Incumbent firms facing disruptive business model innovations must decide whether to respond through inaction, resistance, adoption, or resilience. We focus on resilient responses to simultaneous perceived threat and opportunity by managers of small incumbent firms. Using cognitive framing arguments, we argue that risk experience moderates perceptions of opportunity, whereas perceived urgency moderates situation threat. We test our framework in the real estate brokerage context, where small incumbents face considerable challenges from disruptive business model innovations, such as discount brokers. Analysis of data from 126 real estate brokers broadly confirms our framework. We conclude with implications of our research for small business incumbents.

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Small business managers rely on judgment and heuristics when making critical strategic decisions. We explore this phenomenon, expanding the theory on cognition and strategy to explain the cognitive determinants of strategic decisions leading to small firm business model change. We integrate existing theories (entrepreneurial opportunity exploitation, cognitive resilience, prospect theory, behavioral theory of the firm, threat‐rigidity) into a framework explaining strategic intentions, based on managers' perception of business opportunity interacting with assessment of the external environment, current performance, and prior experience. The framework is empirically tested in the context of Canadian real estate brokerage industry, facing potentially major disruptive change.

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