The role of motivated reasoning and effectuation entrepreneurship in entrepreneurial behaviour and innovation (4-year research project, ID: 147233 "OTKA" K_23 grant)

Source: freepik

Entrepreneurship makes a significant contribution to inclusive economic growth, social, technological and economic innovation. However, little is known about how entrepreneurial decisions are made in an uncertain environment and the mechanisms through which certain entrepreneurial decisions lead to success and innovation. The proposed project aims to contribute to research on this topic.

Entrepreneurial behaviour is often seen as the result of decisions made in an uncertain and dynamic environment, based on subjective value judgements. The entrepreneurial life course thus unfolds in an environment where the utility of all possible alternatives for action cannot be assessed at the moment of decision, and thus utility maximisation based on neoclassical rational decision logic is not feasible.

Within the first research phase of the project, we therefore aim to operationalise entrepreneurial effectuation along the lines of general decision-making theories and link it to entrepreneurial innovation and success. The logic of entrepreneurial effectuation, by reversing the cause and effect relationships of profit-maximising decisions, takes the tools available in the hands of the entrepreneur at the moment of the decision and uses them to achieve new and acceptable goals according to the aspirational level of the decision-makers.

However, some recent studies have shown that many business decisions are made under high levels of uncertainty, where environmental information signals provide no guidance at all for assessing the outcome of possible behaviours at the time of the decision. For example, when making decisions that lead to market entry or radical innovation, entrepreneurs lack information and experience about the situations that may result from their decisions. In the absence of clear environmental cues, heuristics may not be an effective decision-making mechanism, and researchers on this topic have proposed motivated reasoning as an argument that enables entrepreneurial behaviour in such cases. Therefore, in the second phase of the project, we plan to run experiments that investigate the role of motivated thinking in entrepreneurial strategic decisions.

In summary, we want to generate new knowledge about entrepreneurial decision logics and their role in success and innovation.