The (Ecologically) Biased Entrepreneurial Decision Process: A Review

ENTREPRENEURSHIP (Prof.ssa Zucchella)

The (Ecologically) Biased Entrepreneurial Decision Process: A Review


Objectives. Entrepreneurs are always involved in Entrepreneurial Decisions (EDs), such as choosing the market or country to enter; in performing them, they systematically deviate from the rational behavior of classical economic models due to their innate bounded rationality (Simon, 1947; Tversky and Kahneman, 1973; Shepherd et al., 2015; Cristofaro, 2017; 2018; 2019; 2020; Zhang and Cueto, 2017; Adinolfi, 2020). Following cognitive psychology literature and terminology, initially adopted by behavioral economists (Tversky and Kahneman, 1974; Tirole, 2015) and then accepted by one stream of management and entrepreneurial research (Abatecola et al., 2018; Battaglio et al., 2019; Caputo and Pellegrini, 2019), these deviations are driven by biases. Biases, always following these cited studies, is an umbrella term that is comprehensive of both heuristics – rules of thumb (also called ‘cognitive shortcuts’) that can lead to positive or negative effects on choices (Artinger et al., 2015) – and cognitive traps – mental errors that always have a negative effect on decisions (Hammond et al., 1998). On these premises, the study of heuristics has pervaded the entrepreneurial literature over the last 30 years (e.g., Keh et al., 2002; Bernoster et al., 2020; Fatma et al., 2020), arriving at the following (almost) definitive conclusions: i) entrepreneurs heavily rely on heuristics in their decision making more than managers of established firms and non-entrepreneurs; ii) heuristics are likely to be the product of cognitive-emotional intertwinement within and between decision makers; and iii) the reliance on heuristics mainly depends on personal experience, an entrepreneur’s social network, and personal capital.

However, despite the high amount of literature produced about heuristics and traps in EDs, witnessed by related review articles (Cossette, 2015; Shepherd et al., 2015; Zhang and Cueto, 2017; Arend, 2020a; 2020b; De Winnaar and Scholtz, 2020), some important questions still need answers. Specifically, as maintained by Shepherd et al. (2015; p. 22): “future contributions are likely to come from research detailing the types of heuristics used, how these are formed and triggered, and the benefits generated […]. To the extent future research reveals benefits from heuristics, we can worry less about biases and focus more on when to use heuristics and how one develops, learns, adapts, and communicates heuristics”. This call has been supported later by Zhang and Cueto (2017), who reclassified cognitive errors in make-happy, sketchy-attribute, and psycho-physics biases, opening new avenues of research. According to these scholars, the implications of many biases in entrepreneurship are still unknown, together with the investigation of the interaction among biases, and also their multi-level link with other contextual and inner factors (e.g., prior experience).

Stemming from the future research highlighted by the above-mentioned reviews, a deeper investigation on the use of heuristics in entrepreneurship is needed to answer the following open-ended research question: How can heuristics positively or negatively affect entrepreneurial decisions?

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