ENTREPRENEURSHIP

Current Projects

SOURCE OF INFORMATION AND ENTREPRENEURIAL PERFORMANCE EXPECTATIONS: EXPERIENCE-BASED VS. DESCRIPTION-BASED OPPORTUNITY EVALUATIONS

During the pre-entry stage, entrepreneurs form performance expectations based on two sources of information, descriptive information generated by third parties and personal experience.

We argue that the source of information affects expectations of success as if entrepreneurs assigned different weights to the probability of success under different industry conditions, depending on whether their decision is informed by descriptions or experience.

Using data from the Panel Study of Entrepreneurial Dynamics II, we find that, when industry conditions are unfavorable, (e.g. success is objectively rare) experience ‘underweights’ chances of success while descriptions ‘overweight’ them. When conditions are favorable, (e.g. success is objectively more likely) the pattern reverses: experience leads to higher expectations than descriptive information.

Taken together, these findings shed new light on entrepreneurial learning and on how the informational environment in which entrepreneurs operate during the nascent stage shapes their mental representation of their business opportunity.

HOW DOES THE SOURCE OF INFORMATION AFFECT CONFIDENCE

We explore how different forms of presenting information (described or experienced information) to decision makers affect their confidence.

More precisely, we ask whether the source of information affects two aspects of confidence: (1) confidence in the reliability of the information they used to make the choice, and (2) confidence in ‘having made the right choice’.

Previous studies have emphasized the idea that experience breeds confidence even in settings where skills or expertise do not increase with experience (superstitious learning account). Yet, these changes in confidence have not been compared to other ways of learning about a task (e.g. descriptions of risky choices).

We wonder whether some of the differences in choice behavior observed in the ‘DE gap’ literature may relate to differences in confidence brought about by the source of information. The experiment has been registered in OSF and the data collection phase is completed.

BUSINESS PLANNING AND SEARCH BEHAVIOR

In the last decade, a renewed interest in the relationship between business planning and new venture performance has bourgeoned (Brinckmann, Grichnik & Kapsa, 2010). Recent studies have explored more finer-grained aspects and boundary conditions of this relationship, (Greene & Hopp, 2017; Brinckmann & Kim, 2015), and continue to show an overall positive relation between planning and performance.

Yet, an ever-growing body of practitioner-oriented literature (e.g. Mullins & Komisar, 2009; Osterwalder & Pigneur, 2010; Ries, 2011) de-emphasizes the value of planning by arguing that there is little predictive value in any a-priori plan of an uncertain venture.

This later perspective is grounded on the benefits of search processes that promote low-cost experimentation and rapid adaptation over planning (e.g., Blank, 2013; Dew, Read, Sarasvathy, & Wiltbank, 2009; Eisenhardt, 1989; McGrath, 1999; Mosakowski, 1997; Mullins & Komisar, 2009; Ries, 2011; Brinckmann, Grichnik, & Kapsa, 2010).

We argue and test that a key and underexplored mechanism driving the positive effect of planning on new venture performance is information search, which is also a central pillar of the experimentation approach. We hypothesize and empirically test whether the effect of planning on new venture performance is mediated by information search.

We use data on PSED II to how information search mediates the effect of business planning on venture viability and sales, two key performance variables for nascent entrepreneurs.

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