Trust, Positive Reciprocity, and Negative Reciprocity:Do These Traits Impact Entrepreneurial Dynamics?

Experimental evidence reveals that there is a strong willingness to trust and to act in bothpositively and negatively reciprocal ways. So far it is rarely analyzed whether these variablesof social cognition influence everyday decision making behavior. We focus on entrepreneurswho are permanently facing exchange processes in the interplay with investors, sellers, andbuyers, as well as needing to trust others and reciprocate with their network. We base ouranalysis on the German Socio-Economic Panel and recently introduced questions abouttrust, positive reciprocity, and negative reciprocity to examine the extent that these variablesinfluence the entrepreneurial decision processes. More specifically, we analyze whether i) thewillingness to trust other people influences the probability of starting a business; ii) trust,positive reciprocity, and negative reciprocity influence the exit probability of entrepreneurs;and iii) willingness to trust and to act reciprocally influences the probability of being anentrepreneur versus an employee or a manager. Our findings reveal that, in particular, trustimpacts entrepreneurial development. Interestingly, entrepreneurs are more trustful thanemployees, but much less trustful than managers....