We use utility theory to investigate how entrepreneurs frame the decision to re-enter self-employment after experiencing firm failure. We suggest that in the context of re-entry individuals have valuable information regarding the return to their human capital in self-employment and factor this into their decision making. We develop hypotheses that incorporate this reduction in uncertainty regarding the returns to human capital in self-employment for predicting the likelihood that an individual re-enters self-employment after experiencing firm failure. We explain our results using utility theory and prospect theory and suggest that there are two types of entrepreneurs who re-enter after experiencing firm failure – those who make an informed choice based on the return to their human capital in self-employment and those who take the chance to ‘win back’ prior loses.
Jenkins, Anna and Wiklund, Johan
"A RISKY DECISION OR AN INFORMED CHOICE: RE-ENTRY AFTER FIRM FAILURE,"
Frontiers of Entrepreneurship Research: Vol. 32
, Article 5.
Available at: http://digitalknowledge.babson.edu/fer/vol32/iss6/5