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Opportunity Evaluation under Risky Conditions: The Cognitive Processes of Entrepreneurs

Opportunity Evaluation under Risky Conditions: The Cognitive Processes of Entrepreneurs Even though the entrepreneurship literature places much emphasis on opportunity recognition, little is known about how entrepreneurs actually evaluate opportunities. This study uses a cognitive approach to examine opportunity evaluation, as the perception of opportunity is essentially a cognitive phenomenon. We present a model that consists of four independent variables (overconfidence, belief in the law of small numbers, planning fallacy, and illusion of control), a mediating variable (risk perception), two control variables (demographics and risk propensity), and the dependent variable (opportunity evaluation). We find that illusion of control and belief in the law of small numbers are related to how entrepreneurs evaluate opportunities. Our results also indicate that risk perception mediates opportunity evaluation. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Entrepreneurship Theory and Practice SAGE

Opportunity Evaluation under Risky Conditions: The Cognitive Processes of Entrepreneurs

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References (46)

Publisher
SAGE
Copyright
© 2002 SAGE Publications
ISSN
1042-2587
eISSN
1540-6520
DOI
10.1111/1540-8520.00003
Publisher site
See Article on Publisher Site

Abstract

Even though the entrepreneurship literature places much emphasis on opportunity recognition, little is known about how entrepreneurs actually evaluate opportunities. This study uses a cognitive approach to examine opportunity evaluation, as the perception of opportunity is essentially a cognitive phenomenon. We present a model that consists of four independent variables (overconfidence, belief in the law of small numbers, planning fallacy, and illusion of control), a mediating variable (risk perception), two control variables (demographics and risk propensity), and the dependent variable (opportunity evaluation). We find that illusion of control and belief in the law of small numbers are related to how entrepreneurs evaluate opportunities. Our results also indicate that risk perception mediates opportunity evaluation.

Journal

Entrepreneurship Theory and PracticeSAGE

Published: Apr 1, 2002

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