Biology and Entrepreneurship: how they can meet?

Entrepreneurship (SIMA)

Biology and Entrepreneurship: how they can meet?

Mariacarmela Passarelli, Valentina Cucino, Erika Cione, Alberto Di Minin, Alfio Cariola, Roberto Cannataro

Macro (entrepreneurial environment and socio-economic macrosystem) and micro (personal turbulence) environments, provide several stimuli (Tang, 2008) to entrepreneurs. They are always under pressure (Imran et al., 2016) and often find themselves reacting to external stimuli in a complex macrosystem. In a complex macrosystem, especially when catastrophic event happen, entrepreneurship is required to be involved in a process of opportunity identification, evaluation, and exploitation (Shane and Venkataraman, 2000), in order to keep the competitive advantage.

Entrepreneurial opportunities bring into existence new goods, services, raw materials, and organizing methods that allow outputs to be sold at more than their cost of production (Casson, 1982). These opportunities are concrete realities in the environment waiting to be noticed, discovered, or observed by entrepreneurs (Kirzner, 1979; Shane, 2000). They are objective phenomena that are always not known to all parties  (Shane and Venkataraman, 2000). Therefore, by definition, opportunity is unknown until discovered; and one cannot search for something that one does not know exists (Kaish and Gilad, 1991). Entrepreneurs do not discover entrepreneurial opportunities through search, but through recognition of the value of new information that they happen to receive through other means (Kirzner, 1979).

The focus of the current paper is to understand why some people identify entrepreneurial opportunities and others do not, especially in a turbulent context, where unexpected exogenous events happen. Studies have shown that one or more factors influence an individual’s ability to recognize opportunities (Cliff et al. 2006; Cooper and Park 2008). Thus, studying these factors explicitly provides a deeper understanding of the reasons underlying the entrepreneurial recognition process and more thoroughly explains why some individuals can recognize opportunities and others cannot (Shane 2000; Baron 2006). Studies have shown that one or more factors influence an individual’s ability to recognize opportunities (Cliff et al. 2006; Cooper and Park 2008). Thus, studying these factors explicitly provides a deeper understanding of the reasons underlying the entrepreneurial recognition process and more thoroughly explains why some individuals can recognize opportunities and others cannot (Shane 2000; Baron 2006) especially in a turbulent context. A recent turbulent environment has been generated by the COVID-19 health emergency. Indeed, the lockdown has created a unique context for studying the reaction of entrepreneurs.

In the literature, six factors influence opportunity recognition (George et al., 2016): prior knowledge, social capital, cognition/personality traits, environmental conditions, alertness and systematic search. In this paper we focus on alertness because it best represents the concept of “readiness” opportunity recognition. The present work focuses on Alertness. It is defined as “the ability to notice, without search, opportunities that have hitherto been overlooked” (Kirzner, 1979, p.48), endeavor to discover and exploit opportunities. Kirzner (1997) distinguishes discovery from successful search of opportunities and suggests that alert individuals discover opportunities by surprise. However, Kirzner’s alertness by no means implies pure accident either. Rather, the notion of opportunity discovery is midway between that of deliberate search and that of sheer windfall gain generated by pure luck (Kirzner, 1997). From this perspective, entrepreneurs do not discover entrepreneurial opportunities through search, but through recognition of the value of new information that they happen to receive through other means. A concept that well expresses the meaning of alertness is “Flashes of superior insight”(Alvarez and Busenitz, 2001).“Flashes of superior insight” refer to entrepreneurial alertness, which assists an individual in opportunity recognition when it presents itself or even if it does not exist (Alvarez and Busenitz, 2001).

Alertness has been studied in several ways. Miao and Liu (2010) study the individual psychological factors (entrepreneurial alertness and prior knowledge) which influence alertness. Garcia-Cabrera and Garcia-Soto (2009) study the individual’s cognitive capabilities which influence the Alertness. Sambasivan et al. (2009) study alertness as mediator of the relationship between personal qualities and venture performance. Entrepreneurial alertness is still loosely defined both conceptually and empirically in the extant literature, even if different studies put effort in analyzing the concept. While psychological variables are frequently investigated, physiological variables have played a peripheral role in the study of management (Zhang and Zyphur, 2015). No one in literature considers the biological approach. We define the biological perspective on management as the set of studies that examine the genetic influences (Arvey et al, 2016; Lindquist et al., 2015;2016). These studies form the basis for a new school of thought that incorporates human biology, dosing blood biochemical molecules, into explanations of management behavior (Shane, 2009; Shane et al., 2010, Shane and Nicolau, 2015, Nofal et al., 2018).

As mentioned above, entrepreneurs are always under pressure and they must continuously react, to recognize and exploit opportunities. This mood has a connection with a well-known concept in biology “The fight-or-flight response”. The fight-or-flight response, also known as the acute stress response, refers to a physiological reaction that occurs in the presence of something that is alarming, either mentally or physically (Goldstein, 2008;2010). The fight-or-flight response can be activated due to both real and imaginary stimuli (Goldstein, 2010). The fight-or-flight response plays a critical role in how people deal with stress in the environment. The flight or fight response can be activated instantly when needed and the reaction is very rapid and happens unconsciously. The sympathetic nervous system triggers the fight-or-flight response before people consciously make any decision on how to act. When the perceived stimulus passes, the parasympathetic nervous systems begins to return the body back to balance. Then, an opportunity has been felt, identified and recognized; then, a new equilibrium is reached. Form a physiological point of view, the hormones testosterone, and cortisol affect how organisms react to stress (Klein, 2013). Adrenaline, cortisol, norepinephrine are the three major stress hormones, explained. Both testosterone and cortisol bind to steroid-responsive centres in the amygdala (Wood, 1996), a brain structure centrally involved in emotional processing (LeDoux, 2000), where approaching (e.g. fight) (testosterone) or avoidant (e.g. flight) (cortisol) behavior is facilitated (Schulkin, 2003). It has been widely demonstrated that the brain area known as amygdala that belongs to the sympathetic nervous system (SNS), is susceptible to testosterone (Sar et al., 1990, Johnson et al., 2005) as well as to cortisol. It is already well-known that the fight-or-flight reactions are induced by the SNS (Johnson et al., 1992). Approaching (fight) or avoidant (flight) behaviors are facilitated in the amygdala by testosterone and cortisol, respectively (Sherman et al., 2012; Sellers et al., 2007). Taken together, this suggests that, the testosterone: cortisol ratio involved in the SNS-amygdala relationship, regulates the response to (micro and micro) environmental stimuli (Hermans et al, 2008) . In other words, the testosterone:cortisol ratio can be used as a biomarker for human fight-or-flight reactions (Montoya, Estrella R et al., 2012). In addition, the activation of the amygdala by angry faces vs. happy faces is positively correlated with the resting testosterone:cortisol ratio (Hermans et al, 2008). The dual-hormone hypothesis posits that testosterone’s role in status-relevant behavior should depend on concentrations of cortisol, a hormone released in response to physical and psychological stress. Thus, high testosterone/low cortisol ratios seem to predict approach motivation or reward sensitivity. In these motivational stances, individuals are more likely to confront threat (Terburg et al., 2009).

Thus, in this explorative study, we attempt to propose a physiological measure of entrepreneurial alertness. We use Testosterone:cortisol ratio as a biomarker for human fight-or-flight reactions (Montoya, et al., 2012), to measure the “alertness “ of entrepreneurs in the process of opportunity recognition and exploitation. Our assumption is that the Testosterone:cortisol ratio is not considered as a proxy of life stress-full, instead entrepreneurs live they life as a challenge.

There are studies on testosterone:cortisol ratio in the management literature. Some authors have investigated the relationship between testosterone:cortisolo ratio and sleep (Van Cauter et al., 2008). Others invested the testosterone:cortisolo ratio with taking the risk (Barel et al., 2017). Other studies have highlighted (with a non-invasive prenatal exposure of testosterone with a retrospective marker) the relationship with testosterone:cortisolo ratio and the taking of domain-specific risks related to financial investments and professional career (Bonte et al., 2016). There are also studies on testosterone:cortisolo ratio in the Entrepreneurial literature. Several studies have found that the interaction of testosterone and cortisol in predicting status-relevant behaviors, such as risk-taking and desire to compete after a loss, is not moderated by gender (Mehta and Josephs, 2010; Mehta et al., 2015; Mehta et al., in press).

 One study of women found that testosterone and cortisol interacted in predicting reactive aggression, with greater testosterone associated with more reactive aggression but only for women with high cortisol (Denson et al., 2013). Nevertheless, women’s testosterone levels tend to be lower and less variable (across women) than men’s levels (Dabbs, 1991; Harris, et al., 1996). Thus, for women there is less variation in testosterone to potentially relate to behavior, a problem that may be compounded if women show similarly limited variation in the outcomes typically measured in dual hormone studies (e.g., antisocial behaviors, dominance). Most of the physiological analyses of alertness use salive (Sherman et al., 2015.

There are studies investigating the testosterone:cortisol ratio with the entrepreneurial opportunity (White et al., 2006) and entrepreneurial recognition (Nicolau and Shane 2009; 2014), however, we identified some gaps: (1) none research in management has examined the association between alertness and testosterone:cortisol ratio as well as the neuroendocrine axis strictly associated with. (2) no studies performed physiological analyses of alertness with blood samples (most of them use saliva); (3) no study has associated testosterone: cortisol relationship with entrepreneurial alertness as a gender issue.

In this study, we aim to investigate the role of this ratio as a factor that could influence the individual in entrepreneurial alertness to recognize opportunities to create new firms and/or to generate firms’ growth (Fini et al., 2009).

Our research question is the following: “How entrepreneurial alertness is influenced by biological factors?”.

#biology #blood analysis #entrepreneurship #testosterone:cortisol ratio