Self-Transcendence
The values that comprise self-transcendence include universalism and benevolence. Universalism and benevolence are similar in that they both focus on others. However, universalism is typically associated with individuals outside one’s close contact circle, whereas benevolence is associated with individuals inside that person’s close environment (Bardi et al. 2008). These self-transcendence values inspire individuals to move beyond self-centered interests toward bettering the lives of others including personal acquaintances, their colleagues, communities in which they live, and the world overall (Schwartz 1992). People who hold these values tend to focus on being helpful, honest, and loyal to people they interact with and thrive when they have positive relationships with other individuals (Mikulincer et al. 2003). These people are inspired and motivated by enhancing their associates’ lives, and they revel in the psychological benefits they receive from such benefitting others (Lyons et al. 2007).
Individuals with high self-transcendence values are likely to engage in social entrepreneurship (Hemingway 2005). These individuals may be motivated to start new ventures that encourage equal opportunities for everyone, environmental protection, better standards of living in developing nations, or other social improvements. In starting new ventures to solve such problems, self-transcendent entrepreneurs may obtain fulfillment from having an enduring positive effect on the lives of their stakeholders including employees and customers. As such, individuals with high self-transcendence values are likely to stress these forms of non-financial benefits in their entrepreneurial decisions more than those with low self-transcendence values (Holland and Shepherd 2013).
Conservation
The values associated with conservation comprise tradition, conformity, and security (Schwartz 1992). Individuals who appreciate conservation are generally committed to longstanding standards, ideals, and traditions and value societal stability, preservation of customs, and moderation in action (Schwartz 1992). For example, job applicants high in conservation value family ownership of a potential employer more than those low in conservation because family ownership is typically associated with the stability and tradition of the firm (Hauswald 2013). Thus, entrepreneurs with high conservation values will tend to prioritize stability when starting their ventures. Personal and/or family security can be another motivator behind such individuals’ decision to start or persist with a venture (Kuratko et al. 1997). These people will stress self-control and caution in their actions and are likely to maintain the status quo, often keeping with conventional roles while they at the same time strive for harmonious relationships with others (Lyons et al. 2007). Additionally, individuals with high conservation values tend to attend to societal norms and generally perceive an obligation to meet responsibilities (Egri and Herman 2000). Therefore, entrepreneurs with high conservation values are also more likely to have a prevention regulatory focus, seeking to lessen discrepancies with their “ought” selves by avoiding change because they fear that change can yield negative results (Brockner et al. 2004). As such, they often focus on the potential costs of change when they decide about entrepreneurial issues.
Staw (1981) states that shared norms for consistency can result in the preference to remain dedicated to a chosen course of action even if it is failing than be seen as someone who gives up or is unable to make decisions. Staying consistent is an involuntary reaction that can enhance an individual’s feeling of security in challenging situations (DeTienne et al. 2008). Because individuals with high conservation values like to maintain customs and norms, they are likely to be especially vulnerable to norms of consistency and to thus stress the costs associated with switching opportunities in their decisions to persist with their entrepreneurial endeavor (Holland and Shepherd 2013).
Motivation to Persist with Entrepreneurial Action
Researchers have studied and tested the motivation to justify previous decisions at length (Baron 1998; Keil 1995), generally referring to this topic using self-justification theory (Staw and Fox 1977). Self-justification theory is largely based on Festinger’s (1957) theory of cognitive dissonance and argues that “individuals will bias their attitudes on a task in a positive direction so as to justify their previous behavior” (Staw 1981: 579). Thus, people frequently decide to continue with a course of action because they want to demonstrate to themselves (psychological self-justification) and to other people (social self-justification) their rationality and competence (Keil et al. 2000b).
Personal Sunk Costs Driving Persistence
One signal of the motivation to justify previous decisions is the top decision maker’s personal sunk costs. Not only do entrepreneurs frequently invest financial resources in their ventures, but they also tend to dedicate considerable time and effort to their firms (Arkes and Blumer 1985). Their reputation may be intimately connected to their venture, thus leading to psychological or social self-justifications. While the resources an entrepreneur has already devoted to his or her firm are sunk costs and should thus be not relevant for decisions concerning the present or the future, they may actually add to a person’s need for self-justification.
More specifically, sunk costs are “costs that have occurred in the past and cannot be changed by any current or future action” (Devine and O’Clock 1995) and “create a cognitive bias at a subconscious level which may be manifested in the form of emotional attachment” (Keil et al. 2000a, b). The psychological attachment associated with sunk costs may stem from individuals’ need to defend previous behavior and to appear competent to others. For instance, Dean et al. (1997) showed that at the industry level, the exit rate of new ventures is negatively associated with sunk cost levels. We propose that this form of emotional attachment may also occur with entrepreneurs such that persistence in a venture will be positively associated with the level of the entrepreneurs’ personal sunk costs. In this sense, sunk costs can be seen as an obstruction to exit for failing ventures and can change the exit threshold from involving only financial information to also including the need to overcome sunk costs in order to exit (Caves and Porter 1977; Rosenbaum and Lamort 1992).
Personal Self-Interest
Personal self-interest is another form of self-justification. Researchers (Graebner and Eisenhardt 2004; Jensen and Meckling 1976) have provided evidence suggesting that people tend to make decisions based on their own self-interest. Agency theory (Jensen and Meckling 1976), which deals with goal incongruency between a principal and an agent, sheds light on this notion of self-interest: “Under agency theory, goal incongruency between principal and agent can create a situation in which the agent acts to maximize his or her own utility, rather than acting in the best interests of the principal” (Keil et al. 2000a: 636). In relation to self-interest, a similar situation arises: an entrepreneur aims to maximize his or her own utility, which can result in cognitive biases regarding the firm’s best interests. Such a situation frequently leads to self-justification. For instance, an entrepreneur who enjoys skiing wants to build a plant near a world-class ski region, thus deciding in line with his or her self-interest. The entrepreneur can defend this decision based on the firm’s needs (e.g., it would be better to entertain important stakeholders) even when it is obvious that a less costly location would be more prudent.
Personal Opportunities
A third trigger of motivation for self-justification might result from the personal opportunities available to the entrepreneur. Cognitive psychology research (Kanfer 1990) suggests that a key aspect of motivation is being able to choose among alternative courses of action. Thus, a key motivational source for entrepreneurs could be personal opportunities they have available to them (e.g., education, other jobs, retirement), which may in turn influence the decisions they make about persistence with their venture. The literature on turnover has shown that alternative employment options play a significant role in employees leaving the organization (Jackofsky and Peters 1983; March and Simon 1958), and Graebner and Eisenhardt (2004) showed that
CEOs with strong personal motivations have a higher probability of selling their firm. Similarly, McGrath (1999: 14) argued that “an entrepreneur might disband an economically profitable business if other activities appear more lucrative or interesting, if his or her interests change or if it seems that long-run growth is limited,” which suggests that the motivation for persistence at least partially depends on the alternative opportunities entrepreneurs have available to them. When alternatives are available, individuals may choose the most attractive option for their own life regardless of whether that option is in their firm’s best interests. On the other hand, if no alternatives outside their current firm are available or the alternatives are unattractive, entrepreneurs are more likely to persist with their current firm.
Norms for Consistency
Norms for consistency—or the notion that people continue with a course of action purely because they feel that remaining consistent is the most suitable option (Cialdini 1993; Staw and Ross 1980)—are an additional factor influencing individuals’ commitment to a particular action plan (Staw 1981) and can therefore motivate entrepreneurs’ persistence. As Cialdini argued (1993: 53), “Because it is a preprogrammed and mindless method of responding, automatic consistency can supply a safe hiding place from troubling realizations.” Thus, entrepreneurs can search for signals within the venture indicating that persistence is the most appropriate policy and disregard information implying that adaptation is needed. Two important signals are a venture’s prior success and the entrepreneur’s perceptions of the venture’s collective efficacy.
Prior Organizational Success
Having prior success may be another motivator of persistence when entrepreneurs believe that success is close by and that they merely need to “ride out the storm” to achieve it. Indeed, scholars have found that previous organizational success can lead to strategic persistence (Audia et al. 2000; Lant et al. 1992). Audia et al. (2000: 849), for instance, showed that “Once organizations achieve success, their natural tendency is to continue to exploit the strategies that worked in the past.” Similarly, in a study on real options, McGrath (1999) highlighted three key arguments why prior success can encourage persistence . First, entrepreneurs often oversample success while simultaneously undersampling failure. In addition, prior success can lead to the underestimation of risks and overestimation of projected successes (Levinthal and March 1993: 105), thus causing them to believe that their perseverance will ultimately lead to additional successes. Second, previous success can encourage persistence because “organizations code outcomes into successes and failures and develop ideas about causes for them” (Levinthal and March 1993: 97). Stemming from their own cognitive biases, entrepreneurs often believe that their successes result from their own actions whereas failures are caused by bad luck (Staw et al. 1983). Attribution theory scholars (e.g., Shaver et al. 2001) argue that people often try to internalize success—believing that any success is the result of their own efforts—and externalize failure. Thus, entrepreneurs are likely to believe that prior success resulted from specific decisions that were made and/or from resources that were available rather than from some outside source. Therefore, the firm again will be successful in the future. Third, prior success often lessens a firm’s willingness to change routines or technologies even when such changes come with added benefits (Levitt and March 1988; McGrath 1999). As such, prior success seems to make entrepreneurs more complacent and satisfied with their present situation; these entrepreneurs are less keen to make needed adaptations, thereby motivating persistence.
Perceived Collective Efficacy
Furthermore, norms for consistency may “be determined by the cultural and organizational norms surrounding individuals” (Staw 1981: 335). One organizational norm that appears to play a particularly important role in persistence decisions is collective efficacy—or a group’s collective belief that it can effectively perform a specific task. According to Bandura (1986: 449), “Perceived collective efficacy will influence what people choose to do as a group, how much effort they put into it, and their staying power when group efforts fail to produce results.”
While collective efficacy research is still quite new, researchers (e.g., Bandura 1986: 449) argue that “collective efficacy is rooted in self-efficacy” and therefore should function in a similar way. In a meta-analysis of research on the association between self-efficacy and persistence outcomes, Multon et al. (1991) showed that self-efficacy and persistence are positively correlated. This positive association was found across a broad range of participants, experimental designs, and measurement approaches. Furthermore, at the level of the group, scholars have shown that groups with high collective efficacy are more likely to persist than groups with low collective efficacy (e.g., Hodges and Carron 1992; Little and Madigan 1997). Entrepreneurs working in settings where collective efficacy (e.g., of the entrepreneurial team ) is high are therefore likely to be more motivated to persist with their venture than those working in settings with low collective efficacy.
Extrinsic Motivation
Economic theory researchers of firm exit assert that underperforming firms should not exist; instead, they should be exited or be eliminated from the environment. However, empirical studies provide evidence that such firms persist, sometimes with no end in sight (e.g., Gimeno et al. 1997). Earlier, we discussed potential determinants of persistence in underperforming firms, but a question still remains: why do some entrepreneurs’ persistence decisions align with rational economic views whereas others do not? To explain differences among entrepreneurs’ persistence decisions, we look to a core assumption of the economics-based model: extrinsic motivation.
Frequently conceptualized in research as financial income and personal wealth (Kuratko et al. 1997), extrinsic motivation refers to “a cognitive state reflecting the extent to which an individual attributes the force of his or her task behaviors to some extrinsic outcome” (Brief and Aldag 1977: 497). Researchers have long recognized the possibility of receiving a financial reward as a significant motivator for entrepreneurial behavior (Campbell 1992; Kuratko et al. 1997; Schumpeter 1961; Shepherd and DeTienne 2005). As an early example, Schumpeter (1961) proposed that empire building with the goal of gaining financial reward is a salient motivation for entrepreneurs. Further, Campbell’s (1992) economic perspective on entrepreneurship suggests that a person decides to enter entrepreneurship in case the present value of profit he or she expects from entrepreneurship is greater than the expected profit from being an employee. My (Dean) colleague and I (Shepherd and DeTienne 2005) showed that potential financial rewards motivate entrepreneurs to recognize opportunities (in particular entrepreneurs with low levels of prior knowledge), and Kuratko et al. (1997: 31) revealed that “extrinsic goals concentrating on wealth” play a crucial role in sustaining entrepreneurial behavior.
Yet, there is a lack of research exploring extrinsic motivation’s influence on persistence. The literatures on job satisfaction and turnover could provide useful insights to better explain this relationship. Research has repeatedly shown that there is a negative association between pay satisfaction and employee turnover (for a meta-analytic review, see Cotton and Tuttle 1986) and a positive association between job satisfaction and commitment to the organization (Johnston et al. 1990). Such research has shown that people who are happy with the financial income they receive from their job are not only less likely to leave the firm but also tend to have higher organizational commitment. The degree to which an organization meets an individual’s expectations affects how committed he or she is toward the organization (Babakus et al. 1996). Thus, for the context at hand, individuals with lower extrinsic motivation are likely to be content with an underperforming firm, whereas individuals with high extrinsic motivation are likely to be less content with an underperforming firm. As with job satisfaction, people who are content in their organization are less motivated to leave.
Conclusion
In this chapter, we explored why some people are m
ore motivated than others to engage in and persist with entrepreneurship. We found that while some motivators appear to trigger entrepreneurial action more generally (e.g., financial rewards or certain individual values), other types of motivation seem to stimulate a specific type of entrepreneurship (e.g., empathy motivating entrepreneurial action targeted toward developing societies). Interestingly, the inability to pursue a career as a salaried employee (e.g., due to injury or psychological disorder) can also stimulate entrepreneurial motivation. Finally, a key finding is that the effects of prior knowledge as described in Chap. 2 and those of motivation as described in this chapter do not seem to be independent of each other but can conjointly motivate entrepreneurial action.
Open Access This chapter is licensed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.
The images or other third party material in this chapter are included in the chapter’s Creative Commons license, unless indicated otherwise in a credit line to the material. If material is not included in the chapter’s Creative Commons license and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder.
Entrepreneurial Cognition Page 12
