Effectual versus predictive logics in entrepreneurial decision-making: Differences between experts and novices
In support of theory, this study demonstrates that entrepreneurial experts frame decisions using an "effectual" logic (identify more potential markets, focus more on building the venture as a whole, pay less attention to predictive information, worry more about making do with resources on hand to invest only what they could afford to lose, and emphasize stitching together networks of partnerships); while novices use a "predictive frame" and tend to "go by the textbook." We asked 27 expert entrepreneurs and 37 MBA students to think aloud continuously as they solved typical decision-making problems in creating a new venture. Transcriptions were analyzed using methods from cognitive science. Results showed that expert entrepreneurs framed problems in a dramatically different way than MBA students.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Daniel Kahneman & Dan Lovallo, 1993. "Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking," Management Science, INFORMS, vol. 39(1), pages 17-31, January.
- Elliott, Catherine S. & Hayward, Donald M. & Canon, Sebastian, 1998. "Institutional framing: Some experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 35(4), pages 455-464, May.
- Gifford, Sharon, 1992. "Allocation of entrepreneurial attention," Journal of Economic Behavior & Organization, Elsevier, vol. 19(3), pages 265-284, December.
- Edward P. Lazear, 2004. "Balanced Skills and Entrepreneurship," American Economic Review, American Economic Association, vol. 94(2), pages 208-211, May.
- Matthew Rabin, 1998.
"Psychology and Economics,"
Journal of Economic Literature,
American Economic Association, vol. 36(1), pages 11-46, March.
- Rabin, Matthew, 1997. "Psychology and Economics," Department of Economics, Working Paper Series qt8jd5z5j2, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Matthew Rabin., 1997. "Psychology and Economics," Economics Working Papers 97-251, University of California at Berkeley.
- Sarasvathy, D. K. & Simon, Herbert A. & Lave, Lester, 1998. "Perceiving and managing business risks: differences between entrepreneurs and bankers," Journal of Economic Behavior & Organization, Elsevier, vol. 33(2), pages 207-225, January.
- Sarasvathy, Saras D. & Dew, Nicholas, 2005. "Entrepreneurial logics for a technology of foolishness," Scandinavian Journal of Management, Elsevier, vol. 21(4), pages 385-406, December.
- BodenJR., Richard J. & Nucci, Alfred R., 2000. "On the survival prospects of men's and women's new business ventures," Journal of Business Venturing, Elsevier, vol. 15(4), pages 347-362, July.
- Jerker Denrell, 2004. "Random Walks and Sustained Competitive Advantage," Management Science, INFORMS, vol. 50(7), pages 922-934, July.
- Bettman, James R & Sujan, Mita, 1987. " Effects of Framing on Evaluation of Comparable and Noncomparable Alternatives by Expert and Novice Consumers," Journal of Consumer Research, Oxford University Press, vol. 14(2), pages 141-54, September.
- Robert A. Baron & Michael D. Ensley, 2006. "Opportunity Recognition as the Detection of Meaningful Patterns: Evidence from Comparisons of Novice and Experienced Entrepreneurs," Management Science, INFORMS, vol. 52(9), pages 1331-1344, September.
- S. Illeris & G. Akehurst, 2001. "Introduction," The Service Industries Journal, Taylor & Francis Journals, vol. 21(1), pages 1-4, January.
- Paul Gompers & Anna Kovner & Josh Lerner & David Scharfstein, 2006. "Skill vs. Luck in Entrepreneurship and Venture Capital: Evidence from Serial Entrepreneurs," NBER Working Papers 12592, National Bureau of Economic Research, Inc.
- Shepherd, Dean A. & Zacharakis, Andrew, 2002. "Venture capitalists' expertise: A call for research into decision aids and cognitive feedback," Journal of Business Venturing, Elsevier, vol. 17(1), pages 1-20, January.
- Raphael Amit & Lawrence Glosten & Eitan Muller, 1990. "Entrepreneurial Ability, Venture Investments, and Risk Sharing," Management Science, INFORMS, vol. 36(10), pages 1233-1246, October.
- Richard H. Thaler, 2000. "From Homo Economicus to Homo Sapiens," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 133-141, Winter.
- Andersson, Patric, 2004. "Does experience matter in lending? A process-tracing study on experienced loan officers' and novices' decision behavior," Journal of Economic Psychology, Elsevier, vol. 25(4), pages 471-492, August.
When requesting a correction, please mention this item's handle: RePEc:eee:jbvent:v:24:y:2009:i:4:p:287-309. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.