Forecasting Errors of New Venture Survival

This article studies entrepreneurs' forecast errors around market entry. Using data on nascent entrepreneurs in the U.S. and start‐ups in Finland, we find that besides being overoptimistic on average in both countries, entrepreneurs' survival expectations can barely distinguish survival fr...

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Bibliographic Details
Published in:Strategic entrepreneurship journal 2014-12, Vol.8 (4), p.283-302
Main Authors: Hyytinen, Ari, Lahtonen, Jukka, Pajarinen, Mika
Format: Article
Language:English
Subjects:
Entrepreneurs
entrepreneurship
expectations
forecast error
Forecasting techniques
Macroeconomics
Market entry
Measurement errors
overoptimism
Startups
Studies
survival
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Summary:This article studies entrepreneurs' forecast errors around market entry. Using data on nascent entrepreneurs in the U.S. and start‐ups in Finland, we find that besides being overoptimistic on average in both countries, entrepreneurs' survival expectations can barely distinguish survival from exits. Moreover, about one fourth of the entrepreneurs do not provide an estimate for the survival of a typical venture. However, among those that do provide it, the estimates are less overoptimistic. We also compare the forecast accuracy of entrepreneurs to those of macroeconomic forecasters. Our findings provide guidance for the development of positive theories of entrepreneurial belief formation and overoptimism. Copyright © 2014 Strategic Management Society.
ISSN:1932-4391
1932-443X
DOI:10.1002/sej.1187