An analysis of cognitive biases and risk perceptions on female entrepreneurship success

Abstract

The proliferation of female entrepreneurs, especially in developing countries, instigated this study, to understand their judgement and decision-making processes in the highly complex and uncertain entrepreneurial landscape within which they need to thrive. The study focused on cognitive bias and its effects on risk perception and firm performance, particularly in female entrepreneurs. This study took a quantitative approach to analyse the effects of cognitive bias. A cross sectional explanatory research design, using a combination of purposive and snowballing non-probability sampling strategies, yielded a sample of 75 female entrepreneurs. The data collected on their risk perception, which is believed to be a determinant of success, was analysed using Pearson’s correlations, paired t-tests and multivariate regression statistical techniques. The key findings of this study are based on the evaluation of four research hypotheses were; a weak negative relationship exists between overconfidence and risk perception; a positive relationship exists between overoptimism and risk perception; and no relationship exists between self-efficacy and risk perception. With regard to firm performance, none of the cognitive biases or risk perceptions were found to have any statistically significant relationship. This study brought a different dimension to the effects of cognitive bias, as its findings mostly contradicted existing literature.