For venture formation to occur, entrepreneurs must recognize an opportunity and decide to act (Venkataraman, 1997). The decision to act follows careful evaluation of a recognized opportunity (Krueger et al., 2000). During opportunity evaluation, entrepreneurs screen recognized opportunities to judge their attractiveness for exploitation. Explaining this evaluation is critical to entrepreneurship theory. Although risk is central to evaluation, our understanding of risk in this context is incomplete, leading some to call for more rigorous theorizing (Mullins & Forlani, 2005). Further, despite mounting evidence of loss aversion (Kahneman & Tversky, 1979), a striking feature of venture formation research is the continued emphasis on risk aversion. In response, we build on risk literature and entrepreneurship theory to develop a theoretical framework for understanding the influence of entrepreneurial risk, focusing attention on three dimensions essential to explaining the evaluation of venture formation opportunities.
Holmes, R. Michael Jr.; Ireland, R. Duane; and Holcomb, Tim R.
"ENTREPRENEURIAL RISK AND LOSS AVERSION IN THE EVALUATION OF VENTURE FORMATION OPPORTUNITIES (INTERACTIVE PAPER),"
Frontiers of Entrepreneurship Research: Vol. 28
, Article 3.
Available at: http://digitalknowledge.babson.edu/fer/vol28/iss17/3