In this study, we introduce reference point formation as an important antecedent of new venture creation. Based on considerations from prospect theory, we hypothesize that individuals who generally and consistently set more aspiring reference points have a higher intention to form a new venture. Testing our hypothesis with entrepreneurs and managers, results show that entrepreneurs indeed set more aspiring reference points. Therefore, they might find themselves more often in a perceived loss situation which in turn increases their risk-taking behavior, following the predictions of prospect theory. In testing entrepreneurial intention of business graduate students, results are shown to be robust. We discuss theoretical and managerial implications of the findings and develop avenues for future research.
