Entrepreneurs and venture capital investors play a central role in new venture creation, market transformation and economic growth. Therefore, investigation of carefully selected affective, behavioural and cognitive factors can add substantially to our understanding of the basic processes that underlie key activities performed by entrepreneurs (e.g. opportunity creation and exploitation, entrepreneurial learning) and investors (e.g. investment decision-making). This brand new research aims to use real experiments with entrepreneurs, venture capitalists and business angels, and semantic analysis techniques to identify affective, cognitive and other behavioural characteristics of entrepreneurs and investors, and analyse how these characteristics influence ventures’ financing, strategies and performance.
Behavioural entrepreneurship and finance
About the project
Principal Investigators: Silvia Stroe, Francesca Tenca
Researcher team: Massimo G. Colombo, Chiara Franzoni, Evila Piva.
Duration: since 2017
Partners: Italians Angels for Growth; Club degli Investitori; Global Center for Entrepreneurship & Innovation, University of St. Gallen; Department of Management and Organization, Hanken School of Economics; Mendoza College of Business, University of Notre Dame
KEY RESEARCH QUESTIONS
Entrepreneurship involves in the first place human agency, that is, human volition and human action. The entrepreneurial process is initiated and implemented by individuals that act to pursue opportunities. Therefore, entrepreneurship has been considered the result of the combination of affective, cognitive and behavioural factors from the side of the entrepreneur. This research follows this school of thought and focuses on perceptual variables in entrepreneurship, and specifically, on affect (e.g. passion, fear of failure, identity-relevant stressors) and cognition (goal cognitions, cognitive biases, effectual and causal decision-making logics) of entrepreneurs and investors, and investigates how their interaction affects behavioural and performance outcomes. The high contextual unpredictability, together with the high personal risks entrepreneurs take make entrepreneurship a highly emotional endeavour, prone to causing strong affective reactions. Affect can have positive outcomes, such as increased effort or entrepreneurial intentions. However, affective drives may also cloud rational judgements and make entrepreneurs and investors choose unwise courses of action. Therefore, affect is being increasingly integrated into research on decision-making processes and behaviour in the entrepreneurial context. Furthermore, human endeavours, especially complex activities such as opportunity creation, exploitation and evaluation are the result of people’s cognitive processes. Entrepreneurs’ and investors’ cognitive processes, such as sound thinking, decision-making and planning are crucial in order to determine the appropriate course of action. Understanding the cognitive infrastructure underlying entrepreneurial thinking and action can significantly increase our understanding of the ways in which entrepreneurs and investors frame the environment and learn from it. Working from this affective and cognitive angle, this brand new research aims to use real experiments with entrepreneurs, venture capitalists and business angels, and semantic analysis techniques to identify affective, cognitive and other behavioural characteristics of entrepreneurs and investors, and analyse how these characteristics influence ventures’ financing, strategies and performance.
- How can the affective and cognitive traits of entrepreneurs and investors be measured? How can semantic analysis and machine learning techniques be used to generate measures suitable to large-scale quantitative studies?
- How is entrepreneurial behaviour influenced by entrepreneurs’ affective and cognitive traits? How are the behaviour of entrepreneurs and the early routines and strategies they employ in the venture activities influenced by these traits? How are group dynamics, conflicts and cooperation in co-founding teams influenced by these traits?
- What is investors’ perception of entrepreneurs’ affective and cognitive traits? What is the influence of these traits on entrepreneurs’ ability to access external finance? Under which boundary conditions is this influence magnified? What is the role played by investors’ affective and cognitive traits?
OUTPUTS & IMPACTS
- Stroe, S., Parida, V., & Wincent, J. (2018): Untangling Intense Engagement in Entrepreneurship: Role Overload and Obsessive Passion in Early-stage Entrepreneurs. Journal of Business Research. 90, 59-66.
- Stroe, S., Parida, V., & Wincent, J. (2018): Effectuation or Causation: An fsQCA analysis of entrepreneurial passion, risk perception, and self-efficacy. Journal of Business Research. 89, 265-272.
- Stroe, S., Thorgren, S., & Wincent, J. (2018): The Outcomes of Passion in Entrepreneurship: in R. Vallerand, N. Houlfort (Eds.) , Passion for work: Determinants and Consequences. New York: Oxford University Press. in press.
- Franzoni, C., Tenca, F., (2019) Rebuilding entrepreneurial passion, Politecnico di Milano School of Management, Working Paper.