Authors	Caliendo, M., Fossen, F. and Kritikos, A.S.
Year	2010
Reference	IZA Discussion Paper No. 5370, forthcoming in: Journal of Economic Psychology.
Keywords	Entrepreneurship, Trust, Reciprocity
JEL-Classification	D81, J23, M13
Download	IZA Discussion Paper from December 2010: PDF
Abstract	Experimental evidence reveals that there is a strong willingness to trust and to act in both positively and negatively reciprocal ways. So far it is rarely analyzed whether these variables of social cognition influence everyday decision making behavior. We focus on entrepreneurs who are permanently facing exchange processes in the interplay with investors, sellers, and buyers, as well as needing to trust others and reciprocate with their network. We base our analysis on the German Socio-Economic Panel and recently introduced questions about trust, positive reciprocity, and negative reciprocity to examine the extent that these variables influence the entrepreneurial decision processes. More specifically, we analyze whether i) the willingness to trust other people influences the probability of starting a business; ii) trust, positive reciprocity, and negative reciprocity influence the exit probability of entrepreneurs; and iii) entrepreneurs are more willing to trust and to act reciprocally versus employees and managers. Our findings reveal that, in particular, trust impacts entrepreneurial development even though its influence is not as straightforward as expected.