The role of heuristic-driven biases in entrepreneurial strategic decision-making: evidence from an emerging economy. Issue 3 (11th November 2020)

• Record Type: Journal Article
• Authors: Ahmad, Maqsood; Shah, Syed Zulfiqar Ali; Abbass, Yasar
• Is Part Of: Management decision. Volume 59:Issue 3(2021)
• Page Start: 669
• Page End: 691
• Publication Date: 2020-11-11
• Subjects: Representativeness -- Availability -- Overconfidence -- Anchoring and adjustment -- Entrepreneurial strategic decision-making; Management -- Periodicals; 658.403
• DOI: 10.1108/MD-09-2019-1231
• Languages: English
• ISSNs: 0025-1747

Abstract

Abstract : Purpose: This article aims to clarify the mechanism by which heuristic-driven biases influence the entrepreneurial strategic decision-making in an emerging economy. Design/methodology/approach: Entrepreneurs' heuristic-driven biases have been measured using a questionnaire, comprising numerous items, including indicators of entrepreneurial strategic decision-making. To examine the relationship between heuristic-driven biases and entrepreneurial strategic decision-making process, a 5-point Likert scale questionnaire has been used to collect data from the sample of 169 entrepreneurs who operate in small- and medium-sized enterprises (SMEs). The collected data were analyzed using SPSS and Amos graphics software. Hypotheses were tested using structural equation modeling (SEM) technique. Findings: The article provides empirical insights into the relationship between heuristic-driven biases and entrepreneurial strategic decision-making. The results suggest that heuristic-driven biases (anchoring and adjustment, representativeness, availability and overconfidence) have a markedly negative influence on the strategic decisions made by entrepreneurs in emerging markets. It means that heuristic-driven biases can impair the quality of the entrepreneurial strategic decision-making process. Practical implications: The article encourages entrepreneurs to avoid relying on cognitive heuristics or their feelings when making strategic decisions. It provides awareness and understanding of heuristic-driven biases in entrepreneurial strategic decisions, which could be very useful for business actors such as entrepreneurs, managers and entire organizations. Understanding regarding the role of heuristic-driven biases in entrepreneurial strategic decisions may help entrepreneurs to improve the quality of their decision-making. They can improve the quality of their decision-making by recognizing their behavioral biases and errors of judgment, to which we are all prone, resulting in a more appropriate selection of entrepreneurial opportunities. Originality/value: The current study is the first to focus on links between heuristic-driven bias and the entrepreneurial strategic decision-making in Pakistan—an emerging economy. This article enhanced the understanding of the role that heuristic-driven bias plays in the entrepreneurial strategic decisions and more importantly, it went some way toward enhancing understanding of behavioral aspects and their influence on entrepreneurial strategic decision-making in an emerging market. It also adds to the literature in the area of entrepreneurial management specifically the role of heuristics in entrepreneurial strategic decision-making; this field is in its initial stage, even in developed countries, while, in developing countries, little work has been done.