Confidence and Manager’s Attention
Focusing attention on particular tasks not only helps individuals build domain-specific experience and create operating procedures that are standardized, it also improves managers’ confidence—or the “the strength of belief in the goodness, accuracy, and appropriateness of one’s judgments” (Budescu and Yu 2007: 154)—in that particular domain (Levitt and March 1988; March and Shapira 1987). When managers focus on earlier-stage exploration activities, they are more likely to engage in collecting, analyzing, and assessing information about prospecting ventures. In this context, knowledge that is specific to a domain and the arrangement of this knowledge will improve individuals’ confidence as they make decisions in their knowledge domain (cf. Einhorn and Hogarth 1985). In turn, confidence helps managers overcome the anxiety that frequently arises in uncertain situations (Eisenhardt 1989; Eisenhardt and Martin 2000) and helps them “act quickly and decisively” (Judge and Miller 1991: 450; Baum and Wally 2003).
A particularly important exploration-related activity is terminating unpromising projects and ventures at an early stage (McGrath 1999). Due to the higher unpredictability of potential results, exploration in ventures at an early stage is intrinsically more uncertain and more likely to end in failure than exploration of ventures that are at a later stage (Gupta et al. 2006; McGrath 1999). Consequently, firms that focus their attention on earlier-stage exploration activities often have to decide whether to terminate a venture at an early stage. In turn, these firms generally gain experience handling these types of ventures and thus develop more standard operating procedures to detect faults and terminate ventures early on (McGrath 1999) compared to firms that focus their attention on later-stage exploration or exploitation . Moreover, firms focusing on earlier-stage exploration are likely to collect and process domain-specific information more quickly (Forbes 2005) and more confidently use that information (Judge and Miller 1991) to make decisions on a focal venture’s ultimate fate. Thus, these traits and behaviors enhance the speed with which managers terminate ventures during the prospecting stage.
Venture progression during the prospecting stage necessitates heterogeneous experiences , standard operating procedures, and confidence. Venture progression is dissimilar to venture termination in numerous ways. First, the decision to advance a venture centers less on constraining downside risk, but more on the realization of upside potential (Bowman and Hurry 1993; McGrath 1999). Advancing a venture from prospecting to developing requires one to invest in a previously recognized opportunity—an early decision to pursue one venture over others. Advancing a venture therefore represents a move toward opportunity exploitation (Choi et al. 2008; Choi and Shepherd 2004). In contrast to firms that allocate attention toward later-stage development and exploitation , firms that focus more attention on earlier-stage exploration activities tend to heed information indicating the venture’s upside potential or have the experience , operating procedures, or confidence needed to quickly advance a venture. My (Dean) colleague and I (Bakker and Shepherd 2017) showed that in the prospecting stage (i.e., the earliest venture-development stage), a greater orientation toward earlier-stage exploration activities enhances the speed by which managers decide about termination, but it diminishes the speed by which they make decisions about venture progression. Thus, having an attentional orientation toward earlier opportunity-advancement stages enables firms to make certain, but not necessarily all, decisions more rapidly.
Attention to Poorly Performing Entrepreneurial Projects
Research has also explored how managers and team members of entrepreneurial projects attend to the poor performance of these projects and how this attention influences project termination .
Team Members’ Attention and Project Termination
Along with our co-authors, we (Shepherd et al. 2014) shed light on the connection between the timing of project termination and learning from failure from the standpoint of individuals working on the project. These insights in turn have implications for the management of entrepreneurial firms. First, team members are able to decrease negative emotions after the failure of their project by adopting an engineering mindset. An engineering mindset directs more of the individuals’ attention toward the criticality of a firm’s overall engineering challenge than toward any specific project. With an engineering mindset directing people’s attention, the failure of their project results in minimal negative emotion . In addition, there are fewer barriers to rapidly redeploying (human and other) resources to a subsequent project. Yet, in case project team members perceive the transition to a new project to be delayed, they tend to develop negative emotions . Interestingly, those with an engineering mindset also tend to develop more negative emotions when a project (especially one that performs poorly) is not terminated than when it is terminated. An engineering mindset represents a cognitive script for creative problem-solving; this mindset stresses the importance of the engineering process in terms of undertaking challenging tasks that are critical to the organization over and above remaining committed to a particular project the organization no more deems important.
Second, delayed termination gives team members time to contemplate personal errors (i.e., slipups in a specific process, wrong calculations, etc.), issues related to the organization as a whole (i.e., management choices that resulted in failure , problems with coordination between departments, etc.), technical issues (i.e., engineering-related problems), and issues related to industry or markets (i.e., influence of institutions or the government on product development, the inclusion of customers, etc.). These types of reflections often serve as a foundation for lessons learned that can be verbalized and documented when there is enough time left—two steps required for the organization to learn from its experiences (see Zollo and Winter 2002). On the other hand, team members involved in quick termination of projects have minimal time to learn from their project failure experiences . This minimal time for learning is especially troubling in an organizational environment that rapidly redeploys resources because after a project is terminated, there is no time for team members’ reflection, verbalization, or documentation of the lessons they learned from the experience . Additionally, even if team members can engage in reflection, they are unlikely to find time to exchange their thoughts with others, which will hinder learning at the level of the team, nor are they likely to document the lessons they have learned, which hinders learning of the organization overall. Thus, in organizations that rapidly redeploy resources after project termination, team members, teams, and even the organizations themselves typically do not learn from the failures they experience after it has occurred but rather before the event.
Finally, members of teams often harness the negative emotions they feel from their project’s “creeping death” to initiate learning from failure . When negative emotions are used in this way, they can be very supportive for learning because such emotions indicate to the team members that something is not right, that the organization does not find the project worthwhile anymore, and that individuals’ reassignment to a more salient engineering challenge is being delayed. As they wait for redeployment, team members can direct the negative emotions arising from their unfilled need for a prominent engineering challenge toward a new challenge—specifically capturing the learnings from failure . By refocusing attention away from the delay, team members can learn from the failure experience . Thus, the negative emotions arising from creeping death enable rather than impede learning from failure .
Overall, the team members’ perspective emphasizes people’s reactions to project-termination timing and the effects of these reactions on learning from the failure of a project. Namely, when it comes to creeping death, the project team members are able to (1) lessen negative emotions arising from failure by stressing the key role of the engineering challenge instead of a particular project; (2) have time to contemplate, verbalize, and document the lessons they have learned (in the case of rapid deployment, this time is available b
efore the actual termination event); and (3) redirect negative emotions stemming from creeping death to learning from the failure .
Managers’ Attention and Project Termination
My (Holger) colleague and I (Behrens and Patzelt 2016) built on the attention-based view of the firm (Ocasio 1997) to study how managers terminate corporate entrepreneurship projects considering the properties of the portfolio , their attentional focus (reflected by managers’ past project failure experience ), situated attention (reflected by the firm’s growth rate), and attention’s structural distribution within the organization (reflected by managers’ hierarchical positions). The study yielded several insights. First, managers differ in their allocation of attention to different aspects of the project portfolio , more specifically in the attention they allocate to a project’s fit with the firm’s portfolio strategy and the portfolio’s balance of incremental versus radical projects. Therefore, the study highlights that understanding managerial attention allocation in project terminations requires consideration of interactions between portfolio characteristics and effects at the level of the firm, the individual, and the organization.
Second, managers’ prior failure experience influences how they allocate attention in future decisions about project terminations—an impact that goes beyond their emotions and learning from failure (McGrath 1999; Shepherd et al. 2009, 2011, 2013, 2014). Specifically, more prior failure experiences accelerate how an entrepreneurial project’s low strategic fit enhances the probability that a project is terminated. Therefore, prior failure experience has far-reaching consequences on a firm’s future composition of the project portfolio and therefore strategic entrepreneurship. Moreover, the study highlights that prior failure experiences are cumulative in nature (Shepherd et al. 2013) such that more prior failures have a stronger impact on attention allocation than fewer prior failures .
Finally, the negative impact of a project’s contribution to portfolio balance on the propensity of termination is stronger for top managers than for middle managers, illustrating the divergent thinking among managers at different organizational levels (Floyd and Wooldridge 1997; Hornsby et al. 2009; Kuratko et al. 2005). The finding also shows that managers’ attention allocation is different for project start and termination. While middle managers allocate more attention to the project’s strategic context for project start decisions compared to top managers (Behrens et al. 2014), for termination decision , middle managers attend less to strategic aspects (e.g., a project’s strategic fit and portfolio balance) than top managers. Top managers seem to be more prone to resource investments in the start of new projects that are exploratory than in these projects’ continuation.
Metacognition to Focus Entrepreneurs’ Attention
Researchers have argued that “successful future strategists will exploit an entrepreneurial mindset . . . [namely,] the ability to rapidly sense, act, and mobilize, even under uncertain conditions” (Ireland et al. 2003: 963–989). Such a notion implies that the ability to both notice and adapt to uncertainty is a key skill of successful managers (McGrath and McMillan 2000; Ireland et al. 2003). When conceptualizing the notion of an entrepreneurial mindset, Ireland et al. (2003) described cognitive tasks , such as interpreting opportunities as goal change, continually reflecting on and challenging one’s “dominant logic” in changing environments, and reconsidering “deceptively simple questions” about what one believes to be true in regard to markets and the firm. The cognitive tasks associated with an entrepreneurial mindset embody what we more generally call cognitive adaptability. Cognitive adaptability refers to the degree to which people are dynamic, flexible , self-regulating (Jost et al. 1998), and engaged in developing numerous decision frameworks aimed at sensing and processing environmental changes and then choosing from those various alternatives to successfully understand, plan, and implement an array of personal, social, and organizational objectives in a shifting world. Here, decision frameworks refer to organized prior knowledge about individuals and situations that are formed to actively build a meaningful reality (Fiske and Taylor 1991).
Metacognition can be a process that engages these decision frameworks. According to Schraw and Dennison (1994: 460), metacognition is “the ability to reflect upon, understand, and control one’s learning .” More specifically, metacognition is a higher-order cognitive process that helps organize people’s knowledge and what they recognize about themselves, situations, tasks , and environments to enable effective and adaptable cognitive functioning when faced with input from environments that are dynamic and complex (Brown and Eisenhardt 1997). Metacognition is often seen as a conscious process (also known as metacognitive awareness (Flavell 1979)) that occurs in social contexts (Jost et al. 1998). Allen and Armour-Thomas (1993: 204) argued that it is “meaningless to ask a question about any type of thinking without asking concomitant questions about contextual forces in which such thinking is situated” (Allen and Armour-Thomas 1993: 204).
Using metacognition research as a foundation and integrating it with relevant social cognition work (selectively reviewed below), my (Dean) colleague and I (Haynie and Shepherd 2009) proposed the notion of cognitive adaptability, which occurs when individuals perceive and then ascribe meaning to environmental features in relation to their own goal orientation and then utilize their metacognitive knowledge and experiences to develop several alternative decision frameworks aimed at interpreting, planning, and implementing objectives to “manage” an environment that is mutable. Individuals then choose and employ a particular framework from the multiple alternatives and end up with some result (i.e., cognitive [understanding and comprehension] and/or behavioral [action ]). Individuals then evaluate these outcomes in relation to their goal orientation , which in turn informs ensuing decision -framework generation and selection (Haynie and Shepherd 2009; Haynie et al. 2012).
Goal Orientation
Motives affect how individuals perceive and interpret context (Griffin and Ross 1991), and context can also define individuals’ motives (Wyer and Srull 1989). As such, we propose that this relationship is the foundation for the development and use of metacognitive strategies. For instance, in entrepreneurship, these motivations could be to increase one’s share in a specific market, improve manufacturing productivity, or achieve higher sales. In other words, the goals managers pursue are often seen as a function—or as a result—of the environment those goals originated in. Therefore, we argue that the origins of cognitive adaptability stem from the combined effects of (1) the setting the individual functions within and (2) his or her motivations whereby the person interprets context. To capture this relationship between context and motivation , my (Dean) colleague and I (Haynie and Shepherd 2009) proposed the term goal orientation, which specifically refers to the degree to which a person interprets environmental changes in relation to a broad array of personal, social, and organizational goals. Goal orientation engages metacognitive knowledge and metacognitive experience as metacognitive resources.
Metacognitive Knowledge
Metacognitive knowledge is one’s conscious understanding of cognitive processing in relation to (1) people, (2) tasks , and (3) strategy (Flavell 1979). First, metacognitive knowledge of people has both an external and internal focus. Externally focused metacognitive knowledge refers to understanding what other individuals, such as potential customers, competitors, and investors, think about their firms and environments. Internally focused metacognitive knowledge refers to understanding and acknowledging one’s own biases, values , and intellectual strengths and weaknesses. For instance, a manager may know that he or she is better at sensing external stakeholders’ needs than those of employees or other mid-level managers. Second, metacognitive knowledge of tasks relates to understanding the nature of a particular challenge as well as having knowledge of solutions to similar tasks that could be implemented for the task at hand. Lastly, metacognitive knowledge of strategy entails the procedures one uses to ensure that a particular decision framework is suita
ble in light of one’s goal orientation and metacognitive knowledge of people and tasks . More specifically, metacognitive knowledge of strategy is the process of referencing previously learned strategies for functionally similar tasks and altering those strategies for the task at hand. Thus, my (Dean) colleague and I (Haynie and Shepherd 2009) established an overall definition for metacognitive knowledge as the degree to which an individual depends on what he or she already knows about people, tasks , and strategy when generating multiple decision frameworks aimed at interpreting, planning, and implementing goals to “manage” a changing environment.
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