Project title: Social network and emotions – implications for the rationality of entrepreneurial strategic decision making

Running title: ENTREPRENETWORK

Project Number: PN-II-RU-TE-2014-4-2111

Project Director: Oana Cătălina Fodor

 

Intermediary scientific report for the period October 2015 – December 2016

Date: 24th of November 2016

 

  1. Project aims

 

This research project aims to explore the interplay between social and emotional factors and how they affect the ecological rationality of the entrepreneurial strategic decision making process (ESDM) and, finally, its effectiveness.

The specific objectives are to: (1) explore the way in which the embeddedness in social networks influences the ecological rationality of the ESDM and how this affects decision effectiveness, and (2) explore how emotions and emotion regulation shape the relationship between the social networks and the ecological rationality during ESDM. Here below we present the progress on both objectives, during the two intermediary stages of the project: stage 1 (October – December 2015) and stage 2 (January – December 2016).

 

II.1. Summary of the activities planned and executed during the intermediary project stage (October – December 2015)

Year Objectives Activities Deliverables Status
2015 Objective 1 (WP1): Explore the way in which the embeddedness in social networks influences the ecological rationality of the ESDM and how this affects decision effectiveness (to be continued in 2016 and 2017)

 

WP1. A1. Literature search and specifying the methodology:

creating the interview protocol and selecting the measurement scales (to be continued in 2016)

1. theoretical review for Project 1 (list of references)

2. interview guide (Project 1)

1. Accomplished (see report 2015)

2. Accomplished (see report 2015)

Objective 2 (WP2): Explore how emotions and emotion regulation shape the relationship between the social networks and the ecological rationality during ESDM (to be continued in 2016 and 2017) WP2. A1. Literature search and refining the Experience Sampling Protocol: choosing the scales (to be continued in 2016) 3. theoretical review for Project 2 (list of references)

 

3. Accomplished (see report 2015)
WP3. Project management and results dissemination (to be continued in 2016 and 2017) WP3. A1. Project management activities (to be continued in 2016 and 2017) 4. reports 4. Accomplished

(see report 2015)

 

II.2. Summary of the activities planned and executed during the intermediary project stage (January – December 2016)

Year Objectives Activities Deliverables Status
2016 Objective 1 (WP1): Explore the way in which the embeddedness in social networks influences the ecological rationality of the ESDM and how this affects decision effectiveness (to be continued in 2016 and 2017)

 

WP1. A2. Recruiting entrepreneurs and round 1 of data collection (qualitative – semi-structured interviews) 1. recruited entrepreneurs

2. decision scenarios for the experimental design in Project 1

3. data collected (ongoing)

 

1. Accomplished (Appendix 1.a and 1.b)

2. Accomplished (Appendix 2)

3. Accomplished (Appendix 1.a and 1.b)

WP1. A3. Qualitative data analysis (content analysis)
WP1. A4. Elaborating decision scenarios for round 2 of data collection (quantitative, experimental design)
WP1. A5. Recruiting entrepreneurs and round 2 of data collection (quantitative, experimental design) à to be continued in 2017
Objective 2 (WP2): Explore how emotions and emotion regulation shape the relationship between the social networks and the ecological rationality during ESDM (to be continued in 2016 and 2017) WP2. A1. Literature search and refining the Experience Sampling Protocol: choosing the scales (continued from 2015) 1. recruited entrepreneurs

3. data collected (ongoing)

 

1. Accomplished (Appendix 3)

3. Accomplished (Appendix 3)

WP2. A2. Recruiting entrepreneurs and round 3 of data collection (quantitative, experimental design) à to be continued in 2017
WP3. Project management and results dissemination (to be continued in 2016 and 2017) WP3. A1. Project management activities (to be continued in 2017) 4. participation at national/international conferences

5. web platform

6. one article submitted to peer-review journal

7. reports

 

 

4. Accomplished (Appendix 4)

5. Accomplished (Appendix 5)

6. Accomplished (Appendix 6)

7. Accomplished

WP3. A2. Organizing a scientist – practitioner workshop in order to disseminate results and recruit entrepreneurs for following stages
WP3. A4. Disseminating results via participation at national/international conferences (to be continued in 2017)
WP3. A4. Writing manuscripts – scientific articles (to be continued in 2017)
WP3. A5. Creating and updating the web platform for the project (to be continued in 2017)

 

 

III. Brief progress report on the goals set for the intermediary stage of the progress (October 2015 – December 2016)

 

Objective 1/ WP1: Explore the way in which the embeddedness in social networks influences the ecological rationality of the ESDM and how this affects decision effectiveness

Entrepreneurs are decision-makers embedded in various social networks (they can ask advice from friends, family, consultants, other entrepreneurs, etc.). These social networks create the so called “social capital” that entrepreneurs can use in their decision processes. In line with the social capital framework, we argue that the entrepreneurial social networks provide them with valuable informational resources (Greve & Salaff, 2003) and they can be the source of ecological heuristics – beneficial shortcuts to the ESDM (such as imitate the best/IB and imitate majority/ IM). Therefore, the first aim of the project is to explore qualitatively and quantitatively which factors pertaining to the social networks influence the selection of one ecological heuristic versus the other.

Exploratory study[1]

The first stage of this work package is exploratory. It includes a first round of data collection by conducting a set of semi-structured interviews in order to explore the following research questions: (1) under what circumstances do entrepreneurs follow the best in their network, when making strategic decisions?, (2) under what circumstances do entrepreneurs follow the majority in their network, when making strategic decisions? and (3) what was the perceived effectiveness of the decision strategies employed (follow the best vs. follow the majority)?

103 interviews were carried out so far with entrepreneurs (55 men, mean age = 38.72 years) from various industries and with 8.8 years of experience in average in the entrepreneurial sector (Figure 1).

Each interview followed the protocol described in the previous scientific report (report for the intermediary stage 2015) and prompted the entrepreneurs to recall a situation when they made a decision by Imitating the Majority (IM), or by Imitating the Best (IB). The subsequent questions explored what were the causes for making that decision, what were the effects and what were the factors that determined the entrepreneurs to choose that particular decision strategy.

Additional items explored:

  • the perceived risk for the decision made under each strategy
  • perceived satisfaction with the decision outcomes
  • profit increase after implementing the decision
  • revenue increase after implementing the decision

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Figure 1 – Demographics for the first sample in the project (gender distribution on the left and field of activity on the right)

 

A preliminary data analysis shows that entrepreneurs decide by imitating the majority of the entrepreneurs driven by factors such as:

  • customer demands the measure implemented by the majority
  • proven success of the strategy implemented by the majority
  • lack of own experience
  • avoiding risks – imitating majority is the safest strategy
  • similarity with the majority

On the other hand, entrepreneurs decide to imitate the best in their network, driven by factors such as:

  • status of the best entrepreneur
  • desire for success, to be better, to attain profit
  • innovativeness
  • close connection to the best entrepreneur in the market

See Appendix 1.a with a print screen of the data base, including demographics, as well as data on the type of decisions reported under IM or IB, and the factors reported to have driven the selection of one strategy over the other. Since data analysis is ongoing and expected to end by December 2016, a complete data analysis will be available in the first quarter of 2017.

 

Experimental study

The second stage of the project was directed towards designing a set of experimental studies that aimed to test the influence of various network characteristics (i.e. network centrality, quality of interpersonal relations) on the selection of IM or IB.

Around 200 entrepreneurs were initially invited to participate in the study. Since the response rate was rather low (13%), we further employed the snowball technique (Baker, 1999) in constructing our sample. A total sample of 134 entrepreneurs carried out this stage of the data collection (87 men, mean age 33.80) so far, from various industries and with 6.56 years of experience in average in the entrepreneurial sector.

F2Figure 2 – Demographics for the second sample in the project (gender distribution on the left and field of activity of the business on the right)

 

Our preliminary results show that a high centrality in the network for the target entrepreneur leads to a reduced perception of risk for imitating the best entrepreneur in the network (B=-.4133, p<0.01). This relation is further moderated by the innovative (vs. adaptive) style of the entrepreneur, measured with Kirton Adaptation – Innovation Inventory (Kirton, 1976, 1987) (the results are marginally significant; B=-.04, p=0.06). More specifically, node centrality reduces risk perception for IB strategy only for entrepreneurs that have a moderate or high degree of innovativeness (Figure 3).

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Figure 3 – Conditional effects of Node Centrality (IV) on Risk Perception for IB (DV) at low, moderate and high values of the Innovativeness (Moderator Variable)

 

See Appendix 1.b with a print screen of the data base. Since data analysis is ongoing and expected to end by December 2016, a complete data analysis will be available in the first quarter of 2017.

 

Objective 2/ WP2: Explore how emotions and emotion regulation shape the relationship between the characteristics of the social network and the ecological rationality during ESDM

Emotions are argued to be strongly linked to the entrepreneurial process. They are said to have an impact on identifying and exploiting business opportunities, on making strategic decisions, on venture formation and success etc. However, this stream of research is still in its infancy, therefore, as mentioned in the scientific report in 2015, we decided to perform a meta-analysis in order to explore the magnitude of the association between affective experiences and various entrepreneurial outcomes, such as entrepreneurial performance.

 

Meta-analysis[2]

After a preliminary examination of the abstracts, around 50 articles complied with the first criterion of inclusion in the meta-analysis; that is, they seemed to explore the relation between an affective variable and entrepreneurial performance and were considered for further analysis. After applying the other inclusion-exclusion criteria, a final sample of 17 studies (N=3810 participants) was retained for the quantitative analysis, yielding 76 effect sizes. Table 1 provides a summary of the studies included in the meta-analysis.

By synthesizing the current findings in the entrepreneurship literature on the association between positive affect (PA) and entrepreneurial performance (EP) and negative affect (NA) and entrepreneurial performance, this meta-analysis provides a useful insight on the implications of entrepreneurial affect for EP conceptualized as attaining goals such as profitability, business growth and innovation. This is a departure from other meta-analyses exploring affect and individual (not business) performance in more general settings. In particular, our results show that entrepreneurial PA is positively related to EP (r=0.18, CI95=[0.06, 0.29], p<.01), while only state and not trait NA has a significant negative effect (r= -0.16, CI95=[-0.27, -0.05], p<.05). These results vary especially in relation with individual differences such as gender, age and education, with women, more educated (only in the case of PA-EP relation) and older entrepreneurs displaying stronger associations between PA and EP and NA and EP. Practical implications can be derived from the field of positive psychology, concerning interventions that aim to increase the experience of PA within the entrepreneurial context and down-regulate NA in order to foster EP.

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The results of this meta-analysis were disseminated by attending two international conferences (Appendix 4) and they are fully reported in a manuscript that is currently under a review process at an ISI Journal (Appendix 6)

The output of the theoretical review and meta-analysis was used to design the experimental protocol that aims to explore the impact of emotion regulation on entrepreneurial decision making. Data collection recently started and is expected to continue in 2017.

[1] The preliminary results of this study were presented at one international conference – Fodor, O.C. (2016). “Social capital and ecological rationality in entrepreneurial strategic decision making”. International Congress of Psychology, July 24th-29th 2016, Yokohama, Japan

 

[2] The results of the meta-analysis were presented at two international conferences (Fodor, O.C., & Pintea, S. (2016). “Is entrepreneurship really hot? A meta-analysis on the role of affect on the entrepreneurial process”. European Academy of Management Conference, June 1st-4th 2016, Paris, France; & Pintea, S. & Fodor, O.C. (2016). “The role of affect in the entrepreneurial process: a meta-analysis”. Cognitive and Neural Mechanisms of Human Memory, May 17th-20th 2016, Cluj Napoca, Romania) and the manuscript is currently submitted for review to an ISI Journal