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Entrepreneurial cognition and the decision making process

IJdens, T.M. (2015) Entrepreneurial cognition and the decision making process.

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Abstract:This research attempts to make a contribution to the theory of effectuation by establishing a new link between cognitive style and effectuation by answering the following research question: To what extent are the preferences in decision making processes of effectuation and causation influenced by the cognitive characteristics of an individual’. The cognitive style of an individual considers the preferred attitude towards encountered information encountered. When individuals encounter the possibility of becoming an entrepreneur, their cognitive style may influence the way they approach, frame and solve problems. Allinson and Hayes (1996) refer to two different and pervasive modes of cognitive style. Intuition, which is a non-conscious, automatic and non-selective thinking process, where information is processed by observing it at once at the whole. Secondly analytic, which in contrast, is a conscious, intentional and selective thinking process. Information is processed by obeserving at it in sequenced steps. There are two different approaches that entrepreneurs use when making decisions in the new venture development process; effectuation and causation. Effectuation is a means oriented process while causation is goal driven process. The distinguishing characteristic between causation and effectuation is in the set of choices; choosing between means to create a particular effect, versus choosing between many possible effects using a particular set of means. It is assumed that a more effectual approach works best in uncertain environments (Sarasvathy, 2001; 2008). Mitchell, et al. (2002) argue that ventures often occur in fast changing and uncertain environments. This created a tendency to present ‘effectual decision making’ as the best mode of decision making in new venture development process. This is strengthened by Dew (2009a) who argues that experienced entrepreneurs and senior managers apply more effectuation than novice entrepreneurs and junior managers. The combination of the pervasive nature of cognition and the ‘success’ of effectuation in the new venture development process in leads to the relevance of this research. If a preference for ‘effectuation’ is pre-determined by hardly alterable factors such as the cognitive style of an individual ; it would be possible to predict which individuals have better changes to become successful entrepreneurs in uncertain environments. The literature study on entrepreneurial cognition and the decision making process revealed similar characteristics indicating that these concepts are related. In general, individuals with a more intuitive cognitive style are expected to have a preference for an effectual approach in the decision making process. For three of the underlying constructs of effectuation and causation, the: ‘means based principle’, for the ‘attitude towards contingencies principle’, and the ‘view on the future principle’ intuitive individuals are expected to prefer the effectual component and more analytical individuals are expected to prefer the causational component. To test the hypotheses and answer the research question, 759 students were tested for their cognitive style and their preferences in the decision making process. This is done by a questionnaire in which the cognitive style is measured by the Cognitive Style Index (CSI) from Allinson, Chell and Hayes (2010a) and the decision making process is tested by a customized questionnaire from (Brettel, Mauer, Engelen, & Küpper, 2012). In line with the expectations all the hypotheses are rejected, indicating that cognitive style is significantly influencing individuals in the deciscion making process. In answer to the research question: individuals with a more analytical cognitive style prefer causation in the decision making process. But, individuals with an intuitive cognitive style do not have a clear preference for either causation or effectuation.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/68934
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