ROLE WITH IT: THE IMPACT OF ROLES AND HEURISTICS ON ENTREPRENEURS' EVALUATION OF OPPORTUNITIES

Extant research suggests that entrepreneurs’ identities influence the venture creation and management process. However, we know little about how role identities influence how entrepreneurs think about—and select—opportunities. Employing verbal protocol and content analysis techniques, we show that, depending on the role assumed, entrepreneurs attend to different opportunity features and make different decisions with regard to opportunity consideration and selection. In doing so, entrepreneurs also rely on different heuristics to guide their selection of opportunities. As such, role identity may have an important influence on the pattern of growth and pursuit of new ventures. INTRODUCTION Entrepreneurs do not always behave entrepreneurially, and they often take on different roles as they start, manage, and grow their ventures. These roles reflect the myriad decisions facing entrepreneurs in an increasingly dynamic environment. However, we know little about the way in which entrepreneurial identities influence how entrepreneurs think about—and select—different opportunities. Given the influence of social and role identities on entrepreneurs’ motivations, passions, cognitions, and behaviors as they start, manage, and grow their new ventures (Cardon, Wincent, Singh, & Drnovsek, 2009; Fauchart & Gruber, 2011), and the influence of role schemas on entrepreneurial cognition and opportunity evaluation (Corbett & Hmieleski, 2007), differences in role identities also likely influence how entrepreneurs evaluate and select opportunities. When considering opportunities, entrepreneurs must decide which opportunities to pursue and which opportunities to ignore, as not all opportunities are equally attractive, and entrepreneurs do not possess unlimited resources to exploit all possible opportunities. Sometimes, the decisions entrepreneurs make are based on a vast and deep reservoir of knowledge concerning the opportunity in question, but more often, their selection processes rely on simplifying strategies, commonly called heuristics (Holcomb, Ireland, Holmes Jr., & Hitt, 2009). Heuristics are shortcuts—decision rules to reduce complex judgments into more simple cognitive operations (Kahneman, Slovic, & Tversky, 1982). By allowing entrepreneurs to select, prioritize, and execute opportunities from a larger set of possibilities, heuristics are often employed by entrepreneurs to simplify opportunity evaluation and decision-making. Heuristics significantly impact not only how entrepreneurs evaluate a given opportunity but also what opportunities they consider (Bingham, Eisenhardt, & Furr, 2007; Simon, Houghton, & Aquino, 2000). 1 Mathias and Williams: IMPACT OF ROLES & HEURISTICS ON EVALUATION OF OPPORTUNITIES Frontiers of Entrepreneurship Research 2012 ENTREPRENEURIAL COGNITION To date, entrepreneurship research has not fully explored the link between entrepreneurial role-taking and consideration and selection of opportunities, nor how different roles influence entrepreneurs’ heuristic-based logic (Miner & Raju, 2004; Mitchell et al., 2007). We suggest that differences in the roles assumed by entrepreneurs in their new ventures influence the use of heuristics, which in turn, alters the way in which entrepreneurs make decisions regarding opportunities. As such, we answer the following research question: how do differences in role identities and heuristics influence how entrepreneurs think about—and select—opportunities? To address this question, we draw from social psychology theory on identity, and integrate it with extant theory in entrepreneurial action and cognition. We employed quasi-experimental verbal protocol techniques with twenty-five entrepreneurs to study the influence of role identity on entrepreneurs’ consideration—and selection—of opportunities. Specifically, we presented entrepreneurs with three role scenarios (Entrepreneur, Manager, Investor) and asked them to make decisions on what opportunity(ies) they would pursue given the specific role. We content analyzed the entrepreneurs’ verbalized considerations of opportunities when assuming each role identity. We contribute to the literature in three significant ways. First, we show that depending on the role assumed, entrepreneurs may make very different decisions with regard to opportunities considered and selected. As such, role identity has an important influence on the pursuit and pattern of growth of new ventures. Second, we draw on role identity theory to provide insight into the risk profiles of entrepreneurs. Although some research indicates that entrepreneurs may perceive less risk than other individuals, we show that their consideration of risk may be role-specific in addition to opportunity-specific. Third, we further the understanding of entrepreneurs’ use of heuristics, specifically in their consideration and selection of opportunities. We find that different roles influence which decision heuristics entrepreneurs employ with regard to risk, narrowing the scope of opportunities, and opportunity type. Overall, we shed light on how different roles and heuristics shape entrepreneurs’ evaluation and selection of opportunities. THEORETICAL BACkGROUND Role Identity Theory Role identity theory concerns the differences in perceptions and actions that accompany a role, and roles are social positions that carry expectations for behavior and action (Jain, George, & Maltarich, 2009). Entrepreneurs assume various roles, many of which are non-entrepreneurial in nature, and thus make entrepreneurial, investment, or managerial decisions. Although not every decision is only an entrepreneurial, managerial, or investment decision, certain decisions reflect a stronger orientation towards one role or the other. For example, choosing to pursue a new venture opportunity (i.e., an entrepreneurial decision) considerably differs from selecting how many employees to staff on the weekends (i.e., a managerial decision). According to role identity theory, an entrepreneur’s role will be influential in forming heuristics and guiding the decision-making process. Recent research demonstrates that entrepreneurial role identities “are critical elements within entrepreneurs’ self-concepts that drive behavior” (Murnieks & Mosakowski, 2007: 1), and that entrepreneurs often have several distinct role identities within their concept of self. Cardon and colleagues (2009) suggest that founders may have a passion 2 Frontiers of Entrepreneurship Research, Vol. 32 [2012], Iss. 6, Art. 1 Posted at Digital Knowledge at Babson http://digitalknowledge.babson.edu/fer/vol32/iss6/1 FRONTIERS OF ENTREPRENEURSHIP RESEARCH 2012 for different aspects of being an entrepreneur (e.g., opportunity recognition, venture creation, or venture growth) that lead to and reinforce specific founder role identities. These role identities influence goal-related cognitions and thus identity-specific entrepreneurial behaviors and outcomes (Cardon et al., 2009: 519). Thus, an entrepreneur assuming different roles within a new venture (e.g., entrepreneurial, investing, and managerial roles) may initiate a different set of cognitive processes and judgmental heuristics that influence decisions on key firm outcomes. However, there has been little research examining the roles assumed by entrepreneurs as they manage their new ventures, especially with regards to the identification, evaluation, and selection of opportunities (c.f., McMullen & Shepherd, 2006). Given what we know from role identity theory, it seems likely that the different roles assumed by entrepreneurs will influence the way in which they think about and select different opportunities. As such, we use an approach that allows us to explore this phenomenon as well as capture the thought processes of entrepreneurs as they assume different roles while considering and selecting opportunities.