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The Economic Psychology of Entrepreneurship and Family Business


  • We would like to thank seminar participants at DePaul, Michigan State, the LBS Entrepreneurship conference, and the RICAFE 2 conference for helpful comments. Comments and suggestions by Werner DeBondt, Simon Gervais, Ahmed Khwaja, Rick Larrick, Tim Loughran, AnnaMaria Lusardi, Cade Massey, David de Meza, Toby Moskowitz, John Payne, N.R. Prabhala, and Luca Rigotti are gratefully acknowledged. The usual disclaimer applies.


This paper studies the attitudes of entrepreneurs, both how they differ as a group from others in the economy, as well as how they differ from one another according to the mode of entry into entrepreneurship and whether or not the firm is a family business. We use data from the Survey of Consumer Finance to measure and isolate the enjoyment of private benefits, attitudes toward risk, and optimism for these groups. Entrepreneurs are more optimistic and enjoy the nonpecuniary benefits of work more than wage earners. They embrace risk, but perhaps less so than commonly believed, as their risk-bearing is tempered by longer planning horizons. Family business owners share optimism and nonpecuniary benefits with other entrepreneurs; their tolerance for risk is not different than wage earners. In contrast, those who inherit businesses are significantly less risk tolerant than nonentrepreneurs, are no more optimistic than nonentrepreneurs, but seem to derive more nonpecuniary benefits from work than others. Simply possessing these entrepreneurial traits translate into actions, increasing the amount of time spent at work, even among those who are not entrepreneurs.