Antecedents of Entrepreneurial Decision-Making: Prediction and Control Oriented Strategies

Abstract

The economics-related prediction strategies and the effectuation-related control strategies are two main competing hypotheses of how entrepreneurs deal with uncertainty in theories of entrepreneurship. In an experimental test, we study the conditions under which prediction and control strategies lead subjects to make a risky bet in ambiguous environments. Individuals who use predictive methods to gain information and mitigate risks are more likely to accept the bet after receiving bad news as compared to those who used control methods. These results revert in the presence of good news. We discuss the theoretical implications of the results for theories of entrepreneurship.

Keywords: Entrepreneurship, Uncertainty, Effectuation, Experimental economics, Theories of entrepreneurship