Most New Businesses Fail, but Mine Won’t…Right?

Abstract

Building on expectancy theory, we study why entrepreneurs form positive beliefs about, and subsequent commitments to, entrepreneurial actions despite the negative mean outcome observed in the history of entrepreneurial efforts. We test our model using structural equation modelling on a sample of 1,185 entrepreneurs derived from the Panel Study of Entrepreneurial Dynamics II (PSED II) database. We find that the perceived gap between the value of an opportunity and opportunity cost positively influences both entrepreneurial expectancy and entrepreneurial intensity. Further, we find that the strength of these relationships is contingent upon uncertainty preference. Together, these findings contribute to literature on expectancy theory, increase our understanding of the role of uncertainty in entrepreneurial cognition and suggest that entrepreneurs’ cognition may be more rational than surface level appearances suggest

Switch or persevere? The effects of experience and metacognition on persistence decisions

“…This is surprising because extant literature suggests that one of the key elements of entrepreneurial experience is the Bexposure to uncertain and ambiguous operating situations^that it provides (Toft-Kehler et al 2014, p. 15); it follows that the more exposure to uncertainty one has, the more one will pay attention to the degree of residual uncertainty for future decisions. Although we can only speculate, it might be that the exposure to uncertainty gained through entrepreneurial experience merely dulls individuals' sensitivity to uncertainty or perhaps its influence is offset by an entrepreneur's higher level of preference for uncertainty (Mattingly and Kushev 2016).…”

“…Scholars investigating entrepreneurial decision making find that decisions about whether to engage in entrepreneurship, in the first place, are largely driven by conscious, cognitive search that happens early in the examination of a particular opportunity (Chwolka and Raith 2012). This search includes decision criteria such as uncertainty (McMullen and Shepherd 2006) and the gap between opportunity value and individual opportunity costs (Mattingly and Kushev 2016). Although scholars are beginning to uncover specifically what individuals are searching for within their cognition (cf.…”

“…Although scholars are beginning to uncover specifically what individuals are searching for within their cognition (cf. Mattingly and Kushev 2016), we still know little about the targets of cognitive search and what specific individual factors play a role in guiding cognitive search for decisions related to switching to a new opportunity. Given the tendency of entrepreneurs to engage in conscious, cognitive search, it is not surprising that theoretical and empirical evidence suggests that the path to becoming an entrepreneur is often guided by metacognition and experience (Fiet 2007;Haynie et al 2010;Mitchell et al 2007).…”