Entrepreneurs: Financial Risk-takers?
Conventional wisdom says that entrepreneurs are financial risk-takers, but a new Kauffman Foundation research report, Business Owners, Financial Risk, and Wealth, suggests business owners don't view their business ventures as particularly risky.
Granted, business owners are more likely than non-business owners to be willing to assume above-average risk for financial gain, but business owners generally are more conservative when it comes to saving and borrowing. For example, 45 percent of business owners reported that it was important to save for retirement, compared to only 32 percent of non-business owners. Also, business owners are much more likely to report that they are saving for longer time horizons. In addition, 91 percent of business owners report shopping a moderate amount or more to find the best investment or borrowing terms, while only 82 percent of non-business owners shop as much. The author, Tami Gurley-Calvez, based these and other observations on 1989 to 2007 data from Federal Reserve Board Survey of Consumer Finances (SCF).
What do these findings suggest in terms of policy? According to Robert E. Litan, vice president of research and policy at the Kauffman Foundation, “This result suggests that – as opposed to reducing other risks – the policies that will best encourage increased business ownership include those that allow entrepreneurs to determine their profitability, including increasing the transparency of the patent process and implementing less burdensome tax and regulation requirements."