Entrepreneurial Strategic Decision-Making

Entrepreneurial Strategic Decision-Making

A Cognitive Perspective

Patrick A.M. Vermeulen and Petru L. Curseu

Strategic choices made by entrepreneurs have major consequences for SME performance. This book explores the factors that influence entrepreneurial strategic decisions using a cognitive theoretical framework.

Chapter 4: The Role of Cognitive Complexity in Entrepreneurial Strategic Decision-making

Petru L. Curseu

Subjects: business and management, entrepreneurship


4. The role of cognitive complexity in entrepreneurial strategic decisionmaking Petru L. Curs eu ¸ 4.1 INTRODUCTION Good decision-making is essential for organizational success. Imagine the owner of a small IT company who decides to diversify the products portfolio. The way in which this decision is implemented may lead to a rapid development of the company and a substantial increase in profit, or (as unrelated diversification) to complete failure and bankruptcy. Both the turbulent environment in which the company operates and the fact that most of the information available has a certain degree of uncertainty, create a high degree of complexity for this decision. The entrepreneur will most probably try to make sense of all the information available and then make an informed decision. In the end, the strategic decision of how to diversify the product portfolio will reflect the entrepreneur’s efficacy in processing the information at hand. Therefore, the quality of a strategic decision does not depend on the available information, but rather on how well the decision-maker understands this information. In other words, if the entrepreneur has a complex and comprehensive understanding of the available information, the quality of the decision will substantially increase. This example illustrates the role of cognition and in particular the role of cognitive representations in decision-making effectiveness. The aim of this chapter is to explore the role of cognitive complexity as a key cognitive factor for strategic choices in entrepreneurship. In the last decades, the role of entrepreneurial cognitions...

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