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Edited by Kevin Hindle and Kim Klyver
Chapter 15: Perceptual Differences and Perceptual Problems in Providing Government Support for New Venture Creation
Malin Brännback, Alan L. Carsrud and Jerome A. Katz THE PERCEPTUAL ISSUE Despite numerous public policy measures and governmental investments intended to promote high entrepreneurial activity, some developed and technologically advanced countries such as the United States, Finland and Sweden continue to demonstrate low levels of entrepreneurial activity (Delmar et al. 2003; Hjalmarsson and Johansson 2003; Brännback et al. 2005a; Reynolds 2005). In this chapter, three reasons for the continuing problem are considered: 1. the use of prospect theory in popular and government decision making; 2. timescales of breakthrough technologies; 3. differences in the perception of the entrepreneurial process between government bureaucrats and entrepreneurs. Each of these reasons for difficulty in decision making is discussed in terms of the relevant cognitive factors, and examples from famous economic development decisions in Finland and the United States are given to help demonstrate the problem at a practical level. Following the explanation of the analytic basis, suggestions for improved decision making are offered. PROSPECT THEORY, BEHAVIOUR AND THE DRIVE FOR BIG WINS Cognitive psychologists Tversky and Kahneman (Kahneman and Tversky 1979; Tversky and Kahneman 1986) have contended that people in general are ruled by prospect theory, a heuristic in which people will worry more about losses, even small ones, than a win of similar size. Prospect theory posits that, to offset a small loss, there needs to be the possibility of a 280 M2516 - HINDLE PRINT.indd 280 27/01/2011 09:13 Government support for new venture creation 281 big win. Prospect...
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