The Study Of Entrepreneurial Opportunities Evalution Based On Cognitive Theory

There are more and more people to focus on the entrepreneurial activities and entrepreneurial behaviors promote the development of economics increasingly. The evaluation of entrepreneurial opportunity is one of the most important cores in the entrepreneurial process. As the beginning of the activity, opportunity evaluation is affected by numerous factors. Especially in recent years, the scholars have being beginning to use the novel cognitive theory into the opportunity research. Although there is a lot of research on cognitive factors, such as risk perception and cognitive biases of entrepreneurs, the research applying this theory into opportunity evaluation is very few.Building from entrepreneurship theory and cognitive theory, the author selected a pair of cognitive factors, that is, risk perception and cognitive biases, which were the most important objects in opportunity evaluation. In the same time, the author analyzed how the factors affected opportunity evaluation. Moreover, there were five types of cognitive biases in this paper, that is, overconfident, optimistic bias, planning fallacy, illusion of control, and the belief in the law of small numbers in order to analyze their impact on individual risk perception, and further, this paper explored whether they had a direct impact on opportunity evaluation.The results indicated the risk perception had a remarkable negative impact on opportunity evaluation, while the expected return had a significant positive impact, in which illusion of control had a notable negative effect on risk perception and a marked positive impact on opportunity evaluation. The results supported the optimistic bias and the belief in the law of small numbers didn’t affect risk perception, while affected opportunity directly. The two other cognitive biases---overconfident and planning fallacy had no significant impact on risk perception and opportunity evaluation.This paper summarized the findings of the study, and indicated the limitations and the direction of future research. In the actual entrepreneurial activities, the presence of cognitive biases and unrealistic expectation of business results lead to the error occurring when the entrepreneurs are assessing the opportunities. So the author expressed how to minimize the negative impact from cognitive biases and expected return when entrepreneurs are evaluating opportunities, thus it proved the effectiveness of entrepreneurial activities.