Entrepreneurial Strategic Decision-Making
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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.
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Chapter 11: Cognitive Complexity, Industry Dynamism and Risk Taking in Entrepreneurial Decision-making

Sjoerd Bosgra


Sjoerd Bosgra 11.1 INTRODUCTION In recent years, a consensus seems to have emerged among scientists in various fields that the theories and models of strategic decision-making are not universally applicable to both large firms and small and medium-sized enterprises (SMEs) (Papadakis et al., 1998). SMEs typically do not possess the manpower or the mechanisms to constantly screen the environment for information. Decision-making is usually the task of a single individual (that is, the entrepreneur). Consequently the risks that are involved in entrepreneurial strategic decision-making are carried by the entrepreneur. In this respect, the chances of entrepreneurial failure are generally higher than the chances of success. Liles (1974) suggested that besides the financial risks of business failure, the risks involved in entrepreneurial decision-making are much broader and span areas such as psychic well-being and family relations. Yet, entrepreneurs accept those risks and for decades scientists have been intrigued by the functioning of the entrepreneurial mind (Busenitz, 1999). Initially, research in this field was based on the assumption that entrepreneurs show higher natural tendencies to take risks (that is, risk propensity) (McClelland, 1961; Collins and Moore, 1964), but despite a handful of studies that do indeed find some support for such assumptions (for example, Sexton and Bowman, 1984; Begley and Boyd, 1987b), the growing unanimity among scientists is that managers and entrepreneurs do not show structural differences in their natural tendencies to take risks (Brockhaus, 1980; Low and MacMillan, 1988; Ray, 1994; Busenitz, 1999). As researchers sought for alternative points of...

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