Jeffery S. McMullen

The Central Question in Entrepreneurial Cognition Research 2007

In this article, we take note of advances in the entrepreneurial cognition research stream. In doing so, we bring increasing attention to the usefulness of entrepreneurial cognition research. First, we offer and develop a central research question to further enable entrepreneurial cognition inquiry. Second, we present the conceptual background and some representative approaches to entrepreneurial cognition research that form the context for this question. Third, we introduce the articles in this Special Issue as framed by the central question and approaches to entrepreneurial cognition research, and suggest how they further contribute to this developing stream. Finally, we offer our views concerning the challenges and opportunities that await the next generation of entrepreneurial cognition scholarship. We therefore invite (and seek to enable) the growing community of entrepreneurship researchers from across multiple disciplines to further develop the “thinking–doing” link in entrepreneurship research. It is our goal to offer colleagues an effective research staging point from which they may embark upon many additional research expeditions and investigations involving entrepreneurial cognition.

Economic Freedom and the Motivation to Engage in Entrepreneurial Action

Using institutional theory, the Heritage Foundation/Wall Street Journal 2003 Index of Economic Freedom, and the 2002 Global Entrepreneurship Monitor, we regress opportunity–motivated entrepreneurial activity (OME) and necessity–motivated entrepreneurial activity (NME) on 10 factors of economic freedom and gross domestic product (GDP) per capita for 37 nations. We find that both OME and NME are negatively associated with GDP per capita and positively associated with labor freedom, but that various other factors of economic freedom are uniquely related to either OME or NME. Specifically, we find that OME, but not NME, is positively associated with property rights, while NME, but not OME, is positively associated with fiscal freedom and monetary freedom. Thus, governmental restrictions of economic freedom appear to impact entrepreneurial activity differently depending on the particular freedom restricted by government and the entrepreneurs motive for engaging in entrepreneurial action.

An Opportunity for Me? The Role of Resources in Opportunity Evaluation Decisions

We apply the prescriptions of the resource-based perspective to develop a model of entrepreneurial opportunity evaluation. We propose that opportunity evaluation decision policies are constructed as future-oriented, cognitive representations of ‘what will be’, assuming one were to exploit the opportunity under evaluation. These cognitive representations incorporate both (1) an evaluation of the existing resource endowments (already under the control of the venture), which may be employed to exploit the opportunity under evaluation, and at the same time (2) an assessment of the future, wealth generating resources that must be marshalled (and subsequently under the control of the venture) in order to exploit the opportunity under evaluation. We empirically test this model using conjoint analysis and hierarchical linear modelling techniques to decompose more than 2300 opportunity evaluation decisions nested in a sample of 73 entrepreneurs. Our findings suggest that entrepreneurs are attracted to opportunities that are complementary to their existing knowledge resources; however, we also identify a set of opportunity-specific and firm-specific conditions that encourage entrepreneurs to pursue the acquisition and control of resources that are inconsistent with the existing, knowledge-based resources of the venture. We identify these conditions and discuss implications for theory, practice, and future research.

The Cognitive Perspective in Entrepreneurship: An Agenda for Future Research

Despite its many achievements, scholarship at the intersection of entrepreneurship and cognition has focused primarily on the consequences of what happens when an entrepreneur benefits from various cognitive characteristics, resources, or other dispositions. As such, cognitive research in entrepreneurship continues to suffer from narrow theoretical articulations and weak conceptual foundations that lessen its contribution to the managerial sciences. To address these issues, we draw from extant work on the nature and practice of cognitive research to develop a systematic approach to study entrepreneurship cognition. To further articulate this agenda, we assess the state of the field by content‐analysing entrepreneurship cognition articles published between 1976 and 2008. We find that, although it has investigated many relevant variables, research on entrepreneurship cognition has failed to fully articulate key conceptual features of the cognitive perspective. Building on these observations, we propose concrete strategies and research questions to augment the contribution of entrepreneurship cognition research, and advance this research beyond its current focus on ‘cognitive consequences’. In particular, we illustrate the scholarly potential of disentangling the various antecedents of entrepreneurship cognition, of studying the process interactions between cognitive resources and mental representations, and of exploring the operation of entrepreneurship cognition across levels of analysis.

Delineating the Domain of Development Entrepreneurship: A Market-Based Approach to Facilitating Inclusive Economic Growth

Development economists and management scholars have called for a more market–based approach to address the extreme poverty suffered by the billion people residing primarily in least developed countries. This article proposes a theory of development entrepreneurship that blends business entrepreneurship, social entrepreneurship, and institutional entrepreneurship to accelerate the institutional change necessary to make economic growth more inclusive. After examining various explanations of market failure in the base of the pyramid and social entrepreneurship literatures, I explain why entrepreneurial transformation of formal institutions is needed and what differentiates development entrepreneurship from related concepts such as social entrepreneurship, social business entrepreneurship, and socio–political activism.

Dynamic creation: extending the radical Austrian approach to entrepreneurship

We develop a new perspective on entrepreneurship as a dynamic, complex, subjective process of creative organizing. Our approach, which we call ‘dynamic creation’, synthesizes core ideas from Austrian ‘radical subjectivism’ with complementary ideas from psychology (empathy), strategy and organization theory (modularity), and complexity theory (self-organization). We articulate conjectures at multiple levels about how such dynamic creative processes as empathizing, modularizing, and self-organizing help organize subjectively imagined novel ideas in entrepreneurs’ minds, heterogeneous resources in their firms, and disequilibrium markets in their environments. In our most provocative claim, we argue that entrepreneurs, by imagining divergent futures and (re)combining heterogeneous resources to create novel products, drive far-from-equilibrium market processes to create not market anarchy but market order. We conclude our exposition of each dynamic creative process by offering one possible direction for future research and articulating additional conjectures that help point the way. Throughout, we draw examples from CareerBuilder—a firm that has played a major role in creating and shaping the online model in the job search/recruiting industry—and its industry rivals (e.g. Monster, Yahoo’s HotJobs) to illustrate selected concepts and relationships in dynamic entrepreneurial creation.

Managerial (In)Attention to Competitive Threats

We integrate the Attention Based View of the firm and Regulatory Focus Theory to propose a model of managerial (in)attention that explains why appeals by middle managers for top managers to attend to specific threats of emerging rivals go unheeded. By acknowledging that different regulatory foci are elicited by different structural positions within the firm, we suggest that these differences in regulatory foci influence the allocation of attention to competitive intelligence warning of an emerging threat. We conclude by discussing how top managers might better evaluate whether threats of emerging rivals are worthy of deeper consideration.

Encouraging Consensus-Challenging Research in Universities

Drawing from self-efficacy theory and transcriptions of in-depth interviews, we construct a conjoint experiment that we then administer to 54 tenure-tracked assistant professors from two Research-I universities in the United States. Findings from their 1728 nested decisions show that the administrative effectiveness of outcome expectations and time constraints in encouraging highly uncertain, consensus-challenging research depends on the research self-efficacy of scholars. As expected, we find that increases in anticipated credit are more effective at encouraging consensus-challenging research when scholars perceive themselves to be highly competent in the line of research being pursued. Surprisingly, however, we also find that increases in both blame and time pressures are more discouraging of consensus-challenging research when scholars perceive themselves to be highly competent in a research area. We conclude by discussing the findings and their implications for research and practice.

Entrepreneurial judgment as empathic accuracy: a sequential decision-making approach to entrepreneurial action

Entrepreurship theory within economics has long touted the importance of judgment in entrepreneurial action. More recently, proponents have begun to advocate extension of this work to organization studies. However, critics of entrepreneurial judgment have responded by claiming that the construct is only meaningful post hoc and vapid when examined ex ante. Instead, they claim that, if entrepreneurship theory is to progress, then judgment must be replaced by a process logic known as effectuation. This article examines their claims and redefines the judgment dilemma as one of scope rather than existence. Empathic accuracy is then introduced to offer a means of addressing their criticism without having to deny the existence of entrepreneurial judgment. Empathic accuracy is also shown to be capable of explaining some of the cognitive mechanisms necessary for effectuation and dynamic socio-economic order.

To Nurture or Groom? The Parent‐Founder Succession Dilemma

Family business and human resource management scholars suggest that firms whose leaders experience affective commitment are more likely to achieve their goals. Building on self–determination theory, we propose a model in which parent–founders promote affective commitment in child–successors by supporting their psychological needs for competence, autonomy, and relatedness within the family business. We conclude by exploring the ethical implications of different parenting approaches in encouraging intrafamily succession.