Mullins, J. W., & Forlani, D. (2005). Missing the boat or sinking the boat: a study of new venture decision making. Journal of Business Venturing, 20(1), 47-69.

Question 1

What are two contextual factors regarding this paper? (Mullins, J. W., & Forlani, D. (2005)

Answer 1

1. Suitability of entrepreneurs’ skills
2. Entrepreneur’s sources of funds

Question 2

What are two individuals factors regarding this paper? (Mullins, J. W., & Forlani, D. (2005)

Answer 2

1. Entrepreneurs’ risk propensities
2. Entrepreneurs’ perception of risk

Question 3

What does entrepreneurs new venture decision making reflects?

Answer 3

1. Risk’s elements, the likelihood and magnitude of a potential loss
2. Two contextual factors surrounding the market entry decision, the entrepreneur’s skill and degree of personal financial exposure
3. The entrepreneur’s risk-based traits and cognitions, risk propensity and risk perception

Question 4

Which two elements capture the essence of entrepreneurial risk?

Answer 4

• Likelihood of loss (sinking or missing the boat)
• Magnitude of loss

Question 5

What is the “house money effect”?

Answer 5

Individuals are more willing to take risk when the funds they expose to loss are perceived as belonging to someone else

Question 5

Does the “house money effect” apply to entrepreneurial activities?

Answer 5

Use of ‘‘other people’s money’’ can make entrepreneurs more likely to choose ventures where outcomes are uncertain

Question 6

What is the correlation between the skills of the entrepreneur and their risk-taking behaviour?

Answer 6

For choices among new ventures that differ in their potential for upside gain and downside loss, the skills of the entrepreneurs do not influence their risk-taking behaviour unless they expect to directly apply them.

Question 7

Which entrepreneurs are characterized by higher risk-taking propensities?

Answer 7

Those entrepreneurs willing to tolerate a greater likelihood of loss, when magnitude of loss is also high, are characterized by higher risk-taking propensities.