Decision-making Logic Of New Venture

Entrepreneurial activity is powerfully emerging throughout the world and new venture is energizing global economics.Those new ventures are spreading over the market economies and are changing the market structure through technological innovation and commercial reshape,and being the imperatives of global economic development.However,the high failure rate of new venture is detected due to the liability of newness and the uncertainity of its internal and external environment.Improving the survival rate of new ventures is not only related to the future and destiny of entrepreneurial teams,but also the best way to maximizing the utilization rate of entrepreneurial resources of the whole society.Therefore,from the perspective of new venture and the emerging entrepreneurial opportunity,employed with Effectuation Theory and Theory of Planned Behavior,this paper introduces “Perceived Control of Venture”(PCV)and constructes the conceptual model of “PEC-PCV-EDL” for studying the entrepreneur's decision-making in entrepreneurial activities.It proves PCV plays a significant mediation effect between PEC and EDL,and EIP also moderate the relationships between PEC and PCV,and between PCV and EDL.On this basis,this study extends the dynamic model of EDL by applying a longitudinal process research approach,for demonstrating how effectuation and causation logics are combined and how are shifted & reshifted over the time.Firstly,this paper studies the impact of PEC on PCV.The findings are detailed in three aspects: the increasing environmental uncertainty(EU)will lead entrepreneurs to explore alternative solutions and actively increase exploration and utilization of opportunities,thus increasing PCV,while the decreasing EU will lead entrepreneurs to concentration on extant technologies and markets,thus reducing PCV.The Resources Constraints(RC)will stimulate entrepreneurs' s resourcefulness,leading him to actively increase exploration and utilization of opportunities,thus increasing PCV,so as to increasing PCV.Increased Shareholder Pressure(SP)will lead entrepreneurs to focusing on extant technologies and markets,so as to reducing PCV.However,it is reported that the effect of EU is slightly weaker than RC and SP.Afterwards,the changing of PCV determines the selection of EDL: increased PCV promotes the use of effectuation and reduced PCV reinforce the use of causation.This paper further analyzes the similarities and differences between elite entrepreneurs and grassroots as two different classified entrepreneurs in the determination of EDL,by comparing EIP in three dimensions.Specifically,the Learning Competence(LC)of entrepreneurs enhances to discover entrepreneurial opportunities that entrepreneurs actively adjust in circumstance of PEC,to increases their PCV,and the LC of entrepreneurs also strengthens to obtain resources,thus increase the flexibility and experimentation,aiming for more use of effectuation.The Prior Knowledge(PK)of entrepreneurs helps to form a cognitive framework for entrepreneurial opportunities,so as to generating the strategic alliance with external resource providers,the PK of entrepreneurs will also strengthen and increase the possibility of use of effectuation.The Social Network(SN)of entrepreneurs is helpful to insight and predictability of the uncertain environment,to promote entrepreneur's PCV,ultimately facilitate the alliances between upstream and downstream,also for more use of effectuation.This paper also studies the dynamics in the use of effectuation and causation in venture creation processes by appling a longitudinal process research approach.The results show that entrepreneurs' adoption of eith effectuation or causation will be triggered by their PCV's changing in the new venture creation.This finding challenges the conclusion in literatures that treat decision-making logic as stable tendencies,determined by founding conditions such as experience and uncertainty.Our research and analysis can draw the conclusion that causation and effectuation will coexist for quite a long time,while effectuation as flexible decision-making logic will be more prominent in the early stage of new venture.With the progress of new venture creation,their maturity for technology,products,markets and entrepreneurship will continue to increase,and it will transit to causation as planning-based decision-making logic.Even so,the hybrid logic,i.e.the effectual and causal logics are at work simultanesously,just the frequency of their uses is varying.This paper makes the contributions by revealing the fundamental root cause of the success or failure of new ventures and extending the entrepreneurial decision-making logic's theoricalization and operationalization under uncertainty in three ways under the construction of static and dynamic model of new venture's decision-making.Firstly,the concept,measurement and mediating role of PCV are proposed and verified.On the one hand,the affortable loss of Effectuation Theory and the perceived behaviorial control of Theory of Planned Behavior are integrated.Meanwhile,this concept extends the understanding of the conditions and motivations of effectual and causal decision-making logic,which includes not only EU but also RC and SP,these reveals the mechanism of decision-making logic.Secondly,the relationship between causation and effectuation is clarified.It also discovers that causation as as the predictive decision-making represented by completeness,and effectuation as the adaptive decision-making represented by heuristic,are most commonly following a ‘hybrid' logic,while the dominant logic changes dynamically over time,supporting and elaborating the view on contextual dependency of EDL.Thirdly,the moderation mechanism of EIP on EDL is studied,including entrepreneur's LC,PK and SN.In particular,it figures out the similarities and differences between grassroots and elite entrepreneurship,so as to improving the perspective of entrepreneurial process and the manageability of entrepreneurial activities,also improving the pertinence and effectiveness of entrepreneurship education,and providing direct evidence for making differentiated entrepreneurship incentive policies in China.