Configurations for Effective Entrepreneurial Judgment: A Cognitive Structural Perspective on the Process of Early-Stage Investing


Magdalena Cholakova
  • Speaker
Rotterdam School of Management (RSM), Erasmus University Rotterdam

Event Information

Type
Research Seminar
Programme
Strategy & Entrepreneurship
Date
Thu. 8 Nov. 2012
Contact
Pursey Heugens
Time
12:00-13:30 hours
Location
Mandeville Building T3-14


Abstract

This paper focuses on the factors that support decision makers’ ability to form effective judgements under conditions of high uncertainty. In such settings, individuals are seen as boundedly rational and thus often expected to rely on cognitive shortcuts, fast and frugal heuristics or quick and simple rules in order to make decisions. Rather than adopting this view, I focus on a set of effortful and effective heuristics, which have been shown to positively influence decision makers’ judgments in entrepreneurial and strategic contexts. Whilst these heuristics are traditionally viewed as opposite to each other, recent work has shown that not only can they be complementary, but complementarity increases their effectiveness. What remains unclear, however, are the factors that support our ability to successfully apply these effective heuristics. In this paper, I explore these factors through a cognitive structural approach in the context of business angels’ evaluation of entrepreneurial start-up projects. I rely on interview data and verbal protocol analysis to capture the relevant cognitive processes and develop a novel process tracing tool to map decision makers’ ability to structure their mental representations of the problem space. I hypothesize that a high level of complexity of their representations, coupled with the ability to perceive themselves differently across settings, increases individuals’ propensity to use effective heuristics in their evaluations. My results support these hypotheses and contribute to our understanding of effective heuristics under high uncertainty and the cognitive structures that allow decision makers to integrate these heuristics and apply them in their judgments.

Pursey Heugens
Professor of Organization Theory, Development, and Change, Scientific Director ERIM, Dean of Research RSM
  • Coordinator
Justin Jansen
Professor of Corporate Entrepreneurship
  • Coordinator