Affordable loss heuristic scale development and validation

Abstract

PURPOSE : The study aims to develop a distinct and parsimonious scale of affordable loss. The affordable loss heuristic explains a way of reasoning in entrepreneurial investment decision-making in uncertainty. DESIGN/METHODOLOGY/APPROACH : The scale development process spans several phases including conceptualization, qualitative interviews and expert item review in the item development phase. In the exploratory phase, two studies are used to refine the instrument. In the validation phase, the scale is validated through confirmatory factor analysis and assessment of the invariance thereof. FINDINGS : The study produces a two-dimensional reflective scale of affordable loss, including dimensions of a loss heuristic in uncertainty and experimental mindset. The scale is validated and invariant across different geographical contexts. RESEARCH LIMITATIONS/IMPLICATIONS : The scale builds on the theory of affordable loss, presenting clearer insights into the nature and dimensions of this heuristic. It offers an empirical contribution by enabling the measurement of affordable loss as a construct in entrepreneurial decision-making. PRACTICAL IMPLICATIONS : An understanding of affordable loss gives practitioners the means to assess and develop entrepreneurial reasoning. ORIGINALITY/VALUE : The study presents a novel measure of the affordable loss investment heuristic, paving the way for future studies into its antecedents and outcomes.