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The Influence of Entrepreneurial Risk Assessment on Venture Launch or Growth Decisions
Abstract
Entrepreneurs are thought to engage in riskier behavior than nonentrepreneurs, yet little empirical evidence supports that intuitively appealing notion. We argue instead that differences in information, not risk aversion, may explain the decision to launch or grow a venture. We separately test risk taking propensity and risk assessment. We hypothesize that entrepreneurs will not differ from nonentrepreneurs on risk taking propensity. Additionally, we propose and test a model of risk assessment. The sample size for this exploratory study is n=53 with 30 respondents declaring themselves as entrepreneurs and 23 declaring themselves as nonentrepreneurs. The study’s design is a simulation. Each respondent is provided with data on a potential acquisition that would result in either the launch of a new venture or significant growth for an existing firm. Consistent with the hypotheses, the results show no difference between entrepreneurs and nonentrepreneurs on the risk taking measure. We also find that we can predict entrepreneurial behavior based on risk assessment. We close with a discussion of limitations and directions for future research. Copyright Springer 2006
... Entrepreneurship has to deal with uncertain outcomes and risk tolerance is reported as an antecedent for entrepreneurial activity by many (Beugelsdijk & Noorderhaven, 2004;McGrath et al., 1992;Miner & Raju, 2004;Stewart Jr & Roth, 2001;Stewart, Watson, Carland, & Carland, 1999;van Gelderen, 2000;van Stel, Thurik, Wennekers, & Noorderhaven, 2006;Vereshchagina & Hopenhayn, 2009;Zhao, Seibert, & Hills, 2005), Miner and Raju (2004) report that this risk tolerance is more pronounced in the group of high growth oriented, ambitious, entrepreneurs. Norton and Moore (2006) deliver empirical support that this risk tolerance of entrepreneurially active individuals is rather caused by their more favorable assessment of venture opportunities than it is by an intrinsically higher risk propensity compared to non-entrepreneurs. ...
... This lines up with risk adversity (Mullins & Forlani, 2005;Zhao et al., 2005) showing a positive influence on Entrepreneurial Performance. The latter findings must suffer from some selection bias as risk tolerance is an antecedent of Entrepreneurial Propensity, therefore the opportunities that make risk adverse individuals step into active entrepreneurship are probably the stronger ones and can lead on average to a higher return (Norton & Moore, 2006). Apart from this debate, it is defendable that accurate risk assessment capabilities have favorable effects on managerial performance in general and on entrepreneurial capabilities in particular (Aidis, Mickiewicz, & Sauka, 2008). ...
... If the perception changes then it is still a limitation if one wants to predict what an individual will do, but it is an opportunity to offer a better insight to the individual, which would allow the individual to make a better judgement about the career decision, by informing individuals about the perception others have after starting as an entrepreneur. Another example in this respect is given byNorton and Moore (2006). They describe a study about risk tolerance of entrepreneurs and they present empirical results showing that the risk tolerance entrepreneurially active individuals have, is rather caused by their more favorable assessment of venture opportunities than it is by an intrinsically higher risk propensity compared to the risk propensity of the Non-Entrepreneurs. ...
The question “Why do some and not others become entrepreneurs?” has been
broadly researched. Paradoxically, entrepreneurial propensity and
entrepreneurial capability do not seem to go together automatically. This PhD
research investigated the development of entrepreneurial propensity among
individuals who possess strong entrepreneurial capabilities. The call for
ambitious entrepreneurship justifies to research the activation of nonentrepreneurs
who are positioned high on the entrepreneurial capability
dimension.
Qualitative research broadened our scope with insights given by the target
group of entrepreneurially capable individuals. The results of the quantitative
research allow us to present conclusions, that are concise and simple. The work
also suggests how these answers can be further applied by individuals, career
coaches and policymakers.
... The concept of RTP refers to the extent of one's willingness to take the risk when possible to incur loss (Norton and Moore, 2006). It means, one would still be willing to dedicate significant resources despite the possibility of losing them (Alvarez et al., 2006). ...
... RTP is a common trait among entrepreneurs, and entrepreneurs tend to take moderate to high risks compared to non-entrepreneurs (Alvarez et al., 2006). An earlier study reported a positive correlation between RTP and ENIN (Norton and Moore, 2006). Willingness to take risks has been associated with self-adequacy (Mahmood et al., 2020). ...
This study explored the effect of attitude towards entrepreneurship (ATE), need for achievement (NFA), risk-taking propensity (RTP), proactive personality (PRP), self-efficacy (SLE), opportunity recognition competency (ORC), entrepreneurship education, uncertainty avoidance (UNA), and entrepreneurial knowledge (ENK) on entrepreneurial intention (ENIN) among university students in Malaysia. This quantitative study had adopted the cross-sectional design approach and involved 391 university students in Malaysia via the online survey. The study outcomes revealed that the NFA, PRP, and SLE significantly affect students’ attitudes towards entrepreneurship. Moreover, entrepreneurship education and UNA significantly affect ORC. Finally, ATE has a positive and significant effect on ENIN among university students in Malaysia. As entrepreneurship offers an alternative career path for people seeking economic prosperity and addressing social issues, including unemployment, the government should formulate effective policies and regulations that support entrepreneurship activities. Universities and other institutions should play a pivotal role in providing the proper exposure via entrepreneurship education while honing the essential traits for a career in entrepreneurship.
... Risk perception is sometimes referred to as risk assessment (Burns, Peters, & Slovic, 2012), assessment and perception are therefore used interchangeably. Drawing from categorisation and problem framing concepts that state that entrepreneurs assess risky environments more favourable and frame problems as opportunities rather than threats; this study argues that the way entrepreneurs categorise situations will encourage them to exploit more opportunities which will result in successful SMEs (Norton Jr & Moore, 2006). ...
... This is a limitation in this study since the two variables were not measured. However for the purpose of this study Sitkin and Pablo's approach was adopted by only assessing whether the entrepreneurs assess a situation as high risk or not (Norton Jr & Moore, 2006;Sitkin & Weingart, 1995) and expanded to assess the association of such behaviours with business success. Furthermore, the way the entrepreneur perceives an environment affects that entrepreneur's risk behaviour and consequently business sucess. ...
Despite the many government programmes that have been put in place to assist with small business development, South African small and medium-sized enterprises (SMEs) still face high rates of failure. This study is an empirical investigation into the role and influence that endogenous and exogenous risk factors play in reducing SME failure. Building on existing theoretical perspectives, such as complexity and systems theory, hypotheses are formulated to predict the impact of different forms of capital and risk factors on SME success. Moreover, an integrated risk assessment model that can be used to assess SMEs more holistically regarding risk and success was devised. The study collected primary data through survey and employed correlational analysis and hierarchical multiple regression. The results indicate that financial capital and entrepreneurial self-efficacy are significant predictors of SME success. Regarding modeling, the integrated model shows that the effect of the combined risk factors is stronger when compared to individual effects only. These findings highlight that funding models need to incorporate both endogenous and exogenous risk factors which significantly affect the success of SMEs in South Africa.
FULL TEXT AVAILABLE: https://www.ajol.info/index.php/aref/article/view/187627
... Drawing from categorisation theory, this section explains how entrepreneurs assess their environment. Entrepreneurs assess risk differently from non-entrepreneurs, and this is what makes entrepreneurs seize opportunities and expand their businesses (Norton Jr & Moore, 2006). ...
... Categorization theory assert that entrepreneurs assess their environment favourably, they see opportunities where non-entrepreneurs see risks (Norton Jr & Moore, 2006). Entrepreneurs are very optimistic individuals, the way they frame situations make them assess the environment more favourably with more opportunities and fewer threats and perceive their firms to have more strengths than weaknesses (Palich & Ray Bagby, 1995;Simon et al., 2000). ...
The objective of this study is twofold: first to evaluate the magnitude of the effect of endogenous and exogenous risk factors in the success of South African (SA) small and medium-sized enterprises (SMEs); second, to develop a framework for an integrated risk assessment model that can be used to assess SA SMEs holistically. Drawing from the entrepreneurial ecosystem, systems perspective, GEM framework and complex theory, an integrated risk assessment model framework that is person-centric, interdisciplinary, and multidimensional (individual, firm and environment) is formulated. This was a cross-sectional, quantitative study, which followed a post-positivist approach. Primary data, with a sample size of 286, was collected from SA SMEs through self-administered questionnaires. Data analysis included correlational analysis, backward elimination method, hierarchical multiple regression and mediation analysis. Financial capital, entrepreneurial self-efficacy on growth and risk perception emerged as significant predictors of SME success. However financial capital is by far the most influential predictor of financial performance. The results also confirmed the mediating effect of financial capital between entrepreneurial self-efficacy (finance and growth) and financial performance. Entrepreneurs who are confident can raise enough capital for their businesses, thus producing successful SMEs. Government policies and support programmes need to take a holistic view when supporting SMEs. While taking a holistic view, priority needs to be put on making capital available for entrepreneurs to develop and grow their businesses. Training programmes can focus on up-skilling entrepreneurs regarding entrepreneurial tasks that can improve their self-efficacy in management, financial understanding, and growth of their businesses. The study’s findings are important in that they help funders realise that business plans and financial projections are not the most important predictors of SME success, thus the need to review current risk assessment models
... In the contexts of risk-taking propensity's effect on entrepreneurial intention, there are also contradicting results. Norton and Moore (2006) argued that there was no difference between entrepreneur and non-entrepreneur in terms of risk-taking propensity, while Kihlstrom and Laffont (1979) stated that entrepreneurs were a risk-taker than non-entrepreneurs. The latter study counted their argument on the finding ofGurelet al. (2010). ...
... It mirrors as well the students' awareness on regular risks that entrepreneurs should face (Sarasvathyet al., 1998). The empirical result is in line with the works of Gürol and Atsan (2006), Norton and Moore (2006), and Gurelet al. (2010). It reveals that senior students, having educated for university level, perceive business risks as measureable and manageable matters. ...
This study aims to examine whether self image congruity, retail service quality, perceived service quality influence customer satisfaction and test the role of customer satisfaction mediation variable at customer loyalty distro Urban Surf and Planet Surf in Jayapura. data analysis in this research used multiple regression analysis and hierarical regression to measure independent variable in dependent variable with mediation variable. The results show that customer satisfaction fully mediates the relationship of self image congruity and retail service quality to customer loyalty. Meanwhile customer satisfaction also mediates partially customer relationship perceived service quality to customer loyalty. Penelitian ini bertujuan untuk mengkaji apakah self image congruity, retail service quality, perceived service quality berpengaruh pada customer satisfaction dan menguji peran mediasi variable customer satisfaction pada customer loyalty distro Urban Surf dan Planet Surf di Jayapura. Analisis data dalam penelitian ini digunakan analisis multiple regression dan hierarical regression untuk mengukur variable independen pada variable dependen dengan variable mediasi. Hasil penelitian menunjukkan bahwa customer satisfaction memediasi secara penuh hubungan self image congruity dan retail service quality terhadap customer loyalty. Sementara itu customer satisfaction juga memediasi secara parsial hubungan customer perceived service quality terhadap customer loyalty.
... In the struggle to do so, researchers carried out rigorous studies and established that the "risk propensity of entrepreneurs is greater than that of managers" (see Stewart and Roth, 2001;MacKo and Tyszka, 2009;Zaleskiewicz, Bernady and Traczyk, 2020). Later on this notion was further investigated and the researchers produced mixed results (see Gartner and Liao, 2012;Miner and Raju, 2004;Norton and Moore, 2006). Very little empirical evidence addresses the question of whether successful and unsuccessful entrepreneurs differ in their RT propensity. ...
Purpose
While extensive research exists on how positive life circumstances and positive personality traits promote entrepreneurship, there is little research focusing on how negative personal circumstances may potentially breed entrepreneurship. This study aims to build upon the theory of underdog entrepreneurship to examine the effect of challenging life circumstances such as poverty on the development of entrepreneurial traits in underdog entrepreneurs. This research analyzed the effect of risk-taking (RT) on the entrepreneurial success (ES) of underdog entrepreneurs and the role of optimism (OPM) and persistence (P) as mediating variables and poverty as a moderator variable.
Design/methodology/approach
A cross-sectional survey was conducted to collect data from 400 micro-finance borrowers of Akhuwat Foundation Pakistan. Akhuwat provides interest-free small loans to the poor segment of society. Preliminary testing of the survey questionnaire with a sample of 35 borrowers of Akhuwat Foundation in Lahore city was conducted before data collection. Data was collected from four randomly selected branches in Lahore city.
Findings
The authors found that OPM and P significantly mediate the relationship between RT and ES. In addition, the authors analyzed the moderating effect of poverty on the relationship between OPM and ES and found a negative moderating effect. A strong positive moderating effect of poverty was found on the relationship between P and ES. The results of multi-group analysis show that successful and unsuccessful underdog entrepreneurs differ in their RT propensity, which is significantly mediated by OPM and P.
Originality/value
This study provides empirical evidence on entrepreneurial traits and success of poor entrepreneur in an emerging economy. This work is original and has not been submitted elsewhere.
... The sustainability of a corporation is influenced both directly and indirectly by financial literacy. It is common practice to utilize experimental study methods to examine the effects of individual financial literacy on predefined decisions, such as investing strategies and decisions (Norton & Moore, 2006). Research on financial literacy has been conducted in industrialized nations, and various financial literacy studies have been conducted in developing nations' SME sectors (Florio & Leoni, 2017). ...
Individuals, households, and business entities that have met the criteria as businesses have SMEs as productive businesses. Micro, small, and medium enterprises (SMEs) significantly contribute to a region's economic development. Financial literacy, access to finance, and financial risk attitude are important in improving business performance. This study aimed to examine the effect of financial literacy on access to finance, financial risk attitude, and culinary business performance. Test mediating roles access of finance and financial risk attitude on the impact of financial literacy on the performance of the MSME culinary business in Yogyakarta. Statistical analysis model using mediation regression. The research sample is the Actor Culinary business SMEs in Yogyakarta. Sampling technique with purposive sampling. Respondents were 135 SME Culinary Entrepreneurs. Mediation regression analysis tool using PLS. The research results show that: 1) Financial literacy positively affects culinary business performance. 2) Financial literacy has a positive effect on access to finance. 3) Access to finance mediates the effect of financial literacy on culinary business performance. 4) Financial literacy has a positive effect on financial risk attitudes. 5) Financial risk attitudes mediate the effect of financial literacy on culinary business performance. The research results recommend the importance of increasing financial literacy and ease of access to finance. Analyzing risk is needed for SME culinary business actors to improve business performance and sustainability.
... Financial literacy has a direct and indirect impact on corporate sustainability. Experimental research designs are often used to study how an individual's financial literacy influences prior decisions such as investment decisions and strategies (Norton & Moore, 2006). Research on financial literacy has been conducted in developed countries, and some research on financial literacy has been conducted in the SME sector in developing countries (Florio & Leoni, 2017). ...
Micro, small and medium enterprises (SMEs) contribute significantly to economic development. Financial literacy, access to finance, and attitudes toward financial risk play a key role in improving the performance of SME participants. The primary aim of this study is to examine the impact of financial literacy on access to finance, attitudes to financial risk, and financial performance. The impact of financial literacy on home improvement financial performance examines the mediators of access to finance and attitudes to financial risk. Statistical analysis model used mediated regression. The research sample is the Actors' SMEs in Yogyakarta. The sampling technique was purposive sampling. Respondents were SMEs as many as 276 entrepreneurs. The mediation regression analysis tool uses PLS. The results of the research show: 1) Financial literacy has a positive effect on financial performance. 2) Financial literacy has a positive impact on access to finance. 3) Access to finance mediates the impact of financial literacy on financial performance. 4) Financial literacy has a positive impact on attitudes toward financial risk. 5) Attitudes to financial risk mediate the impact of financial literacy on financial performance. Survey results recommend the importance of improving financial literacy, easy access to finance, and attitudes toward financial risks. You need the ability to analyze small business risks to improve your company's financial performance and sustainability. Providing financial education to entrepreneurs requires the will of state agencies, the entrepreneurs themselves, and educational institutions.
... Girişimcilerin bireysel risk alma yetisine sahip insanlar oldukları yapılan araştırmalarda kabul gören bir olgudur. Bununla birlikte var olan risk alma eğiliminin zenginlik üreten fikirlerin keşfedilmesi ve kullanılması için sınırlı sonuçlara sahip olduğu da bir gerçektir (Norton & Moore, 2006). Bu yüzden bir girişim için göze alınacak risklerin kabul edilebilir düzeyde olması başarısızlık oranın istatistiksel olarak daha düşük olmasını sağlayacaktır. ...
This research was prepared to determine the entrepreneurial sense of tourism students at higher education. While preparing this research and giving the definitions of the concepts of entrepreneurs and entrepreneurship, the support provided to entrepreneurs in the world and Turkey were examined. The sense of entrepreneurship, which is the main subject of the research, was defined with its sub-dimensions and a questionnaire was applied as a measurement method in order to determine the entrepreneurship sense of the students of Atatürk University Tourism Faculty. The data obtained through the questionnaire was analyzed using the SPSS 20.0 package program. The data obtained were analyzed by frequency distribution, reliability analysis, independent sample t test and ANOVA analysis. As a result of the research, although the sense of internal control, the desire for independence, the tendency to take risks, and the entrepreneurial potential, which constitute the dimensions of the entrepreneurial sense scale, do not differ significantly by some demographic variables, students' entrepreneurial sense profiles are compatible with most of the dimensions and there is a significant difference. It was suggested that determining the entrepreneurial sense of students can be used as an efficient method in revealing the potential of individuals and can be studied more extensively. Bu makale araştırma ve yayın etiğine uygun hazırlanmış ve intihal incelemesinden geçirilmiştir.
... Girişimcilerin bireysel risk alma yetisine sahip insanlar oldukları yapılan araştırmalarda kabul gören bir olgudur. Bununla birlikte var olan risk alma eğiliminin zenginlik üreten fikirlerin keşfedilmesi ve kullanılması için sınırlı sonuçlara sahip olduğu da bir gerçektir (Norton & Moore, 2006). Bu yüzden bir girişim için göze alınacak risklerin kabul edilebilir düzeyde olması başarısızlık oranın istatistiksel olarak daha düşük olmasını sağlayacaktır. ...
Dergide turizm alanında yapılan bilimsel çalışmalara yer verildiği gibi multidisipliner araştırmalar da desteklenmektedir.
... Risk tolerance is the personality characteristic that receives the broadest attention when trying to understand the influence of personality on entrepreneurial entry. There is strong empirical evidence that mostly points in the same direction: the more risk tolerant individuals are, the more likely they start entrepreneurial activities and vice versa, thus confirming conventional wisdom that becoming an entrepreneur means making risky decisions (Parker 1997, Cressy 2000, Stewart and Roth 2001, Cramer et al. 2002, Kan and Tsai 2006, Norton and Moore 2006, Zhao et al. 2010, Caliendo et al. 2009, 2014a, Vereshchagina and Hopenhayn 2009. Moreover, various studies point to the importance of risk tolerance as it has the strongest effect on the entrepreneurial entry decision compared to all Big Five traits (Zhao et al. 2010) and has relatively high explanatory power (Caliendo et al. 2014a). ...
... Girişimcilerin bireysel risk alma yetisine sahip insanlar oldukları yapılan araştırmalarda kabul gören bir olgudur. Bununla birlikte var olan risk alma eğiliminin zenginlik üreten fikirlerin keşfedilmesi ve kullanılması için sınırlı sonuçlara sahip olduğu da bir gerçektir (Norton & Moore, 2006). Bu yüzden bir girişim için göze alınacak risklerin kabul edilebilir düzeyde olması başarısızlık oranın istatistiksel olarak daha düşük olmasını sağlayacaktır. ...
Son yıllarda dünya geneli ve Türkiye’de gittikçe önem kazanan sınai ve mülkiyet haklarından birisi olan Coğrafi işaret (Cİ)
uygulamaları, belirgin nitelikteki ürünlerin veya lezzetlerin kaynağını, karakteristik özelliklerini ve bu özelliklerin coğrafi bölge ile
olan bağlantısını belirten kalite işaret ve tescili olarak tanımlanmaktadır. Edirne tava ciğeri, Erzurum civil peyniri, Tekirdağ köftesi,
Afyon kaymağı, Kırklareli hardaliyesi, Roquefort peyniri ve Bordeaux şarabı Cİ tescili almış ürünlere ulusal ve uluslararası düzeyde
bazı örnekler olarak gösterilebilir. Çalışmada Cİ kavramı ve uygulamaları hakkında bilgi verilmiş olup Türkiye’nin güncel Cİ tescilleri
hakkında istatistiki veriler derlenmiştir. Eylül 2021 itibariyle Türkiye’de 868 ürünün Cİ tescili aldığı belirlenmiştir. Bu ürünlerin 577’si
mahreç işareti, 287’si menşe adı ve sadece 4 tanesi geleneksel ürün adı olarak tescil almıştır. En fazla Cİ tescili olan bölge 181 ürün
ile Karadeniz Bölgesi iken 68 tescilli ürünü bulanan Gaziantep en fazla Cİ tescili bulunan şehirdir. Doküman analizi yöntemi
kullanılarak gerçekleştirilen çalışma, ayrıca ilgili kurum ve kuruluşları Cİ uygulamalarına karşı harekete geçirmek ve toplumda Cİ
farkındalığını arttırarak tescil almış ürünlerin turizm amaçlı kullanılmasını hedeflemektedir. Çünkü ulusal literatürde yer alan
çalışmaların önemli bölümünde ülkemizde Cİ farkındalık eksikliğine, var olan potansiyelin henüz tam anlamıyla kullanılamadığına ve
turizm açısından da istenilen gelirin sağlanamadığına dikkat çekilmektedir. Bu sebeple Cİ sisteminden beklenen ekonomik ve toplumsal
katkının elde edilebilmesi için etkin ve uygulanabilir mevzuat geliştirilmeli, tescil sayıları ulusal ve uluslararası düzeyde mutlaka
arttırılmalıdır.
... In order to develop new products, the firm undertakes risky initiatives and tries to gain the first-mover advantage (Zhao et al., 2012). Similar to the trade-off between risk and reward, there is also a possibility of adverse outcomes (Norton and Moore, 2006). Thus, entrepreneurial firms tend to pursue calculated risky ventures. ...
Entrepreneurial orientation as a factor in innovation and entrepreneurship research has gained interest in recent years. This paper attempts to explore and evaluate the dimensions of entrepreneurial orientation in the context of Indian new ventures. Drawing from the existing measurement scale of entrepreneurial orientation, the concept is discussed and addressed in three dimensions: risk-taking ability, innovativeness, and proactiveness. Focusing on strategic innovation in new ventures, this paper also highlights the conceptual relationships among entrepreneurial orientation, organisational innovation, technological innovation, and product innovation. With an aim to understand and assess the dimensions of entrepreneurial orientation in the context of Indian new ventures, the paper presents an empirical evaluation of the concept of entrepreneurial orientation, followed by a discussion of the future research agenda.
... In order to develop new products, the firm undertakes risky initiatives and tries to gain the first-mover advantage (Zhao et al., 2012). Similar to the trade-off between risk and reward, there is also a possibility of adverse outcomes (Norton and Moore, 2006). Thus, entrepreneurial firms tend to pursue calculated risky ventures. ...
... Perceived desirability refers to "the actor's belief regarding whether successful exploitation of the opportunity would adequately fulfill some personal desire" (McMullen & Shepherd, 2006, p. 133). Risk, the probability that opportunity pursuit could result in perceived negative outcomes (for example, loss; Norton & Moore, 2006;Osborne, 1995), is often seen as a counterpart to reward. Many conceptions of perceived desirability (Douglas & Shepherd, 2002;Fitzsimmons & Douglas, 2011) have included risk alongside the intrinsic and extrinsic motivational factors in the assessment of perceived desirability, such that desirability is the sum of risk and reward perceptions. ...
We propose and test a process where potential entrepreneurs
(PEs) prioritize a venture idea consideration set using preference-based decision-specific heuristics to assess idea feasibility
and desirability. We test our hypotheses through two studies
with PEs. The first experiment shows that prioritization occurs,
with 113 of 122 PEs voluntarily changing a randomized list of
their ideated ventures into a rank-ordered priority list of potential opportunities. Second, we employ a novel “equivocal
forced-choice” conjoint design with 250 PEs. We find empirical
support that PEs prioritize via relative preferences for experience-based knowledge, strong social ties, and low risk/low
reward venture ideas. We contribute to the entrepreneurship
literature by theorizing and providing evidence of
a prioritization stage for multiple idea sets before evaluation.
Further, we demonstrate the influence of individual and social
network factors on prioritization and expand our understanding
of how PEs conceptualize risk in venturing.
... Deduction is an inference from premises to a conclusion, and it underlies probabilistic approaches to decision-making (e.g., Campbell, 1992;Casson and Wadeson, 2007;Norton and Moore, 2006). In a complex world characterized by the property of emergence, deduction does not constitute a sufficient basis for guiding action as not all premises for deriving conclusions exist at the moment when a decision is to be made (Arthur, 1994;Bromley, 2006: 88-96). ...
We draw on Searle's philosophy of language to distinguish between "opportunities"-intentional content directed towards a preferred future that entrepreneurs aim to fulfill-and opportunities-conditions to be met for their satisfaction. We maintain that studying the former requires adopting a player, rather than analyst stance prevailing in the current literature. We build on pragmatist conceptions of truth and imagination to elaborate on the player stance and propose analogical abduction as a mechanism for conceiving and fulfilling "opportunities". We develop a pragmatist process model of entrepreneurial reasoning that balances the two stances, and derive action principles for entrepreneurs from it.
... Entrepreneurs require confidence, leadership and managerial skills to enable them to access new markets (Okafor and Amalu, 2010). Since businesses are constantly engaged in complex decision-making activities concerning the acquisition and use of financial resources (Norton and Moore, 2006;Drexler et al., 2010), entrepreneurs need to exhibit a high level of financial literacy and certain numerical ability. They face financial decisions nearly every day, such as purchasing new equipment, hiring new employees or acknowledging the possibility of project failure. ...
Purpose
This study aims to determine the contribution of financial skills to entrepreneurial intentions among women involved in university education.
Design/methodology/approach
Clustering and logistic regression analyses were used to infer the determinants and motivators of entrepreneurial intention in a sample of women students at a Spanish online university.
Findings
Financial and numerical skills could play a significant role in boosting entrepreneurial culture, overcoming reticence and increasing awareness of business opportunities, particularly when women are motivated to increase their autonomy and income. The study offers meaningful implications for policymakers.
Research limitations/implications
Further research will be needed before these conclusions may be inferred to other settings and circumstances. Comparison with a similar sample of potential male entrepreneurs may also be necessary to deduce the influence of gender.
Practical implications
The introduction of certain financial content into the education system by governments and policymakers would produce remarkable results on entrepreneurship intention among women.
Social implications
Relational capital and positive social influences also contribute to mitigating the effects of risk aversion, one of the main barriers for potential female entrepreneurs.
Originality/value
The role of financial literacy in entrepreneurial intention among women has scarcely been addressed in academic research. The literature also has paid little attention to the analysis of what motivates women into entrepreneurship, and whether women who decide to embark on a business venture show different profiles. The aim of this study is to contribute to closing these gaps, exploring the effect of cognitive skills, personality traits, contextual factors and motivations.
... One of the important lessons is that management (liquidity, savings, investment activities, diversifying suppliers and customers, etc.) requires special attention (Dvorsky et al., 2020). Corporate financial awareness, prudent long-term planning, proactive investment policies and an accurate vision of the future are more important than ever (Ademola et al., 2019;Fornell and Larcker, 1981;Khan et.al, 2020, Norton andMoore, 2006). A comprehensive change of perspective is inevitable with regard to economic actors. ...
The main objective of this research project is to create new model in the field of corporate financial literacy, with a special emphasis on the Hungarian SME sector. In our study we explore the interpretations and dimensions of corporate finance. Beyond the theoretical analysis, the study aims to justify the level and direction of the relationship between corporate financial literacy and corporate financial results, the efficiency of operations, the outcome of corporate financial decisions. It has been taken a 511-element representative sample from the Hungarian SME sector and built a linear regression model to find a significant moderation effect of financial literacy between financial performance and results. The method used in this study is a literature review analysis of manuscripts discussing topics related to financial literacy, corporate sustainability, published in the last 10 years. Our results show that there are positive and significant relationships between company management and corporate financial literacy. It has been also established in our analysis that the level of corporate financial literacy influences financial results and the effectiveness of operations in companies. This paper draws the attention of business leaders to the importance of financial awareness to help stakeholders and companies to provide better solutions to the existing environmental and economic challenges. The study offers useful policy input for corporate and economic policy decision-makers, which could also help improve the competitiveness of national economies. © 2021, Czestochowa University of Technology. All rights reserved.
... Risk-taking is another value which has constructive and destructive aspects. Risk-taking is often necessary to enable innovation ( Norton & Moore, 2006). Risk-taking and innovation were highly valued aspects of my firm's culture. ...
The time has come to reflect on the warning signs, decisions made, and repercussions of those in leadership of a financial services company which collapsed in the wake of the financial crisis during the mid-2000’s. The author was a divisional technology executive of this firm at the time, close enough to the top of the organization to observe the actions of those in charge. The author’s observations over a period of years eventually led her to resign from her position to enter a doctoral program only a few weeks before the company’s demise. The impetus behind the author’s resignation was her feeling that the decisions and actions of those in leadership violated her personal values. In this account, the author offers her personal reflections and the repercussions of this experience, followed by a deconstruction of this tragic leadership failure which includes references to the leadership literature.
Keywords: Arrogance; combative corporate culture; corporate lifecycle; founder succession; risk-taking; workplace bullying
... Deduction is an inference from premises to a conclusion, and it underlies probabilistic approaches to decision-making (e.g., Campbell, 1992;Casson & Wadeson, 2007;Norton & Moore, 2006). In a complex world characterized by the property of emergence, deduction does not constitute a sufficient basis for guiding action as not all premises for deriving conclusions exist at the moment when a decision is to be made (Arthur, 1994;Bromley, 2006: 88-96). ...
... Finally, entrepreneurs rely on content that is readily available in their memory when making strategic decisions (Fern et al., 2012). Prior industry experience of the founders should increase the "bank of memory" upon which they can draw, hence reducing their perceived risk (Norton and Moore, 2006). Thus, it can be argued that the same industry work experience will impact new venture performance. ...
This study compares the performance of female majority-owned new ventures (FNV) vs. male majority-owned new ventures (MNV). It analyzes the differences in levels of variables such as education, the same industry work experience of owners, and other venture level attributes between FNVs and MNVs. More importantly, this study employs decomposition techniques to determine the individual contribution from the intergender difference of each attribute on the performance of the new venture. For example, the study finds that, on average, the owners of an MNV possessed 3.4 years more of the same industry work experience than their FNV counterparts. This difference in work experience accounted for 47% of the “explained” gap [1] in Net Profits between the FNVs and MNVs.
... Finally, entrepreneurs rely on content that is readily available in their memory when making strategic decisions (Fern et al., 2012). Prior industry experience of the founders should increase the "bank of memory" upon which they can draw, hence reducing their perceived risk (Norton and Moore, 2006). Thus, it can be argued that the same industry work experience will impact new venture performance. ...
Purpose
This study compares the performance of female majority-owned new ventures (FNV) vs. male majority-owned new ventures (MNV). It analyzes the differences in levels of variables such as education, the same industry work experience of owners, and other venture level attributes between FNVs and MNVs. More importantly, this study employs decomposition techniques to determine the individual contribution from the intergender difference of each attribute on the performance of the new venture. For example, the study finds that, on average, the owners of an MNV possessed 3.4 years more of the same industry work experience than their FNV counterparts. This difference in work experience accounted for 47% of the “explained” gap [1] in Net Profits between the FNVs and MNVs.
Design/methodology/approach
This paper utilizes the Kauffman Firm Survey, a longitudinal dataset of 4,928 new ventures started in the USA in 2004. It employs Blinder-Oaxaca and Fairlie decomposition techniques in conjunction with OLS and Logit regressions. Both methods provide point estimates of contributions to the performance gap due to the heterogeneity in each attribute across the groups (FNV and MNV). This approach has a significant advantage over OLS or mediation analysis, which can only provide a directional analysis of the contributions of differences in attributes to performance.
Findings
The paper finds no performance gap between MNVs and FNVs. It further investigates whether the heterogeneous characteristics of MNVs vs FNVs are related to different effects on survival and performance. It finds that characteristics such as owners’ work experience in the same industry, average hours worked by owners in the new venture, the technology level of the venture, and its incorporation status are related with a differential impact on new venture survival and performance.
Research limitations/implications
All firms in the dataset belonged to a single cohort (2004) of new ventures started in the US. Future studies are encouraged to develop a dataset from multiple geographies and founding over several years so that the results may be more generalizable.
Practical implications
The paper provides crucial practical guidance to policymakers, investors, and entrepreneurs. In general, policies that enhance the work experience of women entrepreneurs and provide access to infrastructure such as daycares, which may allow them to work more hours, would probably improve the performance of FNVs.
Originality/value
The paper furthers the literature on women entrepreneurship by analyzing point estimates of differential contribution of disparate variables to performance. From a methodological perspective, the study reconciles the results between regression and decomposition analyses.
... The impact of risk-taking on firm performance has been little studied, however. Most empirical studies have examined the impact of risk perception on a single, predefined decision (Forlani and Mullins, 2000;Norton and Moore, 2006), but not on firm performance. Where it has been studied in terms of performance, results are broadly negative. ...
The paper explores entrepreneurial orientation (EO) in SMEs in the
Middle Eastern state of Abu Dhabi in the United Arab Emirates. We
hypothesize that emerging market context and unique UAE business structures
will impact the expression and effects of the five dimensions of EO. Using OLS
and GMM techniques, our study shows that innovation, risk-taking,
pro-activeness and competitive aggressiveness do not correlate positively with
performance, but autonomy does. By studying EO in a unique region and
amongst SMEs we contribute to the implementation and development of theory
in alternative business contexts. We suggest the EO dimensions co-depend,
with autonomy a capstone dimension in SMEs upon which the others rely. At a
local level, we suggest policy might take steps to encourage autonomy by
reducing ownership restrictions, and improve the institutional environment to
facilitate risk-taking and, in turn, the other EO dimensions.
... Despite the popular myth that entrepreneurs have a much higher propensity for risk than others in society, the reality is that the risk preference of entrepreneurs is scattered across the risk preference spectrum and may actually be skewed toward risk aversion (Begley & Boyd, 1987;Brockhaus, 1980;Miner & Raju, 2004;Palich & Bagby, 1995;Sarasvathy, Simon, & Lave, 1998;Stewart & Roth, 2001). Masters and Meier (1988), Palich and Bagby (1995), and Norton Jr and Moore (2006) failed to find a difference in risk propensity among entrepreneurs. Nevertheless, entrepreneurs have been found to be more positive about opportunity (Palich & Bagby, 1995) more intuitive (Armstrong & Hird, 2009), more self-confident (Macko & Tyszka, 2009). ...
Entrepreneurship and the cognitive processes of entrepreneurs have drawn the attention of researchers in recent years and resulted in the tremendous growth of the segment in the academic literature. To date, researchers have not clearly identify that entrepreneurial element that makes entrepreneurs different from others. This study reviews the literature on serial, habitual, and parallel or portfolio entrepreneurship and not only argues the importance of differentiating between them but also identifying failure versus success when conducting research, especially when researching cognition. The identifying entrepreneurial element that researchers seek lies deep within the metacognitive processes of multi-success entrepreneurs; those who have demonstrated the repeated ability to succeed. Many extant entrepreneurship studies are inconclusive or misleading due to sampling error because they report findings from samples where, based on widely known statistics, most of the entrepreneurs eventually failed or just got lucky once. This paper also suggests that successful serial or parallel, labeled multi-success in this paper, entrepreneurs engage in pessimistic falsification, not excessive optimism, during the early stages of opportunity evaluation and they often engage in entrepreneurial fishing through the allocation of specific but limited resources to test the waters before proceeding with new ventures.
... This behavior shows the risk taking ability of the entrepreneur. An entrepreneur shows better behavior towards accepting the risk rather than a non-entrepreneur (Norton & Moore, 2006) hence making entrepreneurs more risk takers. ...
The purpose of this study was to investigate the mediating role of entrepreneurial leadership between different types of organizational cultures and entrepreneurial orientation. A total of 181 online responses from the small and medium size industries were gathered with the help of chamber of commerce and were analyzed using Partial Least Square (PLS). The result revealed that adhocracy culture and clan culture significantly affected the entrepreneurial orientation only if entrepreneurial leadership style acted as a mediator showing innovative solution development and mentorship were highly dependent on entrepreneurial leadership style. However, the relationship between market culture and entrepreneurial orientation became insignificant with the mediation of entrepreneurial leadership showing lack of external focus towards the market. The role of entrepreneurial leadership style remained significant in hierarchical culture to enhance entrepreneurial orientation suggesting higher internal focus and control. This study will help researchers and practitioners to understand the entrepreneurial leadership style in different organizational perspectives to generate entrepreneurial orientation.
... This behavior shows the risk taking ability of the entrepreneur. An entrepreneur shows better behavior towards accepting the risk rather than a non-entrepreneur (Norton & Moore, 2006) hence making entrepreneurs more risk takers. ...
The purpose of this study was to investigate the mediating role of entrepreneurial leadership between different types of organizational cultures and entrepreneurial orientation. A total of 181 online responses from the small and medium size industries were gathered with the help of chamber of commerce and were analyzed using Partial Least Square (PLS). The result revealed that adhocracy culture and clan culture significantly affected the entrepreneurial orientation only if entrepreneurial leadership style acted as a mediator showing innovative solution development and mentorship were highly dependent on entrepreneurial leadership style. However, the relationship between market culture and entrepreneurial orientation became insignificant with the mediation of entrepreneurial leadership showing lack of external focus towards the market. The role of entrepreneurial leadership style remained significant in hierarchical culture to enhance entrepreneurial orientation suggesting higher internal focus and control. This study will help researchers and practitioners to understand the entrepreneurial leadership style in different organizational perspectives to generate entrepreneurial orientation.
... La visión del emprendedor sin aversión al riesgo, independientemente de su habilidad y capacidad para identificar oportunidades de negocio (Weenekers y Thurik, 1999), tendría la intención de desarrollar una franquicia, operar una franquicia máster 2 , o incursionar con varias unidades de venta o en distintas marcas de franquicia. Norton y Moore (2006) no encontraron diferencias entre emprendedores y no emprendedores respecto de los riesgos tomados, por ello, la primera hipótesis se plantea de tal forma: ...
El desempeño de la franquicia suele abordarse desde la perspectiva de gestión comercial, sin embargo, la contribución interdisciplinar a la investigación sobre el desarrollo económico y sus implicaciones en la gestión han sido escasamente atendidos. México presenta una paradoja; mientras la comercialización de franquicias aumenta constantemente el número de marcas por la incursión de emprendedores, el total de estos establecimientos crece de manera inversa. Determinar los factores que favorecen la incursión de un emprendedor en la actividad franquiciadora y las expectativas de crecimiento, es el propósito de este estudio en la zona noreste del país por sus condiciones diferenciadas. La investigación es exploratoria y explicativa empleando como técnica de análisis un modelo de ecuaciones estructurales cuyos resultados sugieren factores de empresa y las características individuales como determinantes de las expectativas de nuevas unidades de negocio. Se evidencian empresarios jóvenes con perfil más emprendedor que inversor en franquicias, concluyendo que el tamaño de la franquicia y los incentivos empresariales definen la propensión al crecimiento por la apertura de nuevos establecimientos.Â
... If such a view is correct, we might expect entrepreneurs to be prone to take risks in a range of domains, not necessarily just those related to business. However, empirical tests are not supportive of 'general risk propensity' theories showing systematic differences between entrepreneurs and managers or general populations in their risk attitudes (Andersen, Di Girolamo, Harrison, & Lau, 2014;Holm, Opper, & Nee, 2013;Low & MacMillan, 1988;Norton & Moore, 2006;Palich & Bagby, 1995). Effects found in meta-analyses comparing risk attitudes held by entrepreneurs and managers are inconclusive. ...
This paper contributes to the debate concerning determinants of willingness to take entrepreneurial risks and proposes a new approach to this issue. Our theoretical model predicts that entrepreneurs differ from non-entrepreneurs in their willingness to accept business risks because the former produce more vivid and more positive mental images of the consequences of risk taking than the latter. We investigated the psychological processes behind willingness to take business and non-business risks in groups of entrepreneurs and non-entrepreneurs. First, we measured basic risk attitudes. Next, participants were presented with risky scenarios and asked to: (1) produce mental images; (2) evaluate their positivity and vividness; and (3) assess fearfulness evoked by the scenarios as well as risk level and willingness to take risk. Entrepreneurs did not differ from non-entrepreneurs in either their basic risk attitudes or willingness to take non-business risks. However, entrepreneurs declared a greater readiness to take business risks and produced more positive and vivid mental images of business risks. We found that an indirect effect of vividness of mental imagery on declared business risk taking only occurred for entrepreneurs. On a theoretical level, our results show that mental imagery might determine entrepreneurs' willingness to take business risk.
... The impact of risk-taking on firm performance has been little studied, however. Most empirical studies have examined the impact of risk perception on a single, predefined decision (Forlani and Mullins, 2000;Norton and Moore, 2006), but not on firm performance. Where it has been studied in terms of performance, results are broadly negative. ...
... After a number of years of study into traitsbased characteristics, no distinctive demographic or personality characteristics have been found for entrepreneurs that exert any consistent and substantive effect on entrepreneurship (Brockhaus, 1980;Gartner, 1988;Shane, 2008). As such, the focus of recent studies has shifted from traits to more social (Birtch, Au, Chiang, & Hofman, 2018) and increasingly cognitive mechanisms of entrepreneurial decision-making such as perceptions of risk, rather than propensities (Mitchell et al., 2007;Norton & Moore, 2006;Palich & Bagby, 1995;Shaver & Scott, 1991). ...
On the basis of the seminal work of Kahneman and Tversky Econometrica, 47(2): 263–292 (1979), this research extends the boundaries of prospect theory in investigating determinants and temporal variation of risk-taking in entrepreneurial decisions, such as creating a new business organization or investing a risky business project. The two experimental studies (1) identify entrepreneurial risk-taking in the gain situation and find reversal of risk preference after a dynamic entrepreneurial learning process, indicating that the framing effect of prospect theory in explaining entrepreneurial risk-taking is conditional; (2) instead of weights, subjective judgment of the possibility of success of a risky project (subjective probability) consistently plays central moderating role in entrepreneurial decisions under uncertainty, and (3) the different effects of subjective probability in the two studies reveal that novice decision-makers are more value-driven, whereas experienced decision-makers, particularly under low probability conditions, tend to be more risk averse regardless of the value of a risky project perceived as long as they have a lack of confidence in eventual success.
... We argue, therefore, that financial literacy has both direct and indirect influences on firms' sustainability. Thus far most empirical research has used experimental research designs to investigate how individuals' financial literacy influences predefined decisions, such as investment decisions and strategy [26,27]. Further, most of the research on financial literacy has been carried in developed economies and few studies have investigated financial literacy in the SME sectors of developing economies [28]. ...
Role of the knowledge-based resources in promoting sustainability in small and medium enterprises (SMEs) is currently a topic of debate. Financial literacy has been identified as a vital knowledge resource for financial decision making, but insufficient attention has been given to how SMEs’ financial literacy affects their sustainability. Drawing upon a knowledge-based perspective, peaking order theory and dual process theory, we constructed an integrated model to examine the impact of financial literacy, access to finance and financial risk attitude on SMEs’ sustainability. The sample included 291 chief financial officers (CFOs) of SMEs in Sri Lanka. The output of structural equation modelling revealed direct positive effects of financial literacy, access to finance and financial risk attitude on sustainability. Financial literacy also emerged as a predictor of access to finance and financial risk attitude. Moreover, access to finance and financial risk attitude were found to be partial mediators of the relationship between financial literacy and SMEs’ sustainability. Theoretical implications and practical implications for policymakers, industry practitioners and academics interested in promoting sustainability amongst SMEs are discussed.
Risk management forms a very important part of entrepreneurial success, considering the fact that uncertainties and risk are underlying elements of the life of every new venture. This article theoretically investigates the approaches to risk management in entrepreneurial ventures, and explores strategies that have can be employed by entrepreneurs in mitigating risks. The study provides a comprehensive view of how entrepreneurs can approach and handle risks associated with their ventures within financial, market, operational, and technological domains, amongst others, by further elaborating on traditional and more modern risk management theories. The study also identifies and explores the effectiveness of some of the risk management strategies that can adopted by entrepreneurs, thus offering insights into good practice, in addition, the study assesses emerging trends in entrepreneurial risk management including the role of technology, sustainability, and ethical considerations in these processes. The findings of this study present an advancement of knowledge on subjects such as entrepreneurship and risk management and provide entrepreneurs, academicians and policy makers with valuable insights into ways of best cultivating resilient and successful ventures within the ever-changing and increasingly complex business environment.
In this paper, we develop a theoretical model to explain the interplay between individuals’ risk attitudes and happiness on their intention to become entrepreneurs. Our model illustrates that for risk averse individuals, the greater the level of happiness, the lower their willingness to become entrepreneurs. Conversely, if individuals are risk seekers, the higher their level of happiness, the greater their willingness to become entrepreneurs. We test the model using data from the Bank of Italy’s Survey of Household Income and Wealth (SHIW) and the empirical results confirm the proposition set by our model.
Notre étude vise à aborder la question de la représentation sociale du secteur de l’hôtellerie-restauration (HR) et ses effets potentiels sur la perception individuelle du risque à entreprendre. L’objectif sous-jacent de cette recherche est d’identifier certains freins et/ou facteurs destinés à faciliter la vocation entrepreneuriale dans ce secteur, afin de mieux les intégrer dans les pratiques de sensibilisation à l’entrepreneuriat ou de formation. Un échantillon de 279 étudiants d’une école supérieure spécialisée en gastronomie et en hôtellerie a été interrogé en janvier 2018. Une échelle de mesure des représentations sociales du secteur a tout d’abord été validée, puis confrontée statistiquement à l’échelle de la représentation individuelle du risque à entreprendre de Barbosa (2008). Nos résultats montrent une nette influence des représentations liées aux conditions de travail du secteur d’une part, du plaisir, du partage et de l’hédonisme d’autre part, sur diverses dimensions liées à la perception du risque à entreprendre. Ces conclusions ouvrent la voie à d’autres recherches, confirmatoires, menées auprès d’échantillons plus conséquents.
The complexity of finances and access to financial markets is one of the main challenges facing an entrepreneur. However, not many studies examine the effect of financial skills on entrepreneurial intentions. Our research describes venture intentions, considering motivations, contextual factors and personal traits in different clusters, based on the strong sense of entrepreneurial self-efficacy and the levels of financial literacy and numeracy skills. Results demonstrate that financial and numeracy skills and self-efficacy shape different profiles of potential entrepreneurs. The study shows that social motivations exert a favourable impact on entrepreneurial intentions only for those who firmly believe in their abilities or have high financial and numeracy skills. For those without outstanding skills or high self-efficacy, contextual factors play a key role in the decision to launch a new venture.
The present article attempts a more comprehension of the field of Entrepreneurial Marketing (EM) based on the firm size. Many authors link EM to small firms because of their characteristics, where others state that it can be found in large firms too. As small and large firms do not have the same characteristics, our study focused on the different dimensions of EM construct to highlight the differences in both cases. As a result, we have found that innovation, customer orientation, style of management, and resource leveraging permit to distinguish EM in SMEs from larger ones. Executive summary This work targeted a more comprehension of the field of Entrepreneurial Marketing (EM) as a result of the entrepreneurship/Marketing interface. Many authors associated EM to SMEs. In fact, it responds the challenges of marketing and entrepreneurial practices in small firms because of their characteristics. The more exploration of the field shows that EM can be found in large firms in order to establish a competitive advantage, too. The question was if EM was associated to small firms challenging the traditional marketing practices because of the 2 SMEs characteristics, how can we associate EM to large firms while they haven't the same characteristics? To respond this question, we have adopted Morris et al., (2002) EM decomposition. And, because of the large number of its components, we are restricted to the more heterogeneous ones to highlight variables that distinguish EM in SMEs to larger firms. With reference to the literature review, we have developed our conceptual model, then our research hypotheses. Later, we have employed the ACP, discriminatory, and a regressive analysis. Some hypotheses were verified while others were not, in the Tunisian context. As a result, we have found that innovation, customer orientation, style of management, and resource leveraging permit to distinguish EM in SMEs from larger ones (large firms are more: customer oriented, resource leveraging, and innovative than small firms, where these latter are more informal in their style of management).
In a world where technological developments are spreading rapidly, people who adopt an innovative
understanding and can take risks will have more chances to adapt to the new structure and achieve success.
Experiencing rapid changes along with technological developments made it necessary for individuals to adapt to
new situations. With this in mind, it is very important to analyse the relationship between individual innovativeness
and risk-taking behaviour, which is thought to have significant effects on innovation capacity. In this context, it
was decided to examine the relationship between innovativeness, self-confidence and risk-taking behaviours of
university students. In order to obtain the data required for the study, a questionnaire study was conducted using
face-to-face interview method with randomly selected 504 students studying at Firat University. The findings were
interpreted by performing necessary statistical analyses with the obtained data, and the relationship between
innovativeness and self-confidence and risk-taking behaviours of university students was questioned. It was tried
to determine what needs to be done in order to increase the level of innovation and self-confidence and risk taking
among the students. According to the results obtained from the study, it was determined that there is a positive
and significant relationship between innovativeness level and self-confidence and risk-taking levels and according
to this result, it is commented that as students' self-confidence and risk-taking levels increase, their level of
innovation also increases.
Purpose
This work proposes a research model that explains investment intention in online peer-to-peer (P2P) lending based on the persuasion theory of elaboration likelihood model (ELM). In the proposed model, investment intention indirectly relates to source credibility and argument quality through the mediation of trust. At the same time, the study hypothetically moderates the relationships between source credibility and trust and between argument quality and trust by financial self-efficacy and risk preference.
Design/methodology/approach
This research presents an experiment to empirically validate its theoretical rationales. The hypotheses herein were tested using data from working professionals at a large science park in Taiwan. A total of 500 participants took part in the experiment in which the scenario of a pseudo-online P2P lending intermediary was first presented for their perusal, and then questionnaires based on the scenario were provided for the participants to fill out.
Findings
Trust cannot be improved over night without making great efforts on source credibility and argument quality in the long run. Online marketers should study market segmentations to decide what appropriate elements and promises should be provided in advertisements in order to improve their source credibility. Moreover, how online intermediaries formulate convincing messages and Polish their delivery communication skills should be improved so as to increase argument quality.
Originality/value
First, the theoretical conceptualization of source credibility and argument quality built upon the ELM not only broadens the boundary of virtual communities beyond the literature that considers source credibility and argument quality as important determinants, but also shows the practical status quo of trust as a critical mediator. Second, this research incorporates financial self-efficacy (based on social cognitive theory) and risk preference (based on economic theory) as important moderators in the development of trust. For that reason, customer education initiatives that influence financial self-efficacy and risk preference are discussed in greater detail.
The rapid developments in information, communication, and transportation have led to an increase in competition between enterprises. As a result, entrepreneurs striving to survive in the global competition have begun to invest in “digital” competition, which differs from traditional entrepreneurship as it does not require large amounts of capital for its establishment. It enables entrepreneurship to operate all around the world with the internet. This chapter focuses on the differences between digital and traditional enterprises, emphasizing the importance of digital enterprises. According to this purpose, the study employed SWOT analysis to identify Turkish digital enterprises' strengths and weaknesses in relation to the corresponding opportunities and threats.
Research indicates that perceptions of risk and loss affect decision-making. Entrepreneurship presents a context in which risk, failure, and loss frequently frame decisions. This paper presents a review of the entrepreneurship literature that is grounded in Kahneman and Tversky's 1979 article on prospect theory. The theory's contribution to the understanding of how the framing of losses affects decisions offers a useful foundation for considering streams of research in entrepreneurship and small business, given that the prospects for loss and failure are high in these endeavors. This review identifies 79 articles and organizes them into four broad themes: risk-taking perspectives of the entrepreneur and stakeholders, aspirations and reference points, organizational innovation and change, and learning from failure. The review concludes by considering the future research potential in the topics of regret, mental accounting, and an understanding of competitors.
Voiko riskin ottamista ja epävarmuudessa toimimista oppia ja opettaa? Artikkelissa kuvattu, kahteen interventioon rakentuva tutkimus pitää sitä alkuoletuksestaan mahdollisena. Kirjoittajan tulkinnan mukaan lähtöasetelman oletukset ja tutkimuksen tulokset sopivat pääsääntöisesti yhteen: riskin ottamista ja epävarmuudessa toimimista voidaan sekä oppia että opettaa, oppiminen on toimintaan sidottu prosessi ja siihen liittyy sekä epätietoisuuden että epävarmuuden kokemuksia.
Wachstumsorientierte Unternehmensgründungen leisten einen substanziellen Beitrag zum wirtschaftlichen Wachstum, zur internationalen Wettbewerbsfähigkeit und zur Beschäftigungsrate eines Landes. Aus diesem Grund sind viele Regierungen bestrebt, die Rahmenbedingungen der Unternehmensregulierung zu verbessern, um dadurch Gründungen zu stimulieren. Diese Arbeit untersucht den Effekt wiederkehrender politischer Interventionen - den Abbau von Eintritts- und Austrittshürden und die Erhöhung von Flexibilität bei der Beschäftigung von Arbeitnehmern - auf die individuelle Gründungswahrscheinlichkeit eines wachstumsorientierten Unternehmens empirisch im internationalen Vergleich. Die Untersuchung bestätigt einen negativen Einfluss von Eintritts- und Austrittskosten, der bei risikobereiten Personen stärker ausgeprägt ist als bei weniger risikobereiten Personen. Ferner zeigt diese Arbeit, dass eine größere Flexibilität bei der Gestaltung von Arbeitsverhältnissen die Wahrscheinlichkeit wachstumsorientierter Unternehmensgründungen positiv beeinflusst. Dieser Effekt ist stärker ausgeprägt, wenn Gründer auf Erfahrungen und Ressourcen aus einem Netzwerk zu anderen Gründern zurückgreifen können. Zuletzt zeigt diese Arbeit, dass Flexibilität bei der Gestaltung von Arbeitsbeziehungen außerdem die Innovationsrate unter wachstumsorientierten Gründern steigern kann.
This paper aims to examine the constructs that contribute to the business performance of small and medium enterprises in the tourism industry (TSMEs). Data from 278 TSMEs’ business owners were collected using a quantitative survey method. The results indicate that innovation practice does have a positive mediating role in the relationships between social media usage, business planning extent and TSMEs’ business performance. The study implies that TSMEs will have a better business performance should they emphasis on the practice of innovative strategy, in addition to the adoption of social platform and business planning extent. Hence, more expansive innovation practice is proposed to provide future research explanation. Apart from that, government support does have a significant moderating role in the relationship between innovation practice and TSMEs’ business performance. It is assumed that government support will be stronger for those perceived government support to be higher. Hence, the focus of government policy is to enhance the existing institutional programmes offered, by overcoming the barriers faced by the TSMEs. This study contributes valuable evidence for business enterprises in the tourism sector.
This study examines the determinants of university students' entrepreneurship intentions. The effects of eleven factors of entrepreneurial intention were investigated, including personality, social, and societal factors. A convenience sampling method and 350 self-administered questionnaires were used for data collection from four Sudanese universities, obtaining a usable response rate of 84.6%. Through Smart PLS, Structural Equation Modeling (SEM) was used for data analysis and relationship interpretation. The results showed that innovativeness and cultural valuation were positively and significantly associated with students' entrepreneurial intention. This suggests that the government and policymakers should encourage the development of entrepreneurship-fostering environments within universities. Future studies should increase the sample size to generalize the findings and validate new measures for the same study model, and explore a wider Sudanese entre-preneurial field scope.
Role of the Small and Medium Enterprises in economic development is immense. However, in the growing literature of SMEs management, inadequate consideration has been devoted on the financial literacy of the SMEs, and the mechanisms through which it impacts on SMEs performances. Drawing upon knowledge-based view and dual process theory, we tested the impact of financial literacy and risk attitude on SMEs performances in an integrated model. The sample included 244 chief financial officers of SMEs in three provinces of Sri Lanka (Central, Western and Southern provinces). The output of structural equation model revealed a direct positive effect of financial literacy and risk attitude on SMEs performances. Further, financial literacy also has a significant positive impact on risk attitude. Moreover, risk attitude was found to be partial mediator between financial literacy and SMEs performances. Accordingly, we conferred managerial and theoretical implications for policymakers, industry practitioners and academics.
The aim of this study is to research the relationship between entrepreneurship tendency and perception of happiness. Entrepreneurship tendency was represented with tolerance of ambiguity, need for independence, risk-taking, creativity, innovation, relationships with people, internal locus of control and need for achievement aspects in this study. Survey method was used in this study and the surveys were administered to the students of Afyon Kocatepe University and Kastamonu University. Entrepreneurship tendency scale, which was developed by Avsar (2007) and Oxford happiness questionnaire (Hills & Argyle, 2002) were used as measurement tools in the survey. The findings of the research showed that there is a positive and significant relationship between happiness and innovation, relationships with people, need for independence, creativity. Moreover, it was found that there is a negative relationship between happiness and risk-taking.
Keywords: Entrepreneurship Tendency, Creativity, Innovation, Perception of Happiness, Oxford Happiness Questionnaire.
Entrepreneurial intentions are an important determinant to starting new ventures. However, there is only limited knowledge of their cognitive antecedents. Building on the person-environment fit theory and tenets from the cognitive psychology literature, we analyze the effect of cognitive flexibility on individual's intentions to pursue a career in entrepreneurship. We also ascertain the role of attitude toward risk taking and entrepreneurial self-efficacy in explaining the cognitive flexibility-entrepreneurial intentions link. Empirical analyses based on a sample of 440 respondents, supported our hypothesized arguments. We discuss our contributions, highlight limitations and advance suggestions for future research.
Psychology can be distinguished from other behavioral sciences by its emphasis on the behavior of the individual person. Behavior, in turn, is influenced by the way in which the external world is represented in the mind, and by the individual's exercise of choice. The article examines the possibility that relatively enduring attributes of the person might affect entrepreneurial activity, describes the social cognitive processes Involved in constructing representations of the external environment, and suggests which motivational variables affect behavioral choices. Although past research on “the psychology of the entrepreneur” has not been productive, a psychological approach based on persons, process, and choice holds promise for the future.
Defining entrepreneurship research
In this article, we attempt to distinguish between the properties of moderator and mediator variables at a number of levels. First, we seek to make theorists and researchers aware of the importance of not using the terms moderator and mediator interchangeably by carefully elaborating, both conceptually and strategically, the many ways in which moderators and mediators differ. We then go beyond this largely pedagogical function and delineate the conceptual and strategic implications of making use of such distinctions with regard to a wide range of phenomena, including control and stress, attitudes, and personality traits. We also provide a specific compendium of analytic procedures appropriate for making the most effective use of the moderator and mediator distinction, both separately and in terms of a broader causal system that includes both moderators and mediators.
Entrepreneurs are often thought to engage in "risky" behaviors. Thus, they may be seen as more willing than average to take risks. We offer a dissenting view. Central to entrepreneurship is the alertness perspective which suggests that entrepreneurs may assess opportunities and threats differently than non-entrepreneurs. That differential assessment may be understood in terms of Bayesian probability. The Bayesian model argues that differing assessments of prospective outcomes may be attributable to differences in prior information. This perspective on risk assessment has implications for entrepreneurial decision making, whether to launch a new venture or adopt a growth strategy. The literature is reviewed, a synthesis is offered, a numerical example is developed, and a research agenda is proposed. Copyright 2002 by Kluwer Academic Publishers
'This ambitious book draws upon a wide variety of literature in developing a comprehensive theory of entrepreneurship, ranging from the discovery of entrepreneurial activities, to industry differences in entrepreneurial activity, to the organizing process. It represents a major contribution to the field.' - Arnold C. Cooper, Purdue University, US. 'Professor Scott Shane provides a deep and comprehensive discussion of the individual-opportunity nexus in entrepreneurship. Eschewing the usual approaches of either focusing exclusively on the individuals and their motivations and actions or focusing exclusively, almost always ex-post, on the economic potential of opportunities, Scott Shane fixes his gaze squarely on the nexus of the individual and the opportunity. It is this nexus that I believe is the building block for a better understanding of the entrepreneurial phenomenon.' - From the foreword by Sankaran Venkataraman. In the first exhaustive treatment of the field in 20 years, Scott Shane extends the analysis of entrepreneurship by offering an overarching conceptual framework that explains the different parts of the entrepreneurial process - the opportunities, the people who pursue them, the skills and strategies used to organize and exploit opportunities, and the environmental conditions favorable to them - in a coherent way.
The reported research examined the usefulness of placing risk propensity and risk perception in a more central role in models of risky decision making than has been done previously, Specifically, this article reports on two studies that examined a model in which risk propensity and risk perception mediate the effects of problem framing and outcome history on risky decision-making behavior, Implications of the pattern of results for future research are discussed.
Despite intensive inquiry, relatively little is known about the entrepreneur, the central figure in entrepreneurship. The question of how an individual who operates his or her own business differs from a corporate manager remains unanswered. In addressing this question, the primary purpose of this study was to investigate the potential of psychological constructs to predict a proclivity for entrepreneurship. The research model includes three classic themes in the literature: achievement motivation, risk-taking propensity, and preference for innovation.
Introduction Estimating the Regression Line Nonuniqueness and Degeneracy Testing β = 0 An Example of Multiple Regression Estimating the Regression Coefficients Testing βq + 1 = … = βp = 0 Computation
Past research has resulted in contradictory findings concerning the effect of risk on decision-making behavior in organizations. This article proposes a model that reconciles these unresolved contradictions by examining the usefulness of placing risk propensity and risk perception in a more central role than has been previously recognized. Based on this analysis, it is posited that risk propensity dominates both the actual and perceived characteristics of the situation as a determinant of risk behavior. Propositions derived from the conceptual model provide an agenda for future research on individual risk behavior in organizational settings.
A new measure based on confidence ellipsoids is developed for judging the contribution of each data point to the determination of the least squares estimate of the parameter vector in full rank linear regression models. It is shown that the measure combines information from the studentized residuals and the variances of the residuals and predicted values. Two examples are presented.
This field study explores the nature of entrepreneurial strategy making (ESM) and its relationship with strategy, environment and performance. In the first phase, we assess the independence of entrepreneurially oriented strategy-making processes through factor analysis. The second phase, using moderated hierarchical regression anlaysis, investigates the relative predictive power of two approaches for exploring the ESM–performance relationship: contingency and configuration. Findings from a sample of 32 firms competing in a wide variety of industries indicate that configurational approaches that align ESM, strategy, and environment have greater predictive power than contingency approaches. However, not all high performing configurations are consistent with normative theory. Thus, alternate theories linking entrepreneurial strategy making to competitive advantage should be developed and tested. © 1997 John Wiley & Sons, Ltd.
The entrepreneurial literature traditionally considers risk taking an important distinguishing element in entrepreneurship. This study examines the risk taking propensity of the founders or managers of new ventures. Upon examination of competing definitions of the entrepreneur, this analysis defines an entrepreneur as "a major owner and manager of a business venture who is not employed elsewhere." Risk taking is considered "the perceived probability of receiving the rewards associated with success of a proposed situation" required before embarking on a venture. Three levels of risk taking (low, intermediate or moderate, and high) could affect the decision to start a business venture. Risk taking was measured using the Wallach and Kogan choice dilemmas questionnaire (CDQ). Studied were entrepreneurs, promoted managers, and new (or transferred) managers of firms located in St. Louis in 1975; 31 questionnaires were used for each group. The results are not statistically different. Entrepreneurs and managers are found to have the same risk taking propensity. Because previous studies of risk preferences examined limited samples, CDQ scores were also compared against a sample representing the general population. Found that risk taking propensity of entrepreneurs is same as that for the general population. Results also show that entrepreneurs, managers, and the general population all have a propensity for moderate risk. Overall, general risk taking does not distinguish entrepreneurs from non-entrepreneurs. (TNM)
The goal of this essay is to encourage the use of concepts and research methods borrowed from anthropology in the study of entrepreneurship. To that end, the author reviews research utilizing this approach and identifies its theoretical concerns. The anthropological focus on society and culture may be of use, the author argues, in developing theory in entrepreneurship. Common themes in the two research traditions include the accumulation of knowledge and skills, the use of informal networks to acquire access to resources, and opportunity structure. The last, for example, is reflected in studies of the occurrence of entrepreneurship within particular groups, and in the spatial clustering of entrepreneurs. The intangible assets that contribute to a firm's competitive advantages can also be viewed through an anthropological lens, since they are often based on social organization and cultural factors such as legitimacy. The use of grounded theory to guide field research is advocated.
More than 500 top-level business executives were studied to ascertain the validity of common stereotypes of who takes risks and who avoids risks. We began with 13 risk measures based on theoretical grounds, naturally occurring situations, and attitudes. These measures were formed into seven consolidated measures using factor analysis. Data were gathered on numerous socio-economic variables including ones relating to personal, financial, and professional characteristics. When these characteristics were subjected to factor analysis, four main factors emerged. Linear discriminant analysis was used to address the question of whether risk takers can be differentiated from risk averters. The results were surprisingly clearcut. The most successful executives were the biggest risk takers; the most mature executives were the most risk averse.
Though risk plays a central role in most entrepreneurial decision making, little empirical research has explicitly examined how the elements of risk, risk perceptions, and entrepreneurs' propensities to take risks influence choices among potentially risky entrepreneurial ventures. This experimental study asked a sample of entrepreneurs leading America's fastest growing firms to make choices among a series of hypothetical new ventures. The results indicate that such choices are influenced by the risks inherent in the new ventures, as evidenced by the pattern of outcomes anticipated in each venture, the entrepreneurs' differing perceptions of those risks, and differences in their personal propensities to take risks.
Despite intensive inquiry, relatively little is known about the entrepreneur, the central figure in entrepreneurship. The question of how an individual who operates his or her own business differs from a corporate manager remains unanswered. In addressing this question, the primary purpose of this study was to investigate the potential of psychological constructs to predict a proclivity for entrepreneurship. The research model includes three classic themes in the literature: achievement motivation, risk-taking propensity, and preference for innovation.A survey of 767 small business owner-managers and corporate managers was assembled from a 20-state region, primarily the southeastern United States. The participants completed a questionnaire composed of the Achievement Scale of the Personality Research Form, the Risk-Taking and Innovation Scales of the Jackson Personality Inventory and questions pertaining to numerous individual and organizational variables. Respondents were first divided into two groups, managers and small business owner-managers. Subsequently, due to the often cited variations in entrepreneurs, the owner-managers were further categorized as either an entrepreneur or small business owner, using the widely cited Carland et al. (1984) theoretical definitions. Entrepreneurs are defined by their goals of profit and growth for their ventures and by their use of strategic planning. Alternatively, small business owners focus on providing family income and view the venture as an extension of their personalities. In this study, both groups of owner-managers were simultaneously compared with managers using hierarchical set multinomial LOGIT regression.The results indicated that the psychological constructs are associated with small business ownership, but with some important caveats. As hypothesized, those labeled entrepreneurs were higher in achievement motivation, risk-taking propensity, and preference for innovation than were both the corporate managers and the small business owners. This profile of the entrepreneur as a driven, creative risk-taker is consistent with much of the classic literature concerning the entrepreneur. Nonetheless, not all of the owner-managers fit this profile. When compared with managers, the small business owners demonstrated only a significantly higher risk-taking propensity. In terms of the constructs studied, the small business owners were more comparable to managers than to entrepreneurs.In addition to theoretical and methodological implications, the results presented here have important implications for small business owner-managers of both types. A major issue is the connection between the owner’s psychological profile and the characteristics of the venture, including performance. It would appear that psychological antecedents are associated with owner goals for the venture. Some owners will be more growth oriented than will others, and performance should be assessed in light of the owner’s aspirations for the venture. Moreover, owners should be aware of their own personality sets, including risk preferences, which may be more or less suited to different venture circumstances, including those with relatively high levels of risk.Planning in small businesses appears to enhance venture performance. Research has demonstrated the connections between psychological factors and planning behaviors in small businesses. Those labeled entrepreneurs in this study have goals of profit and growth, and tend to engage in more planning. An awareness of these psychological preferences and concomitant attention to planning behaviors have the potential to improve the performance of the venture, irrespective of owner aspirations.Venture teaming is becoming more popular among entrepreneurs. Balanced venture teams appear to improve the chances of entrepreneurial success (Timmons 1990), but a common source of conflict among venture team members is inconsistent or ambiguous motives for the new venture. Awareness of venture partners’ psychological predispositions in areas such as risk-taking could be used to identify and reconcile areas of potential conflict, and enhance the planning process in the small firm. In sum, an individual’s awareness of his or her psychological profile provides a number of advantages, not only to existing entrepreneurs, but also to aspiring entrepreneurs who should assess their perceived entrepreneurial opportunities against the backdrop of their psychological proclivity for entrepreneurship.
The main findings in this study are that: • Entrepreneurs from smaller firms are less comprehensive in their decision behavior than professional managers from larger firms, with comprehensiveness defined as the degree to which an individual follows a formal rational decision process; • As decision comprehensiveness declines, so too does organizational performance, both among entrepreneurs and professional managers.The present study was based on the responses of 15 entrepreneurs from smaller firms averaging 25 employees and 13 CEOs and other top level corporate executives from larger, more professionally managed firms averaging 740 employees. The firms were randomly selected from a list of mid-Atlantic electronic manufacturing firms. Field interviews and questionnaires were employed, as well as a decision scenario involving a series of questions to which the entrepreneur or professional manager responded.After reviewing the literature on entrepreneurship, the researchers noted that most of it focused on developing profiles of entrepreneurs—for example, that they were high achievers, impatient and made decisions quickly. However, little—if any—research has focused on the behavior of entrepreneurs, particularly when compared to that of professional managers. Given this gap in the research, a field study was designed to compare the decision behavior of entrepreneurs and professional managers. It was expected that entrepreneurs would be less comprehensive than professional managers, but given previous research on comprehensiveness, it was difficult to predict the consequences of this less comprehensive model for performance.The researchers note in the discussion and conclusion that the results of the study have major implications for entrepreneurs and professional managers. Granted that decision comprehensiveness should be emphasized, they question the ability of entrepreneurs to change their decision behavior. It is argued that many of the drawbacks of comprehensiveness can be overcome by more sophisticated planning techniques and information processing systems. The paper concludes by stressing the need for research on techniques and ways to train entrepreneurs and managers to be more comprehensive.In summary, the present study has produced some important preliminary findings. It confirmed in larger scale studies, they could have major implications for the manner in which entrepreneurs and professional managers are trained and developed.
Interpersonal and work-related classroom behaviors of 650 kindergarten children were assessed to identify behaviors critical for success. Thirty kindergarten teachers participated, providing behavioral ratings on all students in the fall and spring and global adjustment assessments mid-year and spring. Relative risk, a concept and methodology adopted from epidemiology, was estimated for combinations of behavioral risk factors derived from teachers' ratings. Results of the analyses of relative risk demonstrated a consistent and highly significant risk for casivity (i.e., being classified at mid-year and spring as a case of maladjustment) associated with subnormal ratings on behaviors relating to work (work-related skills) as opposed to social interaction (interpersonal skills). The findings suggest that (a) current educational concepts of “readiness” may need to be expanded beyond academic knowledge to include independent working skills, and (b) teaching of social interaction skills, while important, should not be emphasized in preschool programs at the expense of work-related skills.
This paper presents a parameter covariance matrix estimator which is consistent even when the disturbances of a linear regression model are heteroskedastic. This estimator does not depend on a formal model of the structure of the heteroskedasticity. By comparing the elements of the new estimator to those of the usual covariance estimator, one obtains a direct test for heteroskedasticity, since in the absence of heteroskedasticity, the two estimators will be approximately equal, but will generally diverge otherwise. The test has an appealing least squares interpretation.
The main intent of this paper is to introduce a new statistical procedure for testing a complete sample for normality. The test statistic is obtained by dividing the square of an appropriate linear combination of the sample order statistics by the usual symmetric estimate of variance. This ratio is both scale and origin invariant and hence the statistic is appropriate for a test of the composite hypothesis of normality. Testing for distributional assumptions in general and for normality in particular has been a major area of continuing statistical research-both theoretically and practically. A possible cause of such sustained interest is that many statistical procedures have been derived based on particular distributional assumptions-especially that of normality. Although in many cases the techniques are more robust than the assumptions underlying them, still a knowledge that the underlying assumption is incorrect may temper the use and application of the methods. Moreover, the study of a body of data with the stimulus of a distributional test may encourage consideration of, for example, normalizing transformations and the use of alternate methods such as distribution-free techniques, as well as detection of gross peculiarities such as outliers or errors. The test procedure developed in this paper is defined and some of its analytical properties described in ? 2. Operational information and tables useful in employing the test are detailed in ? 3 (which may be read independently of the rest of the paper). Some examples are given in ? 4. Section 5 consists of an extract from an empirical sampling study of the comparison of the effectiveness of various alternative tests. Discussion and concluding remarks are given in ?6. 2. THE W TEST FOR NORMALITY (COMPLETE SAMPLES) 2 1. Motivation and early work This study was initiated, in part, in an attempt to summarize formally certain indications of probability plots. In particular, could one condense departures from statistical linearity of probability plots into one or a few 'degrees of freedom' in the manner of the application of analysis of variance in regression analysis? In a probability plot, one can consider the regression of the ordered observations on the expected values of the order statistics from a standardized version of the hypothesized distribution-the plot tending to be linear if the hypothesis is true. Hence a possible method of testing the distributional assumptionis by means of an analysis of variance type procedure. Using generalized least squares (the ordered variates are correlated) linear and higher-order
Explores the expectations of entrepreneurs in newlyestablished businesses regarding their own chances of success and theirpredictionsregarding the chances for success of others with similarstartup ideas, in one of the first such studies. Past research suggests that,at best, fewer than 50% of firms survive for more than five years with a givenowner/manager. Based on this past research, three hypotheses are posited:entrepreneurs will perceive their odds of success at less than or equal to 50%,entrepreneurs' prediction of others' success will not differ significantly fromtheir prediction of their own success, and entrepreneurs' expectations ofsuccess will be related to a number of personal factors including theirbusiness experience, prior ownership, and educational level. Data were gathered from surveys sent in 1985 to members of the NationalFederation of Independent Business (NFIB) who reported that they had openedtheir own businesses in the United States. Of those responding, 2994entrepreneurs were selected from the original sample. Findings did not support any of the three original hypotheses of cautiousoptimism (as prior research predicted). In fact, the results show thatentrepreneurs' perceptions of their own odds for success display a noteworthydegree of optimism. In addition, entrepreneurs believe their own odds ofsuccess to be greater than other new business owners with similar ideas.Furthermore, an analysis of the predicted factors for success showed aremarkable lack of relationship between an entrepreneur's belief of their ownpotential and the objective predictors. In fact, those who were poorly preparedseemed just as optimistic as those who were well prepared. One implication isthat business founders should seek advice from more objective outsiders.(SFL)
Investigates the differences in decision-making processes used by managers in large organizations and entrepreneurs. These differences are examined with respect to two biases and heuristics: overconfidence and representativeness. Overconfidence is defined as overestimating the probability of being right, while representativeness is defined as the tendency to overgeneralize from a few characteristics or observations. The following two hypotheses were studied: 1) entrepreneurs will demonstrate more overconfidence than managers in large organizations, and 2) entrepreneurs will show a greater tendency toward representativeness than will managers in large organizations. Data were obtained via surveys of two populations: 1) entrepreneurs from plastic, electronics, and instrument manufacturing firms, and 2) managers who are responsible for two functional areas (such as marketing or finance) and work for publicly owned organizations with more than 10,000 employees. Results from the logistic regression analysis support both hypotheses and show that there are substantial behavioral differences between managers in large organizations and entrepreneurs. (SFL)
Though it occupies the center of most definitions of entrepreneurship, the concept of risk-taking and its linkages with other constructs (most notably personal traits) have been difficult to capture. As a result, it has been difficult to explain why entrepreneurs rush in to take advantage of opportunities that others fail to see or act upon. However, research on social cognition may shed new light on these challenging issues (Shaver and Scott 1991), providing useful frameworks that differentiate entrepreneurs from others while predicting differences in risk-taking behavior.
Analysis of decision making under risk has been dominated by expected utility theory, which generally accounts for people's actions. Presents a critique of expected utility theory as a descriptive model of decision making under risk, and argues that common forms of utility theory are not adequate, and proposes an alternative theory of choice under risk called prospect theory. In expected utility theory, utilities of outcomes are weighted by their probabilities. Considers results of responses to various hypothetical decision situations under risk and shows results that violate the tenets of expected utility theory. People overweight outcomes considered certain, relative to outcomes that are merely probable, a situation called the "certainty effect." This effect contributes to risk aversion in choices involving sure gains, and to risk seeking in choices involving sure losses. In choices where gains are replaced by losses, the pattern is called the "reflection effect." People discard components shared by all prospects under consideration, a tendency called the "isolation effect." Also shows that in choice situations, preferences may be altered by different representations of probabilities. Develops an alternative theory of individual decision making under risk, called prospect theory, developed for simple prospects with monetary outcomes and stated probabilities, in which value is given to gains and losses (i.e., changes in wealth or welfare) rather than to final assets, and probabilities are replaced by decision weights. The theory has two phases. The editing phase organizes and reformulates the options to simplify later evaluation and choice. The edited prospects are evaluated and the highest value prospect chosen. Discusses and models this theory, and offers directions for extending prospect theory are offered. (TNM)
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