Entrepreneurial risk taking: themes from the literature and pointers for future research

Opportunity abandonment: Why are entrepreneurs vulnerable to type I and II errors?

Opportunity actualization is a critical competency attributed to entrepreneurs, which has received widespread attention in the entrepreneurship literature. However, the knowledge of Entrepreneurial Opportunity Abandonment (EOA) decisions is limited. We, therefore, explore the relatively under-studied EOA, analyzing why entrepreneurs commit decision errors, abandon potentially viable opportunities (type I error) or pursue non-opportunity spaces (type II error), and ultimately forsake them later. Through a scoping literature review, we highlight more profound psychological variables that shape entrepreneurial opportunity behavior triggering EOA decisions. We discuss entrepreneurial cognitive limitations in articulating, concretizing, and communicating the opportunity. We argue that varying construal mindsets cause reification fallacies and create perceptual blocks in enunciating an opportunity idea. Further, subjective stakeholder feedback and biased information exchange largely shape EOA decisions, which are mediated through the information processing capacity of entrepreneurs. Finally, we propose four entrepreneurial decision-limiting hypotheses which require an empirical investigation.

The predictive effect of relative intuition on social entrepreneurship orientation: How do exploratory and exploitative learning and personal identity interact?

This study complements the stream of psychology studies on the effects of an individual's intuition on strategic decisions and how it shapes behavioral tendencies by extending how these effects evolve social entrepreneurship orientation in social entrepreneurship. Theoretically, we establish the nexus between relative intuition and social entrepreneurship orientation as well as the moderating roles of exploratory and exploitative learning and personal identity. Empirical validation of these nexuses was based on a cross-section of 276 certified social enterprises in China. The findings indicate that social entrepreneurs' relative intuition has a positive association with social entrepreneurship orientation. Exploratory and exploitative learning positively mediate the nexus between relative intuition and social entrepreneurship orientation. In addition, personal identity positively moderates the effects of exploratory and exploitative learning on social entrepreneurship orientation. Subsequently, we found that the link between relative intuition and social entrepreneurship orientation strengthens as the social entrepreneurs' personal identity increases. In this light, we identify relative intuition as the foundation of exploratory and exploratory learning for the development of social entrepreneurship orientation. Similarly, we shed light on how personal identity positively facilitates the roles of these factors by arousing dedication to the processes/stages of the pursuit of social entrepreneurship orientation goal attainment.

Linking knowledge development with sustainable supply chain performance: mediating effects of innovativeness, proactiveness and risk taking

Purpose

The current study provides new insights into the relationships between knowledge development (KD) and sustainable supply chain performance (SSCP) by exploring the mediating effects of entrepreneurial orientation (EO) in terms of innovativeness, proactiveness and risk taking.

Design/methodology/approach

Data were collected by questionnaire survey from 242 manufacturing organizations. Structural equation modeling (SEM) was used to test the hypotheses.

Findings

The results reveal that innovativeness and proactiveness have full mediating effects on the relationship between KD and SSCP. Though KD is negatively related to risk taking and has insignificant indirect effect on SSCP via risk taking, the mediating effect of risk taking remains moderate positive on the relationship between KD and SSCP.

Research limitations/implications

Given that the current study focuses on manufacturing sector, future research is needed for more comparative studies conducted in different sectors and cultural contexts. The negative link between KD and risk taking also warrants future investigation.

Practical implications

Organizations may reduce their level of risk taking due to the increase in KD. However, in order to enhance SSCP, risk taking is still needed as it mediates the relationship between KD and SSCP.

Originality/value

The mediating effects of innovativeness, proactiveness and risk taking on the relationship between KD and SSCP are unknown. Current study aims to address this gap.

Overconfidence and credit risk-taking in microfinance institutions: a cross-regional analysis

Purpose

The purpose of this paper is to investigate the impact of loan officers’ overconfidence on risk-taking decision and solvency performance measured by z-scores in the context of Islamic and conventional microfinance institutions (MFIs).

Design/methodology/approach

A random effect generalized least square regression was applied to examine the effect of overconfidence on credit risk-taking. The data set covers 326 conventional MFIs and 57 Islamic MFIs in six different regions over the period of 2005–2015.

Findings

Overconfidence proxies have shown through high loan growth, low-interest margin and loan loss provision reveal negative consequences on risk-exposures for both MFIs averagely. The loan officer’s overconfidence is significantly and positively related to the risk-taking decision, and thus, a lower loan portfolio quality. Besides, loan officers’ risk-taking behaviour harms these institutions’ solvency performance.

Originality/value

This paper makes an initial attempt to evaluate the effect of overconfidence behavioural bias on risk-taking decisions and its implication on the MFIs solvency and sustainability.

What constitutes risk for a theatrical film distributor? Evidence from the Hindi film industry

Purpose

This paper aims to examine the strategic issues of risk for independent theatrical film distributors in the Hindi film industry in India.

Design/methodology/approach

The study adopted qualitative grounded theory approach to explore contextually relevant strategic issues of risk for independent theatrical film distributors. Semi-structured in-depth interviews with Hindi film distributors helped to gain explorative insights about the risk behaviour of film distributors operating in Mumbai “circuit”.

Findings

The findings suggest that risk faced by distributors is a function of product (film content) features, contractual terms, resources such as finance and strength of strategic alliances with the producers. The study develops a business risk model for the film distributors from a series of propositions.

Originality/value

The paper contributes to the literature on motion picture industry by highlighting the importance of distribution risk in the film value chain.

Analysis of demand risks for the Indian automotive sector in globally competitive environment

Purpose

The purpose of this study is to understand the different types of risks affecting the demand for the automotive sector in India. The study is further trying to illustrate an approach for analyzing the relative intensities of these risks in the present uncertain business environment.

Design/methodology/approach

Risk on the overall demand is assessed by a combined Bayesian – multi-criteria decision-making approach. Data related to the different factors, affecting their product demand is collected from major automobile firms. Then, weights for these factors are evaluated by applying the analytic hierarchy process approach. Further, these weights are used in the Bayesian analysis network to evaluate the risk intensity for different subgroups, namely, political, economic, social, technological and environmental.

Findings

From the literature and experts’ opinion, total 16 risk factors have been finalized and these are further grouped into 5 categories i.e. political, economic, social, technological and environmental. It is observed that the demand for organizations functioning in the automotive sector is more vulnerable to economic risk as compared to other risks considered in the study.

Practical implications

Managers and decision makers of associated organizations can use the proposed framework to assess the demand risks so as to pre-evaluate their demand corresponding to future changes. Factors can be added or removed and importance could be assigned to different risk factors according to the prevailing business environment for an organization or sector. This will also help the organizations to conduct a more effective risk management in an uncertain business environment.

Originality/value

The study will help in better understanding of the various demand risks prevalent in the Indian auto sector. The methodology used, provides a novel approach for assessing the macroeconomic demand risks and can be used by the firms working in the automotive sector. The proposed methodology could be used for assessing supply chain risk or any other business initiative risk. The suggested approach will help managers in devising flexible management techniques so as to mitigate the risk.