Successful Entrepreneurs are Not Risk Takers: Toward a Theory of Entrepreneurial Decision Making

Abstract

Many scholars see entrepreneurs as action-oriented individuals who use rules of thumb and other mental heuristics to make decisions, but who do little systematic planning and analysis. We argue that what distinguishes successful from unsuccessful entrepreneurs is precisely that they vary their decision-making styles, sometimes relying on heuristics and sometimes relying on systematic analysis. In our proposed framework, successful entrepreneurs assess their level of expertise and the level of ambiguity in a particular decision context and then tailor their decision-making process to reduce risk.

Keywords: entrepreneurial decision making, entrepreneurial risk-taking, performance, new ventures, theory

JEL Classification: M13, D80