Risk and Uncertainty

Chapter
Part of the International Handbook Series on Entrepreneurship book series (IHSE, volume 5)

Abstract

Imagine that you have a brilliant idea for a new business. In fact, your experience and expertise lead you to believe that this is a sure-fire winner. You approach the bank with your idea and they only laugh. You also discover that venture capitalists require a very high interest rate (or equity stake) in order to fund your venture. What’s going on here? One explanation is that, because you are an entrepreneur, you are more willing than investors to undertake risk, that is, you are less risk averse. This is a long-standing argument in the literature on what makes an entrepreneur (Brockhaus 1980). An alternative explanation is that entrepreneurs seeking funding think they are selling US treasury bills while investors think they are being offered pre-Castro government bonds.

Keywords

Defend Stake Verse Dunham Retained 

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Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  1. 1.Department of Finance and EconomicsRutgers UniversityNewarkUSA

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