS

Women University, Sonipat 131305, India.

Email: surendermor71@gmail.com

Abstract

The risk-seeking propensity of total early-stage entrepreneurial activities paves the

way for further business-related activities as risk plungingattitude leads to the creation

of innovative business models, whereas risk aversion hampers new explorations. Skill,

operational social entrepreneurial activities, and family size are the crucial factors

influencing the risk-seeking abilities of the total early-stage entrepreneurs in India.

Entrepreneurs involved in operational social entrepreneurial activities are likely to be

more risk plungers as compared to commercial entrepreneurs. The promotion of social

entrepreneurship by incentivizing and equipping the youth with the requisite skills and

knowledge is theneed of the hour for raising the risk-seeking propensity.

KEYWORDS

operational social entrepreneurial activity (OSEA), risk-aversion, risk-seeking propensity, total

early-stage entrepreneurial activity (TEA)

1|INTRODUCTION

Entrepreneurs enhance productivity through innovations, a proactive

team, and the division of labour. The entrepreneur is a proprietary

capitalist, a supplier of capital and a manager at the same time, who

connects the labour and the consumer (Smith, 1910) besides per-

forming the entrepreneurial function of revolutionizing or reforming

the pattern of production by exploiting an invention or innovation

(Schumpeter, 1934). Entrepreneurship at the individual level (Linan &

Chen, 2009), as well as aggregate levels (Linan, Santos, &

Fernandez, 2011), is getting more and more attention and the govern-

ment is looking at it for raising the level of wealth and wellbeing

(Langowitz & Minniti, 2007). Global Entrepreneurship Monitor (GEM)

defines Entrepreneurship as a comprehensive multidimensional con-

cept and which refers to “any attempt at new venture creation, a new

business organization, such as self-employment, or the expansion of

an existing business, by an individual, a team of individuals, or an

established business”(Reynolds, Hay, & Camp, 1999). Research in

entrepreneurship has established that entrepreneurship contributes

to the economic growth and development (Arenius & Minniti, 2005;

Frederick & Monsen, 2011; Lerner, 2010; Wennekers, Van

Wennekers, Thurik, & Reynolds, 2005) and speed up the process of

employment creation (Van Praag & Versloot, 2007).

Entrepreneurs are calculated risk-takers, who continuously strive

to maximize the potential of their business venture, on the one hand,

and minimizing risk on the other. Entrepreneurial risk is “the ability to

respond rapidly on an unproven opportunity or the ability to remain

long before responding”(Dickson & Giglierano, 1986). It also refers to

the likelihood and magnitude of risk, where the above link to the

probability that a new project will achieve the desired level of losses

or profits, and the latter is the size of losing (March & Shapira, 1987).

Several reasons can lead to a business failure like the weak business

idea, lack of funding, flawed technology or product design, legal diffi-

culties, interpersonal and emotional tensions (Oser & Volery, 2012)

besides “risk-seeking propensity, failure resilience, overly positive self-

rating, over-optimism, and the illusion of control”(Cassar, 2010;

Hmieleski & Baron, 2009). Risk perception refers to the decision

maker's evaluation of the risk essential in a specific case (Sitkin &

Pablo, 1992) and “the level of perceived risk in a decision alternative

depending on such discrepancy may vary in their judgment from per-

son to person”(Mullins & Forlani, 2005). Risk propensity is defined as

one's temperament to act as a risk plunger or risk-averse (Sitkin &

JEL classification codes: L26, L31, M13.

DOI: 10.1002/jsc.2330

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