The role of heuristics in entrepreneurial decision - making

Abstract

Entrepreneurs have to constantly make decisions about the various opportunities available to them. Bad decisions can lead to the failure of a business while good decisions will enable the business to grow and make a positive contribution to society and the economy. Understanding how successful entrepreneurs make decisions about business opportunities will assist other entrepreneurs because this knowledge will equip them to run their own businesses more successfully. In this particular research study, twelve successful entrepreneurs were interviewed and asked about the way in which they make decisions about business opportunities. Through a process of thematic analysis, the data collected was woven into an innovative Grounded Theory that identified and explained the heuristics entrepreneurs use when making decisions about opportunities. Seven heuristics emerged from the data and were ordered according to the frequency of observation. The two most common heuristics included inputs required/outcomes desired and formal/emotional processes. The five less frequent heuristics were classified as influence, environmental factors, risk and control, commitment and balance. An additional insight that was gained through the research process was that the entrepreneurial idea itself contributes little to the overall success of the business and an “action-orientated” focus was a far better contributor to ultimate success