Differences between entrepreneurs and managers in large organizations: Biases and heuristics in strategic decision-making

Busenitz, Lowell W.; Barney, Jay B.

doi:10.1016/s0883-9026(96)00003-1

Cited by 1,959 publications

(1,559 citation statements)

References 50 publications

Supporting

Mentioning

1,469

Contrasting

Unclassified

Order By: Relevance

“…At the same time as acknowledging that potential entrepreneurs may chafe under an employment relationship, the entrepreneurship literature simultaneously places great weight on entrepreneurial overcon…-dence (Cooper et al 1988;Busenitz and Barney, 1997;Köllinger et al, 2007) as a reason why entrepreneurs seem to earn systematically lower amounts of income after venture launch (as noted in Shane 2008, pp. 101-02, synthesizing an observational literature dating back several decades).…”

Section: Introductionmentioning

confidence: 99%

Slipping the surly bonds: The value of autonomy in self-employment

Croson

Minniti

2012

Journal of Economic Psychology

View full text Add to dashboard Cite

This paper models the tradeo¤ between increased autonomy from self-employment and the generally higher income that traditional employment o¤ers. While the demand for autonomy is a purely psychological construct, the economic tradeo¤s involved in its achievement are eminently amenable to quanti…cation and analytical modeling characteristic of economic analysis. We use this setup to o¤er a multifactor utility formulation formalizing the notion of an explicit, autonomy-based preference for self-employment. We propose that such a formulation as a theoretically-defensible alternative to the classic (and also psychologically-based) overcon…dence hypothesis in explaining why self-employment is chosen despite evidence that newly self-employed individuals earn less than comparable individuals who continue their current employment. Our model, founded on utility maximization by a rational individual, demonstrates not only that newly self-employed individuals are willing to accept lower earnings outcomes in exchange for psychic bene…ts from self-employment, but also that the structure of their optimal launch-timing decision guarantees that they will quit at a time such that their income will (at least initially) be reduced. We conclude with implications for the design of empirical instruments to quantify the relative importance of autonomy and income.

show abstract

Section: Introductionmentioning

confidence: 99%

Slipping the surly bonds: The value of autonomy in self-employment

Croson

Minniti

2012

Journal of Economic Psychology

View full text Add to dashboard Cite

show abstract

“…As a result, they are likely to be biased. There exists some evidence that distortions in perceptions are common among individuals in general, and among entrepreneurs in particular (Cooper et al, 1988;Busenitz and Barney 1997). The importance of perceptual variables, and their associated bias, in the decision to start a new business may explain some of the observable inconsistencies between expected and actual returns to entrepreneurship and entrepreneurial decisions found in the literature (Hamilton, 2000) as well as the fact that many new businesses fail shortly after inception (Dunne et al, 1988, Geroski, 1995".…”

Section: Literature Reviewmentioning

confidence: 99%

“…(1982) state that people tend to make decisions based on small or nonrandom samples while ignoring the unreliability or unrepresentativeness of small samples. Studying the founders of 124 startups in comparison to 95 managers of two large corporations, Busenitz and Barney (1997) report that entrepreneurs tend to use rules of thumbs or their own opinion more than the managers. Such behaviour is more prone with entrepreneurs that come from families where either one or two parents were entrepreneurs or were working as managers (Aldrich et.…”

Section: Literature Reviewmentioning

confidence: 99%

See 1 more Smart Citation

Separating the Biased Perceptions from Lack of Knowledge on Entrepreneurship Through a Diagnostic Instrument: LEDI

Kalayci

Çiğdemoğlu

2018

isarder

View full text Add to dashboard Cite

Students of entrepreneurship either have 'biased perceptions' and/or they lack knowledge. The literature states that biased perceptions can have lasting effect even after the training (von Graevenitz, et.al, 2010). Lack of knowledge hinders the decision making of nascent entrepreneurs when they rely on personal opinions or past experiences as heuristics derived from small samples or non-random samples. Currently entrepreneurship education is not designed to address the impact of biased perceptions and lack of knowledge. There is a need to separate biased perceptions from 'lack of knowledge' so that entrepreneurship training could be implemented on a more tailored manner. It is the goal of this paper to devise such an instrument in the lean start up context which is a widely used model of entrepreneurship training. The proposed instrument is tested on a convenience-based sample composed of 212 people. Employment of a three-tiered instrument in this context is a first of its kind. Knowledge or lack of knowledge is checked in the first tier, relevant reasoning is assessed in the second and certainty is evaluated in the third tier.

show abstract

“…This can be viewed as a part of a larger question of considerable scholarly interest (see, for example, Lowe & Ziedonis, 2006;Simon, Houghton, & Aquino, 2000): given the high failure rate of entrepreneurship, why does anyone choose to become an entrepreneur? The consensus solution to this problem is that many entrepreneurs are too confident of their success in a variety of ways (Busenitz and Barney 1997, Camerer and Lovallo 1999, Cassar 2010, Dushnitsky 2009, Hmieleski and Baron 2009. That is, entrepreneurs understand that there is risk in any venture, but also overestimate their personal chances of success at all stages of the business (Cassar 2010).…”

Section: Persistence and The Founding Gapmentioning

confidence: 99%

Second Thoughts About Second Acts: Gender Differences in Serial Founding Rates

Kuppuswamy

Mollick

2016

SSRN Journal

View full text Add to dashboard Cite

Men are far more likely to start new ventures than women. We argue that one explanation of this gap is that women respond differently to signals of past entrepreneurial success due to the "male hubris, female humility" effect. We argue that as a result women are disproportionately less likely to persist in second founding attempts than men when they have succeeded or failed by large margins. Using a data set of serial founders in crowdfunding, we find evidence supporting this prediction. We then turn to a unique survey of founders in crowdfunding in order to examine alternative explanations. We find support for a variety of systematic differences between male and female founders, but the persistence effect remains. While decreased persistence in the face of low quality opportunities benefits women individually, we argue that it disadvantages women as a group, as it leads to 25.3% fewer female-led foundings in our sample than would have occurred if women reacted similarly to men. Abstract: Men are far more likely to start new ventures than women. We argue that one explanation of this gap is that women respond differently to signals of past entrepreneurial success due to the "male hubris, female humility" effect. We argue that as a result women are disproportionately less likely to persist in second founding attempts than men when they have succeeded or failed by large margins. Using a data set of serial founders in crowdfunding, we find evidence supporting this prediction. We then turn to a unique survey of founders in crowdfunding in order to examine alternative explanations. We find support for a variety of systematic differences between male and female founders, but the persistence effect remains. While decreased persistence in the face of low quality opportunities benefits women individually, we argue that it disadvantages women as a group, as it leads to 25.3% fewer female-led foundings in our sample than would have occurred if women reacted similarly to men. * Authorship is alphabetical; both authors contributed equally in developing this paper. The authors would like to thank Adam Cox, Disciplines Management Sciences and Quantitative Methods

show abstract

Differences between entrepreneurs and managers in large organizations: Biases and heuristics in strategic decision-making

Cited by 1,959 publications

References 50 publications

Slipping the surly bonds: The value of autonomy in self-employment

Slipping the surly bonds: The value of autonomy in self-employment

Separating the Biased Perceptions from Lack of Knowledge on Entrepreneurship Through a Diagnostic Instrument: LEDI

Second Thoughts About Second Acts: Gender Differences in Serial Founding Rates

Contact Info

Product

Resources

About