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Are current models of entrepreneurial decision-making and cognitive coping relevant to novice entrepreneurs?
Louise Elizabeth Pinfold
The objective of this research is to explore the extent to which current models of decision- making and entrepreneurial cognition are relevant to a sample of true novice entrepreneurs, those who are in the process of founding their first business venture. Novice entrepreneurs are recognised as being essential to sustaining the entrepreneurial churn in economies (Disney, Haskel & Heden, 2003) especially as the young firm population requires new entrants. The need arises because of the high rates of churning observed in populations of young firms that require a constant inflow of new ventures to renew the stock of businesses (Ganguly, 1985). Whilst some studies of the behaviour of entrepreneurs do focus on relatively young firms (e.g. Chandler, DeTienne, McKelvie, & Mumford, 2011) studies of true novice entrepreneurs are rare. The thesis seeks to address this gap in the literature. A sample of true novice entrepreneurs, that founded businesses in 2013 and 2014, is interviewed to explore their decision-making and cognition regarding a realistic new business case study. The approach replicates that used by other authors who have studied expert entrepreneurs (Sarasvathy, 2001; Sarasvathy, 2008; Chandler et al., 2011; Dew, Read, Sarasvathy & Wiltbank, 2009) using a think-aloud protocol to identify causation and effectuation styles. However, by using a mixed methods approach of concurrent and retrospective think-aloud aspects it was possible to identify novice decision-making and to capture the prior experiences that they referred to (Banks, Stanton & Harvey, 2014). The sample of 32 true novices was a randomised sub-set of 1128 business founders in the UK. The experimental protocol enabled a comparison with alternative expertise theories of feedback and linear thinking in decision-making (Winch & Maytorena, 2009). The key findings were contrary to the hypotheses; the true novices were both more effectual and more casual than expected; and furthermore were frequently using feedback loops in their decision-making. In addition, as the novice entrepreneurs reflected upon their experiences that informed their decisions, the literature predicts that novice entrepreneurs would have to adopt analytical approaches to decision making as they lack salient experiences to inform their decisions in the early years of trading. However, contrary to expectations, the novices used both analogical and heuristic sense-making approaches and were adept at switching between them (Jones & Casulli, 2014). The outcome of the experimental protocol offers insights into the extent to which the current literature captures the decision-making processes and entrepreneurial cognition of true novice entrepreneurs. The evidence is mixed, offering the opportunity for further refinement of existing theoretical constructs, and reinforcing the relevance of alternative theories of cognition and decision making for novice entrepreneurs, for government policies and the support networks and that provide resources to assist the creation and survival of new entrepreneurial ventures.In addition, for novice entrepreneurs, this research examined the relevance and influence of their prior experiences and emotions on their entrepreneurial decision-making. In founding their first business, the prediction for novices is that they would struggle to draw on appropriate experiences (Mathias, Williams & Smith, 2015). However, the results showed novices referencing a wide variety of experiences, with the majority of these based on personal events that they had directly experienced either in their current start-up or previous work activity. Emotions are believed to influence entrepreneurs’ abilities to cope with uncertainty in business decision making and to persist in their endeavours in the face of adverse experiences and entrepreneurs are predicted to be over optimistic (Koellinger, Minniti & Schade, 2007; Ucbasaran, Westhead, Wright & Flores, 2010). The research profiled the novices’ emotions using the internationally externally validated PANAS (Positive and Negative Affect) scale (Watson, Clark & Tellegan, 1988) and the findings showed the novices engaged consistently with their underlying trait emotions however, interestingly, they were not statistically more optimistic than the UK population (Thompson, 2007). The findings make a contribution to both the theoretical explanations and practical aspects of novice entrepreneurship and show the appropriateness of relating current research to widely used measures from other fields of study, particularly as the impact of emotions is currently influencing the future of entrepreneurship research (Cardon, Foo, Shepherd & Wiklund, 2012; Shepherd, 2015).