Using Cognitive Theory to Explain Entrepreneurial Risk-Taking: Challenging Conventional Wisdom

Abstract

Uses social cognition as a framework for differentiating entrepreneurial behavior, centering on the cognitive processes involved in what is commonly considered to be the entrepreneur's core trait: risk-taking behavior. Results of a risk propensity survey of 92 members of a business organization show that while entrepreneurs did not consider themselves more apt to take risks than others, they did perceive more strengths than weaknesses, more opportunities than threats, and more potential for improvement than for deterioration. Thus, entrepreneurs should not be characterized by their risk-taking behavior, but by their likelihood to cognitively assess business situations as positive opportunities. In other words, the research supports Weick's (1979) theory that, when it comes to entrepreneurs at least, "believing is seeing." These results suggest that potential entrepreneurs may benefit by training in cognitive approaches to better assess risk-taking opportunities. A cognition-based classification system could also be created for firms to assess individuals' potential entrepreneurial behavior. (CJC)

Keywords: Social cognition, Perceptions, Risk assessment, Behavior (individual), Individual traits, Risk orientation, Cognitive theory