Entrepreneurial Cognition

by Dean A Shepherd

  Entrepreneurs likely differ in the number of micro-identities they have, and these micro-identities are fairly invariant over time. There is also likely to be variance in the weight entrepreneurs assign to their distinct micro-identities (as they are a part of one’s holistic self-identity) in terms of meeting their personal distinctiveness and belongingness needs. For example, a founder may have various micro-identities that indicate belongingness —such as being a family member, sports team member, or church goer—but may only try to fulfill the need for belonging through one (or a few) of those micro-identities (Oswald and Suter 2004; Stewart 2003).

  Entrepreneurs’ choice of strategies for managing identities will influence the degree to which various micro-identities channel both distinctiveness and belongingness (and therefore improved psychological health). An identity-management strategy’s effectiveness hinges on how one’s various micro-identities are separated and interact. However, the challenges associated with managing identity (so as to maximize psychological well-being) lie in effectively transitioning between micro-identities —namely, switching from one identity to another so one can “psychologically (and where relevant, physically) exit one role and enter another” (Ashforth et al. 2000: 477). The idea of transitioning between identity boundaries is often viewed as a psychological transaction cost (see Ortona and Scacciati 1992). High psychological costs of leaving one identity and entering another lead to higher costs to one’s psychological well-being. Two micro-identity -management strategies—compartmentalization and integration —have implications for a person’s psychological well-being via an individual’s distinct entrepreneurial identity.

  Compartmentalization and Integration as Strategies for Micro-Identity Management

  Compartmentalization is a strategy used to maintain an identity that indicates distinctiveness (i.e., their entrepreneurial identity) and one that indicates belonging , choosing between the micro-identities at various times and in multiple situations (Shepherd and Haynie 2009a). Entrepreneurs using a compartmentalization strategy rarely switch between micro-identities in order to manage boundaries, specifically to reduce the boundary transition costs. For instance, a founder may also be a father or mother, thus having a parenting identity that addresses his or her need for belonging (Oswald and Suter 2004). Using a strategy of compartmentalization to manage his or her micro-identities, this entrepreneur separates his or her entrepreneurial role from non-work roles by taking on one identity after the other through intermittent transitions. With this approach, the individual is able to internalize his or her micro-identity as an entrepreneur while at work and then switch to other identities (e.g., father/mother, friend, athlete, etc.) when outside work.

  A compartmentalization strategy does not alter the shape of the curve of the entrepreneurial identity; rather, it adds an additional curve representing the entrepreneur’s non-work micro-identity. In the example, we use two curves representing two identities (refer to Fig. 5.3 (Shepherd and Haynie 2009a)). On the far right is the entrepreneurial identity curve, which confers distinctiveness while the person participates in founding activities. On the left is the non-work curve, which confers belonging while he or she participates in activities not associated with work. Compartmentalizing various micro-identities allows one to develop a super-ordinate identity that maximizes his or her psychological well-being by fulfilling his or her distinctiveness needs (through the entrepreneurial identity) and his or her belongingness needs (e.g., through the identity as a father or mother, sports team member, etc.).

  Fig. 5.3Compartmentalization of micro-identities

  Yet, managing identity with the goal of reducing identity conflict through compartmentalization may be challenging for many entrepreneurs. A large research stream has focused on exploring identity conflict, particularly work-family conflict (Lobel 1991). This work has argued that efforts to maintain separate identities using compartmentalization may not work (Lobel 1991). Greenhaus and Beutell (1985), for instance, uncovered three theoretical types of conflict between work roles and family roles: (1) time-based conflict, which occurs when the amount of time needed for the identity as an entrepreneur and the identity as a father or mother is extreme or conflicting (e.g., the individual is required to be in two places at the same time); (2) strain-based conflict, which occurs when the strain (e.g., fatigue or illnesses) caused by the stresses of one role makes it harder to adequately execute the other role; and (3) behavior-based conflict, which occurs when the behavior required is different between identities. For instance, the strain associated with the uncertainty of founding activities may make it challenging for an individual to successfully immerse him- or herself in the father/mother identity.

  While compartmentalization is at one end of the identity-management strategies continuum, integration is at the other end. Integration is a strategy entrepreneurs use to manage multiple micro-identities and in doing so lessen the tradeoff between addressing the needs to be distinct and to belong by uniting the identity-conferring distinctiveness and an identity-conferring belonging . With this strategy, both identities can be enacted (almost) simultaneously through transitioning frequently. Integration is an effort to combine identities into “a single, all-purpose mentality, one way of being, one amorphous self ” (Nippert-Eng 1996: 568). A straightforward example of an integrated identity can be found in a family firm. In a family business, the roles characterized by one’s micro-identities—which are very prominent in the strategy of compartmentalization—are in essence merged together when one utilizes an integration strategy. The goal of integration is to overcome the conflicting demands associated with multiple micro-identities by enacting various identities at the same time or by quickly switching between them. In Fig. 5.4, my (Dean) colleague and I (Shepherd and Haynie 2009a) illustrate this strategy, with two different identities being replaced by one identity.

  Fig. 5.4Integration of micro-identities

  Similar to compartmentalization, entrepreneurs may have a hard time employing integration strategies to manage several identities. Attempts to lessen separation between micro-identities may lead to unforeseen interruptions of one micro-identity because of another. Such interactions can be a way to minimize the tradeoff between being distinct and belonging ; however, they may also be a source of distraction. Further, these distractions may occur without warning (Hall 2002), leading to an interruption of the individual’s immersion in a particular identity. For instance, a friend’s phone call can interrupt one’s immersion in his or her entrepreneurial micro-identity, and a call from a coworker can interrupt one’s immersion in an interaction with friends. In each of these instances, the entrepreneur may have decreased psychological well-being due to feelings that neither the need for distinction nor the need for belonging is being adequately fulfilled as well as bewilderment and worry about which identity is the one that is most important (Ashforth et al. 2000). With compartmentalization strategies, where individuals maintain their separate identities, these types of interruptions are unlikely.

  With the above descriptions of compartmentalization and integration strategies, it is critical to note that we are not suggesting that the extreme form of such a strategy is usual or suitable. We just propose that these strategies are endpoints on a continuum on which people allocate themselves as either following more compartmentalization or more integration when managing multiple micro-identities. Moreover, because of the different benefits and costs for compartmentalization and integration, it is likely that entrepreneurs differ in their evaluations for strategies to manage identities based on fulfilling their personal distinctiveness and belongingness needs. Indeed, individuals may have power over the degree to which they pursue strategies for being distinctive and/or to belong. Researchers usually assert that enacting an entrepreneur identity will more likely meet one’s need for distinctiveness , whereas enacting other “collective” micro-identities will more likely meet one’s belonging need. Some individuals will favor more compartmentalization (i.e., they pref
er the benefits of compartmentalization more than those of integration or may be better positioned to handle the challenges associated with compartmentalization), whereas some individuals may favor higher integration for similar reasons. My (Dean) colleague and I (Shepherd and Haynie 2009a) argued that despite entrepreneurs’ preference for either compartmentalization or integration, they all usually want to (1) fulfill their needs for being distinct and to belong, (2) reduce issues in identity transition related to “the effort required to become psychologically and physically disengaged from one identity and re-engaged in another identity” (adapted from Ashforth et al. 2000: 473), and (3) lessen the occurrence and scale of identity conflict.

  To apply this idea of compartmentalization and integration to entrepreneurs as they attempt to balance distinctiveness and belonging , we now explore how boundaries and synergies between identities influence the degree to which compartmentalization and integration are suitable strategies for balancing entrepreneurs’ needs to be distinct and to belong. We form our theorizing based on the idea that boundaries and potential synergies between micro-identities constitute strategic constraints, which is in line with the socially constructed nature of identities (Ashforth et al. 2000). Following this line of arguments, identity is not exclusively controlled by a person; rather, the individual “takes” the role characteristics that other people “offer” (Katz and Kahn 1978). Yet, our arguments do not depend on this assumption but instead imply that, for instance, entrepreneurs can strengthen or weaken identity boundaries. In other words, identities can be the outcome of negotiation (Swann 1987) wherein social reality not only shapes people (Turner 1987) but individuals also influence social reality (McNulty and Swann 1994). For instance, people utilize things like impression management and partner choice to bring others to view them as they view themselves (Swann 2005).

  Identity Boundaries, Identity Synergies, and Management Strategy

  Above, we outlined a continuum of strategies for managing identities by explaining the anchors of that continuum—compartmentalization and integration. The key question becomes why would (or should) an individual choose any strategy (more compartmentalized vs. more integrated) as the more suitable way to balance distinctiveness and belonging . We suggest that the success of an entrepreneur’s chosen strategy in terms of maximizing well-being is dependent on the dual consideration of potential synergies between micro-identities that are in conflict (possible benefits from identity transitions). Moreover, this success also depends on the characteristic of the identities’ boundaries (costs associated with identity transitions). Figure 5.5 develops and illustrates this model (Shepherd and Haynie 2009a).

  Fig. 5.5Managing entrepreneurs’ multiple micro-identities to maximize PWB

  Specifically, identity synergy denotes the degree of relatedness among identities, with higher levels of convergence between identities resulting in a higher likelihood that each identity will improve the success of the other. As an example, Pratt and Foreman (2000) described a person with strong religious beliefs (a strong micro-identity related to one’s role in the church) deciding to work for a religious organization, thereby serving to “align one’s religious and work-related identities” (Pratt and Foreman 2000: 23). Another example could be a family firm in which one’s “family ” micro-identity (a key element of which is being a “provider”) aligns with managing the firm to feed the family . Identity synergy occurs in the case that one identity improves the outcomes of a different identity—for instance, the family identity increases the founder identity’s ability to fulfill the distinctiveness need and/or the founder identity increases the family identity’s ability to meet the belongingness need. For instance, identity synergy outside the family firm context is the case of Phil Knight, the founder of Nike. His identity as a University of Oregon track team member in the early 1960s combined with the desire to uphold his identity as a running community member after graduation motivated him to develop a groundbreaking running shoe. Not only did Knight’s founder identity confer and fulfill his need for distinctiveness , it also furthered his identification with the running community , thus enabling him to maintain an identity that fulfilled his belongingness needs, with each identity ultimately improving the other identity’s performance.

  The way my colleague and I (Shepherd and Haynie 2009a) conceptualized synergies’ role regarding conflicting micro-identities is equivalent to how organization scholars describe the relationship between people, groups, and performance. This stream of research has shown that when synergies exist between members of a specific group, the group’s overall performance will exceed the sum of each group member’s individual performances (Watson et al. 1991). Along these same lines, we propose that at the micro-identity level, synergies between identities both “broaden” and “raise” the super-ordinate identity curve. That is, when there are synergies between an individual’s micro-identities , the benefits for the founder’s holistic identity are greater than the sum of each identity’s benefits. The benefits in this case are improved psychological well-being due to fulfilling both the distinctiveness and belongingness needs. We illustrate this idea in Fig. 5.6.

  Fig. 5.6Optimal distinctiveness and psychological well-being

  Next, we characterize the boundaries defining entrepreneurs’ micro-identities as being either strong or weak. When boundaries are strong they are impermeable and inflexible whereas weak boundaries are permeable and flexible . This boundary flexibility denotes the degree to which one’s identities are associated with distinct contexts or situations. Boundary permeability describes how vulnerable a boundary is being interrupted and distracted, which makes it necessary that the individual transitions between identities. Impermeable boundaries permit only few intrusions into a specific identity from a different identity’s roles and activities, whereas permeable boundaries are more vulnerable to intrusions. Inflexible boundaries that are rigid serve for the definition of a particular micro-identity in terms of its identity-specific features, such as working hours, places, interactions, and even personality traits. For instance, an entrepreneurial identity tied to having to be in the office from 7:00 a.m. to 6:00 p.m. is an inflexible boundary. Boundaries that are flexible , on the other hand, are characterized by transitions between competing micro-identities that are not well-defined and nuanced. With flexible boundaries, conflicting micro-identities are indistinct.

  Integrating these notions of synergy and boundary into strategies for compartmentalizing and integrating identities helps form a framework of specific conditions that we can use to explore a particular strategy for entrepreneurs attempting to balance their needs for identity distinctiveness and belonging . My (Dean) colleague (Shepherd and Haynie 2009a) and I dichotomize the continuous variables of this model in Fig. 5.7 for illustrative purposes.

  Fig. 5.7Managing multiple identities

  Compartmentalization of Micro-Identities

  The most effective compartmentalization strategies have strong boundaries. Strong boundaries help entrepreneurs keep their identities as entrepreneurs and identities that are not related to work distinct. In other words, interruptions from one identity to another are minimal. These rare transitions between identities enable the individual to balance his or her distinctiveness and belonging needs. For instance, moving from a family identity to a founder identity at the beginning of a day fulfills a founder’s need for distinctiveness , and the transition from a founder identity to that of an athlete at the end of the day fulfills his or her need to belong. Yet, trying to maintain separate identities with deliberately infrequent transitions using a compartmentalization strategy makes it challenging to establish synergies. That is, two identities need to integrate for the effective realization of synergies (Allred et al. 2005; Schweiger and Goulet 2005), so realizing potential synergies hinges on the degree to which identities interact and are coordinated (Larsson and Finkelstein 1999). Therefore, entrepreneurs who utilize compartmentalization to manage multiple micro-identities have increased psy
chological well-being in the case of strong boundaries between identities but have decreased psychological well-being when there are weak boundaries (Shepherd and Haynie 2009a).

  Integrating Micro-Identities

  Entrepreneurs use integration strategies to mitigate the tradeoff between distinctiveness and belonging by uniting their entrepreneur identity related to being distinct with their identity related to belonging such that they can enact both identities at the same time (or almost at the same time) through frequent transitions. As mentioned earlier, the benefit of this type of strategy is realizing potential identity synergies. However, for one to benefit from potential synergies using an integration strategy, there have to be weak identity boundaries. For instance, there is often a blurred line between “market” and “home” in many family firms because the family and the firm are intimately entwined (Hamilton 2006). Weak boundaries lessen the challenges and psychological efforts of moving between identities, which is a prerequisite to capitalize on synergies. With growing boundary strength, however, the gulf between one’s identities is wider, thus necessitating more effort for bridging the gulf. This increased effort enhances the psychological costs that come with frequent identity transitions. As such, with increasing boundary strength, possible synergistic benefits will become weaker or less likely to materialize. We therefore argue that when boundaries are inflexible and impermeable, it becomes more challenging—if not entirely impossible—for an individual drawing on a strategy of integration to capture the advantages of possible synergies between a distinct identity and other identities and fulfill their need to belong. However, even when boundaries are flexible and permeable and synergies do not develop, the entrepreneur must deal with the costs associated with weak boundaries. These costs can include identity conflict resulting from blurred identity boundaries such that one identity’s (e.g., the entrepreneurial identity’s) roles and responsibilities spill over into another identity and vice versa (Williams and Alliger 1994) without the synergistic benefits.