Effects Of Entrepreneur's Social Capital On Strategic Decision-making Quality

Currently,it is not uncommon to see the low strategy decision quality or even the fault in decision-making in our country.On the one hand,the entrepreneur is so authoritative that centralized decision-making leads to mistakes.On the other hand,as to immature market system in transitional period,enterprises are facing an environment with high uncertainty and disorder.Administrative intervention to the market leads to the market information failed,which makes entrepreneurs cannot judge and make decisions according to economic laws.Under the current environment,Chinese companies are different from those of western countries in making strategic decision.Entrepreneurs try to build social ties with government agencies,banks and economic and management experts by all means.It is convenient for them to get the latest economic information to avoid risk and to make more accurate judgment to the enterprise environment to avoid fault in decision-making.Academia does not give a good answer to such questions,like how to make strategic decisions and what effects entrepreneurs' social capital has on the process and quality of strategic decision and how to affect in China.Strategy formulation is a psychological cognitive process happening in the mind of strategists(Mintzberg,1998).If you want to understand the specific strategy formulation,the best way is to study strategists' thought and cognition.Behavior decision theory brokes the hypothesis of perfect rationality,considering that decision makers are boundedly rational and environment is complex and uncertain.Therefore,entrepreneurs' cognitive behavior has an important influence on the process and result of strategic decision.Social network helps to obtain the information and resources.Individual's belief,cognition and behavior to environment are affected by the social environment.Not only entrepreneur's information acquisition but also their cognition,belief and behavior are closely related to decision behavior and results.Therefore,there is a cause-effect chain among social capital,strategic cognition and strategic decision quality.Based on the perspective of cognition,synthesized social capital theory,social information processing theory and upper echelons theory,the theoretical model(inconsistent multiple mediation models)to study the mechanism of entrepreneurs' social capital on the strategic decision quality is established.This study includes two parts:(1)Study on the mediating mechanism of entrepreneur social network to the strategic decision quality.Indexes of entrepreneur social network including network size,strength trust and shared language and code.Information quantity,information quality,comprehensiveness of decision and illusion of control mediats the relationship between entrepreneur information network and strategic decision quality.(2)Study on the moderating mechanism of entrepreneur social network to the strategic decision quality.Need for cognition moderates the relationship between social network and information access.Need for cognition also moderates the relationship between social network and comprehensiveness of decision.Absorptive capacity moderats the relationship between information access and strategic decision quality.Power moderats the relationship between illusion of control and strategic decision quality.On the basis of theoretical model,related concepts are defined and empirical research model is established.Then 22 hypotheses are put forward through literature review and theoretical deduction.Structural equation model and hierarchical regression are applied to test mediation mechanism and moderation mechanism by lisrel8.70 and SPSS 17.0.Among the 22 hypotheses,18 supportted while 4 do not,which explains the stability of theoretical model.The following conclusions are reached:(1)As a whole,entrepreneurs' social capital is helpful to promote strategic decision quality.Most of the entrepreneurs' social capital indicators have a positive effect on strategic decision quality while trust has a negative one.(2)There are two kinds of path for entrepreneur social capital's effect on strategic decision quality:one is positive mechanism,including information quantity,information quality and comprehensiveness of decision-making;the other is negative mechanism,including illusion of control.They act in the opposite direction.The sum of two mechanisms leads to the effect of social capital indicators on strategic decision quality.The total effect may be positive or negative or not significant.(3)The effect of social network on information access and comprehensiveness of decision-making is related to the need for cognition of entrepreneur.The utilization of information to decision quality is related to absorptive capacity.The damage of illusion of control to strategic decision quality is related to the power of entrepreneur in decision team.The theory contribution includes:(1)Opening the black box of entrepreneurs' social network on strategic decision quality and revealing the mechanism,this kind of crosse-over study can help to supplement and perfect strategic process theory.(2)Revealing the negative effect of social capital(illusion of control),this study can help to supplement and perfect strategic process theory and social capital theory.(3)Studing the strategic decision and strategic cognition placed in the social network,this research can provide reference to decision science and cognitive science.This study also provides guidance for management practices of Chinese companies:(1)Exploring the mechanism of social network on strategic decision quality,this study provides theoretical guidance to improve entrepreneurs' strategic cognition and strategic decision quality,which can promote strategic management practice.(2)Almost all decision-making of organizations and individuals occurred in social network situations.Therefore,the conclusions of this study may also enlighten other organizations as well as individuals.