How can biases affect entrepreneurial decision making? toward a behavioral approach to unicorns

Abstract

How can cognitive biases affect the birth and evolution of entrepreneurial ventures? In Entrepreneurial Decision Making (EDM), this lively research question remains largely unaddressed when the world of Unicorns, as a per se entrepreneurial species, is considered. Thus, through this conceptual article, we aim to contribute toward knowledge creation in this context. We start by proposing a conceptual framework of Unicorns’ EDM based on a behavioral approach. Through three propositions, this novel framework advances how the birth, transition, and consolidation of a Unicorn may be explained by the sequentially intertwined occurrence of biases, from which establishment and legitimization eventually emerge. We complement the framework with examples from the social media industry and then discuss its main implications for theory and practice.

The initial survival of the Unicorns: a behavioral perspective of Snapchat

“…In line with some recent research (Cowden et al, 2020;Abatecola et al, 2022), through this historical case, we advance that there can be an integrative, behavioral explanation for Unicorns easily overcoming the liability of newness despite their bad performances. In particular, and drawing on behavioral decision theory (BDT; Simon, 1947;Slovic et al, 1977;Einhorn and Hogarth, 1981;Cristofaro, 2017b;Cohen et al, 2019), we argue that the network Behavioral perspective effectwhich is proper of some high-tech companies and by which the value a user derives from a good/service depends on the number of users (Shapiro et al, 1999) triggers some cognitive biases (hereafter biases) of the Unicorns' founders and investors.…”

Affect and Cognition in Managerial Decision Making: A Systematic Literature Review of Neuroscience Evidence

“…In this last regard, from the analysis of the sample contributions described above, it can be derived that the managerial decisions result as the product of an emotional-driven dialectic of affect and cognition (e.g., Damasio, 1994 ; Sadler-Smith, 2016 ; Abatecola et al, 2018 ; Cristofaro, 2020a , b , 2021a , b ), redirecting the discussion on information processing from dual-mind processing theories (e.g., Stanovich and West, 2000 ; Hodgkinson and Sadler-Smith, 2018 ) to a “unified” mind processing theory ( Sadler-Smith, 2016 ) for which the two systems of our mind are not in conflict and for which affective states have an initial (but not exclusive) primary driving role. As a consequence, the recent affect-cognitive interplay emerges, under a neuroscientific point of view, as supported, and may be considered as the fertile ground from which a renewed understanding of managerial decision making can move forward – also because its explanations are intertwined with other relevant streams of research such as the Upper Echelons Theory ( Hambrick and Mason, 1984 ; Abatecola and Cristofaro, 2020 ) and Behavioral Strategy ( Powell et al, 2011 ; Sibony et al, 2017 ; Abatecola et al, 2021 ; Cristofaro and Giannetti, 2021 ). In particular, it seems to be that the provided understanding supports the recent Affect-Cognitive Theory of management decisions by Cristofaro (2021a) ; in fact, assumptions of this theory clearly identifies an interplay of affect and cognition, with affective states having an initial (but not exclusive) primary driving role, for the formation of choices supporting the cited “unified” mind processing theory.…”

“…Over the years, managerial decision making – concerning the decisional activities made at the low-, middle-, and top-management levels ( Koontz et al, 1980 ) – attracted the interest of scholars in various areas, mainly due to its cross-disciplinary nature ( Cristofaro, 2017 ; Adinolfi, 2021 ). A great advancement has been made by the Behavioral Decision Theory (BDT), that originated in the ‘60s for the study of the real behavior of people when making decisions ( Edwards, 1961 ), and then increasingly adopted/developed in managerial decision-making research stimulating reflections on bounded rationality (e.g., Edwards, 1961 ; March, 1978 ; Kahneman, 2011 ; Powell et al, 2011 ; Sibony et al, 2017 ; Abatecola et al, 2021 ; Cristofaro and Giannetti, 2021 ).…”

Tourist accommodation, consumption and platforms

“…Indeed, the nature of economic development has continuously changed and shifted fundamental factors (Audretsch et al, 2022; Bertello et al, 2022; Chen et al, 2022; Puertas‐Medina et al, 2022; Sharma et al, 2021; Skare & Riberio‐Soriano, 2021). In addition, entrepreneurs have a leading role in economic and social change (Abatecola et al, 2022; Belchior & Lyons, 2021; Belitski et al, 2021; Callegari & Feder, 2021; Gupta et al, 2020). Presently, there is an open debate about the legitimacy of this activity, while it has an obvious effect on the traditional accommodation sector (Bort, 2014).…”