Roots, reasons, and resources: Situated optimism and firm growth in subsistence economies

Do entrepreneurs have optimism in subsistence economies, and if so, how does it influence entrepreneurial outcomes? We investigate this question by taking the situated view of optimism. We reason that variations in optimism are a function of the type of opportunity pursued and the diversity of opportunity information entrepreneurs receive and that optimism plays an intervening role between these antecedents and business growth. We also hypothesize that this mediating relationship is conditioned on the reason for business formation (i.e., opportunity/necessity) and the level of microcredit loans. We test our model using survey data collected from more than 1000 entrepreneurs in Kenya, Burundi, and Indonesia. Our findings support the idea that optimism is an important determinant of business growth, but it is conditioned and altered by other salient factors.