Chaos and the Dancing Stars: Nonlinearity and Entrepreneurship1

Abstract

The determinants of the decision to become self-employed are analysed in a logit model which includes as arguments a variety of economic, psychological and environmental perspectives. Of particular interest is the role played by workers’ abilities to predict chaotic patterns in data. Chaos was operationalized as a set of observations of variables drawn at different points of time, wherein the relationship between the values taken by the variables in one period was determined precisely by the values they had taken in the past according to a non-linear relationship. The plausibility of individuals more sensitive than others to chaos being more successful than others in initiation and leadership functions—which are characteristics of entrepreneurs—was examined through a binomial logit exercise that required individuals to forecast daily equity prices. Whether the ability to forecast complex time series is a distinguishing trait of entrepreneurs received robust support in relation to some demographic and psychographic variables, and weak support in relation to others.