Thesis:The To find these traits, subjects were
Thesis:The Decision Making of Entrepreneurs has long been centered around the bias of strong confidence and high risk taking.
Entrepreneurs often have their own mindset, believing that their chances of success are higher than they are and not taking into consideration that their business ventures could affect themselves or others greatly. 1. Businitz, Lowell W. “Entrepreneurial Risk and Strategic Decision Making.” N.p.
, Sept. 1999. Web.Entrepreneurs consistently engage in risky events often taking a “gambler-like” mentality in business decisions.They usually believe that their chances of success are much higher than they actually are. Besides losing their financial investments, they also put their career opportunities, family relationships, personal wealth and wellbeing on the line.
They are often a lot more confident of people compared to managers in large organizations. To find these traits, subjects were given scenarios representing various real life strategic decisions where two alternatives were put against each other. 2. Bonnet, Jean, Pascal Cussey, and Thomas Brau. “World Encyclopedia of Entrepreneurship.” N.p.
, 2011. Web.Personal characteristics play a huge factor in the decision to become an entrepreneur. “Need for achievement” and ‘locus of control” are two popular terms to describe the psychological tendencies of entrepreneurs.
One must have a taste or interest in this job compared to a salary type job. An entrepreneur must be able to commit individual resources like specific managerial abilities and/ or financial resources. Entrepreneurs often show a huge confidence towards their business decisions. To find information about the entrepreneurs personal characteristics, entrepreneurs were randomly selected from a nearby town where they were asked to answer a series of psychological questions which helped determine these tendancies. 3. McVea, John F. “A Field Study of Entrepreneurial Decision-making and Moral Imagination.” N.
p., 17 Sept. 2008. Web.Entrepreneurs have many different possible decisions they can make when doing business. As I talked about in previous paragraphs, these are often swayed by their psychological tendencies and high confidence.
Some examples of decisions are whether or not to exploit an opportunity, how to approach a competitor, how to approach a new market, and whether or not to discontinue a business opportunity. Entrepreneurial decision making is often referred to as a paradigm because it proposes a certain way to approach things. For this, participants were chosen not only with entrepreneurial backgrounds but they selected 12 random students who had received there MBA. 4. Vennapoosa, Sandra. “Entrepreneurship Decision Making Process | IT Training and Consulting – Exforsys.
” N.p., 16 Aug. 2012. Web.
As going through my research, I came across an article that I believe gives a very good summary to three components and three tips of decision making. Three main components of the decision making process are 1) ones vision for the venture 2) risk and uncertainty they confront and 3) the innovation process or.reallocation of resources. Three tips that the article provides to entrepreneurs in the decision making process would be to trust your instincts, focus on customers and also know when to say goodbye to the business. These tips and components were determined by studies asked on random entrepreneurs from across the U.S,5. Schade, Christian. “Journal of Business Venturing.
” Entrepreneurial Decision Making: A Paradigm Rather than a Set of Questions (n.d.): n. pag. Web. 2010.
Although personal and psychological characteristics of an entrepreneur often play a huge role in their decisions, entrepreneurs obviously must have a very strong business background to run their business. They must be able to come up with intelligent decisions to help improve the overall outcome of their business venture. They must also be able to deal properly with any problems that could come their way with employees, customers, finances or their services and products. If they are not able to make the proper decisions to run their business properly, it could lead to a lack of support from their own workers and customers which could lead to the business failing. 6.
Ucbasaran, Deniz, Gry Agnete Alsos, Paul Westhead, and Mike Wright. “Habitual Entrepreneurs.” N.p., 20 Mar. 2008. Web. There have been various studies to determine whether novice and habitual entrepreneurs make different decisions from each other.
Some find that there are very many and clear differences in the decision making process between the two while other research studies find that there really are no differences between each other. In the end, it seems that more favor the belief that there is a clear difference between the way the two think. Novice Entrepreneurs often will take less chances than habitual as they want to establish themselves better in the business world. 7. Smith, Ken G. “Decision Making Behavior in Smaller Entrepreneurial and Larger Professionally Managed Firms.” N.
p., 07 June 2002. Web.
It is often found that entrepreneurs from smaller firms are much less comprehensive than managers in larger firms. Smaller firm entrepreneurs often follow a formal rational plan much less than managers in a larger firm causing a decrease in organizational performance. A research study questioning and evaluating members of each of the two groups found that entrepreneurs often have a very tough time changing their decision making behavior. This study was based on the responses of 15 entrepreneurs from smaller firms averaging only 25 employees vs professionally managed firms averaging about 740 employees. They were chosen at random from a list of Mid-Atlantic electronic firms. 8. Vermulen, Patrick, and Petru L. Curseuurseu.
“Entrepreneurial Strategic Decision-making.” N.p., Jan. 2010. Web.Entrepreneurs regularly use biases and heuristics to help make decisions in the business world.
Using biases and heuristics can helps entrepreneurs make decisions better, sometimes in complex or difficult environments. Although biases and heuristics can be positive, they can also be negative. One of the main bias in entrepreneurship is confidence which although can be good, can also be bad. Many entrepreneurs have too much confidence, which can lead to the downfall or unsuccessfulness of a business. 9. Berry, M.A. “Entrepreneurial Decision Making.
” N.p., 15 Mar. 2013. Web.
As I stated, entrepreneurs form their own biases and opinions very easily. Telling an entrepreneur to not involve themselves in risky business behavior is often inappropriate because they do not believe their actions to be risky. They rarely address risk by first calculating and then choosing among alternative risk options. Because of market potentials that entrepreneurs view, they often picture themselves as experts in the field even though they may know nothing about it. 10. Nouri, Pouria, Behrooz Jamali, and Ehsan Ghasemi.
“Directory of Open Access Journals.” Management Science Letters. Growing Science, 01 Oct. 2012.
Web. 12 Dec. 2017.This article takes a bit of a different viewpoint on Entrepreneurial Decision making by saying that entrepreneurs often make smart and wise decisions. They tell how entrepreneurs often have to make last second decisions that are often swayed by biases in crunch time. A bunch of different factors affect these biases like high cost of rational decision making, differences in style and procedure, information overload and environmental uncertainty. Research on this article was found doing a study where entrepreneurs had to make a decision in a limited amount of time where one option was more risky than the other. The control group for this was regular people who were randomly selected.
11. Holm, Hakan J. “Entrepreneurs under Uncertainty.” Summon 2.
0. INFORMS, July 2013. Web.
12 Dec. 2017.In this study, researchers found although entrepreneurs are more likely to accept strategic uncertainty related to competition and trust, they are ordinary people also when it comes to non strategic forms of decision making. This study was done by taking a survey on whether people were willing to expose themselves in the business world and to what extent. As the study was done in China, sample was randomly taken from 700 chief executive officers from the Yangzi delta region and compared it to a control group of 200 people.12. Brozik, Dallas. “Entrepreneurial Decision Making in a Dynamic Environment.
” Taylor & Francis. N.p., 25 Sept. 2008.
Web. 12 Dec. 2017.This particular study describes a game to play with an entrepreneur or future entrepreneur where entrepreneurs make decisions based on non standard situations along with conflicting goals. There are multiple rounds of different scenarios that test many aspects of the person and to see if the the person meets the entrepreneur “stereotype”. The different aspects of entrepreneurship that are tested in this study are market demand, government control, production costs and production capacity.
13. Wei, Xueyan. “Error Orientation and Entrepreneurial Decision Making in Chinese Enterprises: Opportunity Identification as Mediator.
” Social Behavior and Personality. N.p., May 2016. Web.
12 Dec. 2017.This article is pointing errors in Entrepreneurial Decision Making through the perceptions of opportunity identification mediating the effects of error. The researcher analyzed 187 surveys from participants from the SME firm in China. The results showed that there frequently was cases of stronger perceptions of Entrepreneurial Decision Making that tended to sway results even more. Noticing these beliefs in studies can help regulate results for better and more exact research. While doing the research on Entrepreneurial Decision Making for this annotated bibliography, I started to realize that entrepreneurs are not like the regular businessman.
Entrepreneurs are very confident people, taking part in business ventures that most people would not take part in. Entrepreneurs put a lot on the line when making business decisions, as certain decisions could affect personal wealth or well being along with relationships with families, coworkers and customers. I would say it is certainly true that Entrepreneurs have a “gambler-like” mentality as gamblers often take many risks as entrepreneurs would.
Entrepreneurs also often believe that their chances of success are very high because of their confident mentality, although they often have at least a 50% chance of failure within the first 5 years of their business venture. Entrepreneurship is not based all on the personal or psychological characteristics of of an entrepreneur though, as they do have to have a background in business to make the right decisions and manage the business properly. If they are not able to do this, their characteristics will not even matter to begin with and the business will fail. There has been lots of studies on whether novice and habitual entrepreneurs think differently in their decision making or not. While some studies have shown there is not a big difference between the two, others say there certainly are differences in the way they think.
It is often believed that novice entrepreneurs will not take as risky or as many chances as a habitual entrepreneur would make. Lastly, biases and heuristics play a huge role in an entrepreneur’s way of thinking. Both can play a huge factor in swaying a business decision.
As we know lots about Entrepreneurial Decision Making already, it is still a topic that needs to be looked at greater and is as time progresses. Due to this, there are many strengths and weaknesses with research currently. Some of the strengths would be that there has been many different studies on how to determine the tendencies of entrepreneurs. The studies are creative, original and can show results that support the many stereotypes of imperialism. Although, there is a couple weaknesses in research of Entrepreneurial Decision Making. The first would be that the most effective way has not been figured out yet. Based on my sources, there were many different ways to try and develop Entrepreneurial characteristics or tendencies but not a main one.
Often times there would be studies with entrepreneurs and then a control group of regular people, but sometimes taking a survey and then sometimes playing more of a real life game. Another weakness which I had touched on in one of my sources is that sometimes results are varied to help support something that may be true. As this can happen in any research, one might very choice of words to help seem like something is different from what is really is. A third weakness would be that the tendencies and characteristics would surely not fit for all entrepreneurs. There is never an exact number how many there characteristics would fit, but each as their own way of handling business situations not always fitting the entrepreneurial biases. As I said before, Empirical Decision Making is heading in the right direction. Although it is a fairly new topic that has not been fully talked about, there has been a lot of research to figure out what possibly make Entrepreneurial Decision Makers different from other decision makers.
The next step in these studies would to be address the weaknesses that I brought up in the last paragraph. To get a more standard test that could be used on everyone would help research a lot. There is still a lot of unknowns in this development like why not all entrepreneurs fit these stereotypes and what might cause them to think differently. We also do not know when the entrepreneurs start to change the way they might think or act.
At what point does an entrepreneurs confidence begin to turn and possibly make more risky decisions. These questions should be looked at in future Entrepreneurial Decision Making research.