The influence of risk perception, misconception, illusion of control and self-efficacy on the decision to exploit a venture opportunity

Abstract

This paper reports on decision-making cognitions just before and \nduring the start-up decision within the entrepreneurial process. It uses \nempirical results based on responses collected through questionnaires \nfrom entrepreneurs, managers, employees and students as respondents. \nThe importance of entrepreneurial cognitions is reported, and \nthe possible implications during the decision-making process are \nexplored. \nUsing a case design required respondents to read a case and decide \nwhether they would start the venture or not. First viability thoughts \nabout the venture happened as early as reading 12% into the case, and \n81% of the respondents had their first thought about the viability of the \nventure before reading 36% of the case. As all the financial information \nwas attached at the end, viability was judged to a large extent without \nreading financial information. This confirms that respondents appear to \nhave used heuristics (shortcuts) and biases to make the start-up \ndecision. \nCorrelation and inter-correlation strengths and directions between \nbusiness risk perception, misconceptions, self-efficacy and illusion of \ncontrol bias with the start-up decision and viability thoughts were \nestablished. Highly significant differences between those that supported \nthe start-up and those that did not were observed for business \nrisk perception and misconceptions, and significant differences for \nillusion of control bias, but none for self-efficacy. \nThe paper recognises the importance of cognitions in entrepreneurial \nthinking and the tendency to make judgements without complete \ninformation. This may lead to decisions that can contribute to failure, or \nmay alternatively be the reason why some entrepreneurs are successful.

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