Photo: Michael R Ross

Article by Martin Koudstaal

PhD candidate at the Amsterdam School of Economics (ASE) and affiliated with The Amsterdam Center for Entrepreneurship (ACE)


Most people have a certain view of what characterizes an entrepreneur and what characterizes a manager. For example, they perceive the former to be a risk-taker, very optimistic, and intuitive, while managers are generally regarded as rational decision-makers “who make the trains run on time”. However, are these common perceptions actually true? Or are the differences between entrepreneurs and managers perhaps subtler than expected up front? Insights from a new research program run by PhD candidate Martin Koudstaal and supervised by Mirjam van Praag and Randolph Sloof.



Entrepreneurship is ‘hot’ in the Netherlands. More and more successful student start-ups are getting off the ground and politicians seem to become increasingly aware of this. As a result, new policies are designed to create an entrepreneurial environment and influential people are put forward to endorse this trend (see for example the recent crowning of Neelie Kroes as the ambassador of Startup Delta).[1] The initial results seem promising, with the Dutch start-up scene already being considered one of the most prominent in Europe.[2]

Despite all the claims that the Netherlands is a thriving entrepreneurial country, however, it still lags behind countries like the United States, United Kingdom or Canada (see Global Entrepreneurship Index 2015).[3] The common argument is that – albeit that the percentage of entrepreneurs is high – many entrepreneurs in the Netherlands work in sole proprietorships and lack serious growth ambitions. Rather, they prefer to remain ‘lifestyle entrepreneurs’ or ‘stipsters’, i.e. start-up hipsters. In fact, a recent CBS report shows that the number of firms with more than 50 employees has actually declined (CBS, 2015).[4]

An alternative explanation for the absence of many high growth entrepreneurs may lie in the value of outside options. That is, instead of setting up high growth firms, good students prefer to have an ambitious managerial career at one of the big multinationals such as Shell, Unilever or Philips. But why do they do so? Do they have different personalities in terms of preferences and behavior? Or are their personalities very similar but have they rather chosen to work in different environments? Hence, we thus need to know; do entrepreneurs and managers have different preferences and behavioral traits? And if so, are these traits inherited or learned? It is these questions that we wish to address in our research.


So who are the entrepreneurs and managers in our sample?

Collecting the survey responses of many time-constrained entrepreneurs and managers is obviously a daunting task. We therefore collaborate with The Week of the Entrepreneur, organizer of the largest entrepreneurship event in the Netherlands, and VNO-NCW De Baak, a reputable leadership institute for C-level executives and other managers. In total, these two institutions have some 20,000+ entrepreneurs and managers on file, ranging from the founder of a small start-up to the founder of New York Pizza, and from a board member of Schiphol Group N.V. to a floor manager in a supermarket.

On average, each of our biannual research waves consists of about 750 entrepreneurs and 400 managers, both with an average income of almost €100,000. For the sake of comparison, we also include 500–1,000 employees in every research round so that we are able to put the results in a broader perspective.


So what makes our research different from others?

We believe that our research contributes to the literature by means of a combination of three main distinguishing features. Firstly, our surveys tend to rely on objective measures instead of the more commonly used subjective ones. We do so because these subjective measures might suffer from the so-called “experimenter-demand effect”. In other words, when an entrepreneur reads a question like “what is your willingness to take risks?”, he/she might answer that he/she is very willing to do so because that’s what entrepreneurs are supposed to do. However, that doesn’t really learn you whether he/she differs from a manager, right? Instead, we therefore prefer using measures adapted from experimental economics, which have the benefit of measuring behavioral traits more precisely. For risk aversion, for example, we thus ask participants for their certainty equivalents of a gamble with a 50% chance of winning €300 and then compare these certainty equivalents with each other.

The second distinguishing feature of our research is that it is incentivized. Hence, when a participant prefers a 50% chance of winning €300 over a fixed amount of €100, this implies really taking risks and having (survey) earnings that can either go down to €0 or go up to €300 in this specific case. So no hypothetical risk taking, but real risk taking. The benefit of having such incentives is again that it obtains better proxies for actual behavior.

Finally, our third selling point is that we have very large samples of entrepreneurs, managers and employees, thus allowing us amongst others to compare various sorts of entrepreneurs and managers with each other. For example, we can compare successful entrepreneurs to less successful ones and CEOs to other types of managers.


So what are the results?

We have thus far examined three different aspects of decision-making: (1) risk attitude, (2) optimism, and (3) decision-making style. The results indicate that:

(1) – entrepreneurs and managers are not different in their risk aversion (though both are less risk averse than employees), but they do differ in their loss aversion. In other words, entrepreneurs are more willing to take risks when the risky proposition includes the possibility of making losses. Comparing more or less successful entrepreneurs and managers with each other does not affect these findings.[5]

(2) – entrepreneurs are more optimistic than managers and employees, and differ especially in their more optimistic way of dealing with bad events. Furthermore, both entrepreneurs and managers appear to be more prone to overconfidence than employees. Successful entrepreneurs and managers are found to be more optimistic but not more overconfident than their less successful peers.

(3) – entrepreneurs have a more intuitive decision-making style than managers but not than employees.[6] Furthermore, while managers are the most rational decision-makers of the three groups, they are still on average not so rational when comparing it to the objective ‘first-best’ level. Finally, the aforementioned results remain unaffected when further exploring the impact of various measures of success (like income, number of employees/direct reports).

Taken together, the results thus suggest that entrepreneurs and managers do differ significantly from each other, but in a subtler way than suggested by common wisdom. This especially holds true when comparing the differences between entrepreneurs and managers with the much larger differences between entrepreneurs and employees on the one hand and between managers and employees on the other hand.

Whether these behavioral differences are inherited or learned cannot be assessed based on our cross-sectional research. However, other findings in the literature are informative in this regard. For example, in the area of risk attitude and optimism, the existing evidence mostly seems to suggest that these traits are rather stable. In other words, the difference in loss aversion could therefore be an inherited trait and a differentiating factor between entrepreneurs and managers. Similarly, the differences in optimism and overconfidence may be differentiating factors between entrepreneurs and managers and between the more and less successful types. Much more in-depth research is however required to draw any of such conclusions. A difference-in-difference framework could be a suitable technique to do so, although the pilot of this study has already revealed that this is not such a straightforward task. In that sense, the party has just started.



Koudstaal, M., R. Sloof, C.M. van Praag (2015), “Risk, uncertainty and entrepreneurship: Evidence from a large lab-in-the-field experiment”, Management Science (forthcoming).

Koudstaal, M., R. Sloof, C.M. van Praag (2015), “Are entrepreneurs more optimistic and overconfident than managers and employees?”, mimeo.

Koudstaal, M., R. Sloof, C.M. van Praag (2015), “Who is instinctive and who is contemplative? Evidence from a lab-in-the-field experiment”, mimeo.

Newspaper coverage

“Verschillen ondernemer en manager kleiner dan gedacht” (FD, 19 april 2015),

“Risico Honger” (FD, 26 juli 2014),