May 10th: Camille Hebert
I use administrative and survey-based micro data to study the relationship between expectation errors, subsequent updates, and the development and hiring decisions of a representative sample of French start-up founders. I find that optimistic entrepreneurs update their expectations negatively and pessimistic entrepreneurs update positively after making errors. Although optimistic and pessimistic types persist over time, my results show that expectation errors decline within individuals over time. In terms of real effects, I find that the ability to correctly forecast sales and employment and update after an error is highly correlated with start-up performance and growth. The evidence is consistent with entrepreneurs learning from their past errors over time.