Source of Information and Entrepreneurial Performance Expectations

We explore how expectations of entrepreneurial performance are affected by the source of information consulted by entrepreneurs at founding time, be it experiential or descriptive information. To do so, we refer to the ‘description-experience gap’ in decision making research: risky decisions based on descriptive information tend to overweight rare events and decisions based on experience tend to underweight rare events. We consider entrepreneurial success a rare event and explore how its expectation is affected by each source of information, and how this relationship is moderated by industry conditions. Using data from the PSED II survey we find that experience and description differently affect entrepreneurial expectations in a way that is consistent with the probability weighting pattern suggested by the experience-description gap. We also find that the relation between source of information and expectations is moderated by the phases of the industry, because the ‘rarity’ of success changes across the p...