A Cognitive Perspective
Chapter 11: Cognitive Complexity, Industry Dynamism and Risk Taking in Entrepreneurial Decision-making
11. Cognitive complexity, industry dynamism and risk taking in entrepreneurial decision-making 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;...
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