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Forecasting Errors of New Venture Survival
Author(s) -
Hyytinen Ari,
Lahtonen Jukka,
Pajarinen Mika
Publication year - 2014
Publication title -
strategic entrepreneurship journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 5.061
H-Index - 46
eISSN - 1932-443X
pISSN - 1932-4391
DOI - 10.1002/sej.1187
Subject(s) - entrepreneurship , economics , venture capital , econometrics , business , marketing , finance
This article studies entrepreneurs' forecast errors around market entry. Using data on nascent entrepreneurs in the U.S. and start‐ups in F inland, 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 S trategic M anagement S ociety.