Risky Business: Risk Tolerance of Entrepreneurs in Europe

In this thesis, research is done on a micro- and macro-level, where first it is investigated how risk tolerance differs between wage workers, solo, and employer entrepreneurs. Second, on a macro-level it is tested how the relationship between risk tolerance and entrepreneurship is influenced by two regions in the European Union, and a country’s uncertainty avoidance and economic development. The model implemented is based on the GEM survey, the IMF dataset, and Hofstede’s dimensions dataset by means of logistic regressions. All the variables retrieved from these three sources are from the years 2014 and 2015, around 100,000 observations were audited. On a micro-level the main findings show the presence of a higher risk tolerance of both, solo and employer, entrepreneurs in comparison to wage workers. Over and above, between the two groups of entrepreneurs, employer entrepreneurs are generally found to administer any kind of risk in a more advanced way. Further is it the existence of a significant influence of economic and cultural indicators on the relationship between entrepreneurs and risk tolerance which has been found. No distinction could be made between Eastern and Western Europe as an insignificant relationship was ascertained regarding the difference in risk tolerance of entrepreneurs in these two regions. Therefore, it can be confirmed that young business entrepreneurs do take more risks than any other individual in the labour force. Crucial economic and cultural factors such as GDP per capita and uncertainty avoidance affect this risk tolerance, respectively in a positive and negative fashion. Hence, the findings from the model indicate that countries which have a high income per capita and/or a low uncertainty avoidance have entrepreneurs with a higher risk tolerance.