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Journal of Business Venturing

Volume 37, Issue 4, July 2022, 106210
Journal of Business Venturing

Persist or let it go: Do rational entrepreneurs make decisions
rationally?

Author links open overlay panelNidthidaLin^aRalfWilden^aFrancesco
Chirico^a^bElaheGhasrodashti^aDawn R.DeTienne^c
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https://doi.org/10.1016/j.jbusvent.2022.106210Get rights and content
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Highlights

*

    Theory highlights that entrepreneurs draw on backward-looking and
    future-looking factors when making persistence decisions.

*

    These decisions are affected by entrepreneurs' rationality and
    need for cognitive closure.

*

    Contrary to expectations, we find that self-proclaimed highly
    rational entrepreneurs do not (always) behave rationally.

*

    Entrepreneurs with high need for cognitive closure put more
    emphasis on backward-looking factors.

Abstract

We theorize that both highly rational entrepreneurs and entrepreneurs
with a high need for cognitive closure (NFCC) are likely to put more
emphasis on retrospective factors (period and degree of
underperformance, personal investments) and less on prospective
factors (risk of going into default, potential for growth, personal
options) when deciding whether to persist with an underperforming
venture. Our findings from three discrete choice experiments with
three independent samples of entrepreneurs (a sample of 176
Australian entrepreneurs; a narrow-replication with 128 Australian
entrepreneurs; and a quasi-replication with 157 United Kingdom
entrepreneurs) consistently show that entrepreneurs who perceive
themselves as rational do not always demonstrate rational behavior
and entrepreneurs with a high NFCC put more emphasis on retrospective
factors in persistence decisions. Important theoretical and practical
contributions flowing from our study are shared in the concluding
section.

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Keywords

Entrepreneurial persistence
Need for cognitive closure
Rational decision-making style
Discrete choice experiment
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(c) 2022 The Authors. Published by Elsevier Inc.

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