Optimism may be the mother of invention. UCF Assistant Management Professor Aaron McKenny, Ph.D., takes a look at the effect entrepreneurial optimism has on startups and small business growth.
Widespread collective entrepreneurial optimism in the U.S. is highly predictive of the number of new venture startups and small business growth, according to a study by McKenny and professors at University of Oklahoma. This optimism can be contagious in its ability to encourage others to start firms when optimism is a widespread social phenomenon.
The researchers examined quarterly fluctuations in collective entrepreneurial optimism from 1993 to 2010 using National Federation Independent Business data, finding that collective optimism influences new venture launches and investments in growth. The team also examined media data from 242 USA Today articles covering entrepreneur and small business endeavors and found similar effects, indicating that the spread of collective entrepreneurial optimism is reflected and perhaps perpetuated in press coverage of entrepreneurs.
The team concluded that in more turbulent, rapidly changing economic environments like the dot-com boom in the early 2000s when the bubble was bursting, collective entrepreneurial optimism becomes more important in predicting startups and growth. Dynamism is all about uncertainty and unpredictability so you tend to see this when what happened yesterday and what will happen tomorrow may be very different from what happens today. This finding suggests that when markets do not provide entrepreneurs with the hard clues they need to determine when to launch or grow a business, then entrepreneurs turn to each other for deciding when to make a decision.
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