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Explaining entrepreneurial success: a conceptual model.

ABSTRACT

Explaining entrepreneurial success has long remained a contentious issue. Failures on this front have been attributed to extra emphasis on individual or environment and plethora of constructs. The paper proposes new constructs that are parsimonious and holistic in nature. These constructs are cognitive complexity, threat to identity, status inconsistency. The constructs assume that entrepreneurship is consequence of interaction between individual and environment.

INTRODUCTION

Despite considerable work in the field of entrepreneurship, efforts to arrive at explanation and theory of entrepreneurial success have not produced desired results (Phan, 2004; Wortman, 1987; Shane and Venkataraman, 2000). The Inability of scholars to arrive at distinct theory is attributed to a number of factors that include disagreement on definition of entrepreneurship, (By grave and Hofer, 1991; Brazeal et al, 1999; Gartner,1989), inability to look beyond their disciplines (Hornaday et al, 1987), inability to apply multilevel analysis and new constructs (Phan, 2004), development and measurement of constructs used (Smith et al., 1989; Vanderwerf and Brush, 1989), lack of dynamism in theories (Bygrave and Hofer, 1991) and lack of parsimony in model development (Phan, 2004). If a distinct theory of entrepreneurship is to developed, field has to pay attention to interactions among cognition, organization and industry level analysis. Further, analysis at every level should be connected to provide holistic picture. This is obviously a tall order to achieve (Phan 2004).

This paper aims to build a conceptual framework which explains entrepreneurial process using psycho-social processes. It attempts to answer some of the above mentioned problems, by using new concepts like cognitive complexity, threat to identity and status inconsistency. The framework presented in this paper is based on psychological and sociological theories of information processing and emotions as basis for describing enterprise creation. It assumes that information creation and management along with emotions are the heart of entrepreneurial decision-making.

The paper first defines entrepreneurship and its implication for explaining the process. It then presents concepts that would be used to build the model. Towards the end, the paper describes the conceptual framework, which explains entrepreneurial process and why model claims acceptability.

ENTREPRENEURSHIP: DEFINITIONAL AND METHODOLOGICAL PROBLEMS

A good science has to begin with a good definition (Bygrave and Hofer, 1991). If the field of entrepreneurship is to claim scientific accreditations, there has to be sharp and unanimous definitions. But sadly, there is no consensus on definition of entrepreneurship (Bruyat and Julien, 2001; Lumpkin and Dess, 1996). The number of definitions is almost equal to the number of scholars. Another problem with development of distinct theory of entrepreneurship is lack of reliability and validity of constructs developed to measure a phenomenon (Smith et al, 1998). This makes measurement of different constructs, developed in entrepreneurship, inconsistent. It renders comparison across different works difficult and in some cases even futile, hindering progress of research inquiry (Brazeal, 1999).

Given multiplicity of definitions, the author concurs with Misra and Kumar (2000) that there is no point in proposing another definition. However, without definition, research inquiry becomes difficult. For this very reason, the author adopted a definition from the existing literature. The Definition adopted is: "Entrepreneurship is the process that involves innovative action towards organization creation." The definition has elements of Gartner's (1988) definition which say's that entrepreneurship involves organizational creation and Drucker's (1985) definitions which say's entrepreneurship involves innovation. The definition is close though not same as Shumpeterian (Schumpeter, 2000) notion of "Creative Destruction".

Entrepreneurial Process

Consistent with the definition adopted- innovation and organization creation, the author is of the opinion that the explanation of enterprise creation cannot be separated from volition of entrepreneur. Assumption is that entrepreneur is at the heart of entrepreneurship though not the sole explanatory force. Given these assumptions, paper adopts Baron's (2004) framework for explaining entrepreneurial process. It states that "Willingness to start enterprise', 'Identifying opportunities' and 'Success of the enterprise' "are the three stages of the process.

LITERATURE

As already emphasised, entrepreneur is at heart of organization creation. The decision to become an entrepreneur is volitional (Carland, 1988; Baron, 2000). Entrepreneurship literature abounds with studies probing propensity of an individual towards enterprise creation. This literature could be divided into two categories.

First category of research is on personality traits. Some of scholars, mainly psychologists, working in this field have developed useful insights towards this. Some of important concepts that have been explored by these scholars to explain entrepreneurship are: Need for Achievement (McClelland; 1961), Need for power (McClelland, 1975), Internal locus of control (Rotter; 1966), Risk taking propensity (Brockhaus, 1982), Tolerance for ambiguity (Begley and Boyd, 1987) etc. However, the research on trait theories has yielded, at best, moderate results (Gartner, 1988, Baron, 2000). The reasons for failure are twofold. Firstly there has been problem in measuring the various concepts (Chell, 1989) and secondly these concepts may not be good indicators of entrepreneurship (Robinson et. al: 1991).

The second line of inquiry is by sociologist, who have analysed background and demographical factors as reasons for successful enterprise creation. This emphasis led to finding out conditions that are responsible for emergence of entrepreneurship (Gnyawali and Fogel, 1994) The result of these findings have highlighted factors such as dissatisfaction with previous job or life experiences (Brockhaus, 1982), immigration (Borjas, 1986), ability to form social networks and social capital (Aldrich, 2000; Reynolds, Storey and Westhead, 1994), minority status (Hisrich and Brush, 1986; Turner and Bonacich, 1980) and host of other factors. However, like trait factors, sociological factors have also received lukewarm success.

What are the reasons for failure of these factors? Two kinds of explanations are possible for this question. First, it can be argued that homogenous characteristics, like background factors, cannot explain success of entrepreneurs, who are outliers. It is not the conditions (or background factors), per se, that are important but what are the impact on individuals of the conditions. Hence mere demographic variables should be abhorred in favour of consequences of these variables on individuals. This author is of the opinion that some scholars have not been able to focus on effect of demographic conditions on individual. Such analysis could have yielded better insights.

After these failures, research inquiry in entrepreneurship diverted from individual and social variables to development of models, which contained both individual and social factors. This approach was predominant in entrepreneurship literature in early 90's to mid 90's (Learned, 1992; Hornsby et al., 1994). However, these models also failed to account for the success of the process of entrepreneurship. This failure could be attributed to too many variables and hence lack of parsimony. Too many variables, leading to overlap and hence redundancy. For example, there is significant overlap in 'Need for achievement', 'Internal locus of control', 'Risk taking propensity', 'Dissatisfaction', 'and Immigration and Minority status'. An individual who has high need for achievement is likely to be moderate risk taker. Also, S/he is likely to have internal locus of control (Pandey and Tewary, 1979; Diaz and Rodrigues, 2003 and many others). Similarly, the person who migrates to different land might land up in a situation where S/he is denied upward mobility through normal channels. The individual may end up with dissatisfaction, leading to higher efforts.

Does it mean that research on individual variables, both trait and situational, which has yielded at best mediocre results (Chell et al, 1989, p44), should be discarded? Gartner (1988) went to the extent that results on individual personality characteristics have not yielded any result and hence question--"Who is a successful Entrepreneur?" should be discarded altogether. However, Carland (1988) and Baron (2004) have argued that entrepreneurship, as an act cannot be separated from entrepreneurs. Hence, it would be foolish to discard this research as there are some very useful insights that could direct the future research in achieving better results.

What are these useful insights and lessons? The first lesson is that these factors are may need to be improved upon. The second lesson that could be learnt from these results is- any explanation for entrepreneurial behaviour should include minimum number of factors. It requires building of minimum and valid constructs. Is this task achievable?

It is achievable if the new concepts can be thought of, which can encompass two or more earlier concepts. It would reduce duplicity of same phenomenon being explained through different concepts. This is a huge task. But an effort has been made in this paper, though conceptually. The following section discusses constructs that have been used in this paper to build the conceptual framework.

CONSTRUCTS FOR FRAMEWORK BUILDING

Consistent with Baron (2004) requirements of explaining entrepreneurial success, the author presents important concepts, which would act as a raw material for framework building, As pointed earlier, conceptual model will try and find answers to the three questions.

Threat to Identity

The Author feels that 'Perception of threat to Identity' could be one of the factors, which can encompass some of the inter-related concepts, if not all. It is a negative emotion which forces an individual to quit and start a fresh action. Individual is gripped by fear. He/she starts to think: "What would happen to me if I'm not able to achieve a particular goal. The fear leads to tension. Perception of threat to identity and hence fear can lead an individual to put extra efforts to search for identity. There are many scholars, who have highlighted importance of fear in enhanced information seeking. Minniti (2004) says that the need to prove leads to enhanced alertness (Gaglio and Katz, 2001). Negative emotions like fear, could lead to enhanced information seeking (Muramatsu and Hanoch, 2005). Information seeking may lead to information asymmetry. Hindle (2004) has also highlighted importance of studying fear of failure as a possible cause for decision to start enterprise.

Self Efficacy

Self-efficacy as concept has been found to have an effect on intentions of individuals to start enterprise. Albert Bandura (1986) defined "Self efficacy as a belief in one's capability to organize and execute the resources for actions required--"Manage Prospective Situation". It is related to intensity of efforts an individual would put in a particular task, how long would individual persist with the task and the nature of task an individual would choose. Boyd and Vozikis (1994) co-related entrepreneurship with self efficacy. They cleared the confusion between concepts such as 'self efficacy' and 'locus of control', 'self efficacy' and 'belief that an effort to lead to desired performance' and 'self efficacy' and 'outcome expectations'. They argued that self-efficacy is a broader concept that includes such factors as moods and coping abilities under stress.

Boyd and Vozikis (1994) have argued that a person's self-efficacy can be improved through four methods. These methods in decreasing order of effectiveness are 1. Mastery experiences or Enactive mastery 2. Modelling or Observational learning, 3. Social Persuasion and 4. Judgement of own Physiological states.

Boyd and Vozikis (1994), while further developing Bird's (1988) model of intentions claimed that entrepreneurial intentions are best predictors of entrepreneurial behaviour as compared to other factors like past experience. Similarly, Krueger, Reilly and Carsrud, (2000), while testing models of entrepreneurial intentions, proved that perceived self efficacy of an individual leads to perceived feasibility, which is a better predictor of intention. Noble, Jung and Ehrlich (1999) found that two dimensions of self-efficacy namely, developing new opportunities and meeting unexpected challenges, distinguish students who major in entrepreneurship against students with non-entrepreneurship subjects as majors.

Cognitive Complexity

Bieri (1955) was first to develop the idea of cognitive complexity. However, his concept could not hold ground; subsequently Crockett (1965) modified it. His concept of cognitive complexity is amalgamation of two concepts. The first concept is "Personal constructs" from Personal construct theory of George Kelly (1955). The second concept is taken from structural development theory of Heinz Werner (1957). According to Kelly (1955) every individual has his ways of knowing and dealing with the world through 'Constructs'. These constructs are bipolar in nature. Kelly said that all individuals are like scientists, who continuously apply their constructs to deal with different situations in day-to-day world. Individuals improve and change these constructs with experience. We interpret world through these constructs as per Kelly. He argued that all constructs that fall within same domain constitute specific subsystem. The constructs are organized in hierarchical fashion, such that some elements in the subsystem subsume or imply other elements.

Werner's (1957) theory of structural development states that development takes place from the state of little differentiation to high differentiation, low complexity to high complexity, little articulation to better articulation and hierarchical integration. Werner referred to this as orthogenetic principle of development.

Crockett (1965) combined the theories of Werner and Kelly to arrive at cognitive complexity. Applied to personal constructs, the orthogenetic principle suggests that more developed systems of constructs will be more differentiated (contain greater numbers of constructs), articulated (consist of more refined elements), abstract and integrated (organized and interconnected). These developed systems of constructs are relatively complex. That is, individuals with more differentiated, abstract, and organized systems of constructs, in a particular domain, are considered to possess higher cognitively complexity in the domain. Thus, someone with a relatively differentiated, abstract, and organized system of interpersonal constructs can be regarded as having a higher level of interpersonal cognitive complexity.

As per concept of cognitive complexity, two kinds of development can occur. First is development in a specific domain. This is similar to Sarasvathy's (2004) concept of Expertise and Intuition. Second is, development in general domain which Mitchell (2000) refers to as 'Arrangement Cognitions'. General development is not likely to be complex and its range would also be limited. Development in specific domain is likely to be highly differentiated and complex. Hence it is possible that an individual will have highly differentiated construct in one field and not in others. (Crockett, 1965).

Crockett (1965) related cognitive complexity to impression formation, which is a potential area that could contribute to the entrepreneurship literature (Downing, 2005). Cognitive complex persons were found to be related to better at judging impression of others when they are exposed to contradictory information (Delia and Crockett, 1973; Press, Crockett and Rosenkrantz, 1969). These people have the quality to differentiate and integrate information better than others. Streufert and Swezey (1986, p 61-90) have shown that more cognitively complex individuals gather and process information better, are flexible in their thinking, They change their attitude very quickly in response to the change in the environment and are better strategic planners.

Cognitive complexity of individual increases with age up to late twenty's and early thirties and then decreases with age. It is related positively to formal education. Cognitive complexity of an individual is also influenced by amount and variety of social interactions. Variety of social interactions and education would result in more constructs, whereas the amount of social interaction and education would result in differentiation of constructs. To put it differently, the breadth and depth of social interaction would influence the cognitive complexity. The experiences that an individual has are converted into cognitive constructs through learning. These constructs are used as data for making decisions.

Cognitive Complexity has been related to social perception skills like; identifying others' states and inferring in their dispositions, impression organization, information integration, social evaluation and reliance on evaluative consistency principles, social perspective-taking ability, production of person-centred messages (Crockett et. al, 1975). It is also related to message production forms, communication effectiveness, individual differences in listening, comprehension and conversational memory, differential responses of low and high complexity judges to person-centred, behaviourally complex messages, representations of conversational interaction, topic management during conversation, planning processes during conversation (Burleson and Caplan, 1998). All these skills are very important for entrepreneurs. Baron and Ward (2004) cite a few researches where more cognitively complex person has been found better at picking taxonomical categories.

Cultural Aspirations

Every culture can be conceptualised as a complex system of subcultures. These subcultures can, sometimes be in opposition to the dominant culture in a society. Such subcultures are referred to as contra-cultures. Subcultures are like Kelly's constructs which are integrated and differentiated in a hierarchy. Every subculture has a prescriptive element in it and is unique to the subculture. Subculture/culture transfers its aspirations to individuals through various modes of socialisation. Hence, every individual wants to live up to these aspirations that have been internalised through socialisation. Prescriptive element of culture have performance requirement from individuals if theses individuals have to live up to cultural aspirations and gain identity. These could be termed as "Construct of Performance Requirement". The requirements become standards against which the performance of an individual is measured. Entrepreneurship aspires to fulfil these requirements which would depend on his capability to gauge them properly.

THE CONCEPTUAL MODEL

As already said, the Author accepts Baron's (2004) position that explaining entrepreneurial success would require explaining three phenomena- 'Willingness to start enterprise', 'Identifying opportunities' and 'Success of the enterprise'. In the next section, explanations for these phenomena would be developed with the help of concepts mentioned in the previous section.

Willingness to Start an Enterprise

Why would a person like to start an enterprise, especially when entrepreneurship is not preferred career option? The willingness is determined by the pulls and pushes that an individual faces while starting an enterprise (Clark and Drinkwater, 2001; Olomi et al., 2000). Pushes and pulls arise from positive or negative emotions that a person experiences. Push is negative emotion that forces a person to leave the status quo whereas Pull is a positive force that attracts person towards new path, which can be enterprise formation. In other words, a person finds his current status to be unsatisfactory and alternatives like enterprise formation become attractive.

The push factors are: job dissatisfaction, job loss, unemployment, career setbacks, saturation in the existing market, language, immigrant status, deprivation, low family income and lack of flexibility in the previous job. The Author proposes that the perceived threat to identity, mentioned in previous section, can be used to explain as to why individuals are pushed into entrepreneurship. When an individual fears that his identity is threatened he is likely to indulge in actions, which would re-establish his identity or give him a new identity. Entrepreneurship could be a means towards that. However, fear of threat to identity is not enough to make him look for alternatives. Everyone with threatened identity does not start enterprise even if the entrepreneurial career is a preferred choice in the culture/subculture. Some individuals may perceive irreparable damage to their identity to the extent that they lose initiative for alternative action.

In addition to the push, pull is also required to initiate action to regain identity. Various pull factors described in literature are: Need for achievement, Internal locus of control, Intentionality, Practical purpose of individual action, Demand, Common culture, Language, Self sustaining economic environment, Good policy, Infrastructure and Profit. If we have to look for parsimonious model, then it is important that a new concept which encompasses the existing concept should be developed.

The Author proposes perceived self-efficacy as a concept, as described previously, can fulfil the role of providing positive energy to an entrepreneur. Carsrud et al (2000) have shown that self-efficacy is better predictor of entrepreneurial intentions. Chen, Greene, and Crick (1998) reported that self-efficacy is positively related to an individual's starting an enterprise. Self-efficacy provides individuals with the pull and can be a result of both personal and environmental factor, as Boyd and Vozikis (1994) highlighted. It can be used to explain entrepreneurship at culture and structural level of societies. Population in the lower strata in hierarchical societies would have low self efficacy because of high power distance and domination by higher ups. The high power distance leads to "Poor Modelling",' Social Persuasion 'and Mastery skills. On the other hand population in the upper strata would find it relatively easy to hold on to power. This would mean entrepreneurship is likely to remain low in that culture as opportunities for change are non-existent.

Self-Efficacy provides positive emotions and a belief that an individual can make a difference. The difference comes from ability to effectuate. Mere emotions can only lead to propensity and not action.

The Author proposes that decision towards enterprise creation could be explained by combining concepts of "Self Efficacy and Threat to Identity"

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Identification of Opportunity

Author proposes that identification of an opportunity can be explained through cognitive complexity and perceived positive self-efficacy. How is it possible? An individual can have high cognitive complexity in both specific and general domain. Higher cognitive complexity in specific domain leads to differentiated constructs. For example, Bill Gate's would have high cognitive complexity in software. Similarly higher cognitive complexity, in general field, would lead to better connectivity with constructs from other field. Continuing with example of Bill Gates, this would mean that he would be able to connect his constructs in software to that of constructs in market. Cognitive complexity in a particular field makes individual expert and general cognitive complexity connectivity in related fields. Hence, a more cognitive complex individual is likely to generate more ideas through differentiation and integration. Hence an individual with high cognitive complexity is likely to be more creative.

Baron and Ward (2004) argue that creativity is related to opportunity identification. They hint towards the possibility that entrepreneurs use different, integrated knowledge structure. Creativity leads to better identification of opportunities through process of conceptual combination, analogical reasoning and abstraction.

A more cognitively complex person is likely to be more creative than less cognitively complex person (Streufert and Swezey, 1986, 73-74). A cognitive complex individual would have better information creating, handling, managing and manipulability capabilities leading to creativity. The more differentiated and integrated constructs an individual has better would be the capability to generate alternatives.

Innovation and creativity are nothing but ability to create new and additional constructs, different from existing constructs. A person with multiple constructs is likely to produce better integration and differentiation of his present constructs to produce newer constructs. To illustrate, we would take an example: Say there are two boys, A and B. Suppose A has vocabulary of 4 words and B has vocabulary of 6 words. If we replace "construct" for "word" then, A has four constructs and B has six constructs. Who has capability to create more number of sentences given this limitation? Obvious answer to this is B. Hence person with higher cognitive complexity would, under normal circumstances, generate more alternatives. After alternatives generation, next task is that of alternatives evaluation to decide upon the most feasible. This requires a good judgement. Cognitively complex makes better individual judgements (Tripodi and Bieri, 1964, 1966) especially when environment is dynamic and complex. The Entrepreneurs operate in a complex and dynamic environment. Hence Cognitive complex entrepreneur would do a better job of evaluation in dynamic environment.

A person with higher cognitive complexity would also be receptive to cultural aspirations. He is more capable at comprehending trends. She/he is likely to be more empathetic to environment. Empathy level can be defined "As overlap of individual constructs and environmental constructs". Higher cognitive complexity would result in identification of appropriate opportunities, as most of viable ideas come from aspirational culture.

Similarly, a persons need to have positive and affirmative outlook while generating and evaluating ideas. Person with higher self efficacy can do such. Kasouf (1997) showed that self-efficacy helps an individual in opportunity assessment and opportunities recognition. Krueger and Dickson (1993) also related self-efficacy to opportunity recognition. This is because self-efficacy could be the difference between something being termed as "opportunity" or "threat". An individual with higher self-efficacy may view a particular situation as opportunity whereas another individual with lower self-efficacy may end up viewing the same situation as a threat.

Hence, identification of opportunity could be explained by combining cognitive complexity and self efficacy. Some scholars have proved that cognitive complexity decreases with age. These results give support for the findings that people are less likely to form ventures as their age increases (Mayr, Ulrich; Kliegl, Reinhold, 1993).

Developing Opportunities/ Creation of an enterprise

Once an individual decides to start an enterprise after identification of opportunity the next stage is developing the opportunity to create organization. The success of an enterprise creation would depend on the ability of an entrepreneur to generate resources for running the organization. Self efficacy has been related to resource acquisition capacity (Brown and Kirchoff, 1997), though the relation was not strong. Cognitive complexity has been linked to higher level of empathy and understanding towards others, leadership skills, ability to attract people and problem solving (Streufert and Swezey, 1986). An entrepreneur is dependent upon all the stakeholders of an organization for success. The stakeholders have differing expectations from entrepreneur. Sometimes these expectations sometimes can be convergent while most times these are divergent. Managing this situation can be rattling to most individuals. For example; the expectations of customers might be different from those of venture capitalists, financiers, employees, shareholders and suppliers. In order to satisfy these divergent expectations, an entrepreneur has to be aware and sensitive to these divergent needs. A cognitively complex person, both in a specific domain and general domain is likely to be aware about the expectations and standards of performance that culture expects if an individual wants to be successful. Baron and Ward (2004) do not deny the possibility that entrepreneurs might possess ability to recognise complex pattern, which other persons do not possess. It helps in better resource acquisition from environment. As per Sternberg (2004) "Entrepreneurs are successful because they have better 'Successful Intelligence' which is different from intelligence measured through different IQ instruments". He says that the successful intelligence is combination of practical, analytical and creative intelligence. This relationship when combined with cognitive complexity can have better relation with successful running of an enterprise. Practical intelligence is combination of effectuation and ability to gauge environment.

Contingency in Model

An industry can be thought of as a dynamic environment. Every environment has certain performance requirements from individuals if individuals have to survive and grow in the same. The Environment is dynamic and competitive with many players in a particular field at a point of time. Hence one way of looking at success is synchronization between individual environments. Suppose in the earlier hypothetical example of A and B. A and B both study in school and they would be evaluated by school on the basis their ability to create more sentences. Suppose, out of six words that B has, three are slang and cannot be used in examination. Effectively, B has only three words, as other three are defunct. On other hand, all four words of A are valid. Effectively, A has more constructs than B. Hence despite B having more constructs, overall, but less constructs compatible with relevant environment, would be out competed by A. Entrepreneurs are more cognitively complex in a particular domain and out-compete others in the domain.

It is realized that success of an entrepreneur/enterprise will depend on his/its relative position to others with respect to framework established in the model vis-a-vis. other players in and out of industry. The survival and growth of these players would be dependent on the relative strength of cognitive complexity of players in the industry. The more cognitively complex person would be able to drive out the players who are less cognitively complex (industry). The assumption that the author has made is that a person who has higher cognitive complexity, is not only likely to assess the environment better than others but has more capability to generate more information and resources which are crucial for growth and survival of an enterprise.

On the other hand, self efficacy and threat to identity are likely to provide individual with emotional energy that acts as motivator to indulge in action of enterprise creation.

A Contradiction in Model

A first look at the model would suggest a contradiction in form of use of two constructs--"Threat to identity and Self-efficacy". A question can be raised as to how it is possible for a person to have both? This could be explained in terms of status inconsistency (Lenski, 1954, 1956), across time and space. An individual occupy more than one status in day-to-day life. It might so happen that he derives self-efficacy from one status (higher one) and he fears threat to his identity from the other status (lower one). The Fear of loss of identity and confidence of self-efficacy might lead to a balance or what Brockner (2004) called promotional and preventive focus in regulatory focus theory of enterprise opportunity identification and evaluation. The Author believes that in order for a person to be successful entrepreneur, it is important that he should have balance of negative and positive attitudes. This helps to avoid excessive optimism or pessimism and leads to better judgement. Brockner says that promotional focus is helpful during idea generation times and prevention focus is helpful during idea evaluation and day-to-day running of the organization. A desirability of both optimistic as well as pessimistic outlook explains why successful entrepreneurship is difficult and a rare phenomenon. Gaglio (2004) also refers to finding of Galinsky et al in his paper which states that, individual who indulges in both "Counterfactual Thinking" and "Mental Simulation" is less prone to biases. The two phenomena are almost opposite to each other but can co-exist.

HOW IS FRAMEWORK DIFFERENT FROM OTHER MODELS?

If entrepreneurial process has to be successfully predicted, the field of entrepreneurship needs a comprehensive model (Bygrave and Hofer, 1991). The model should not only take individual level factors into consideration but also changing environmental conditions (Gartner, 1989). The model has to be dynamic in its relation between individual and environmental factors (Phan, 2004). The second property that a model should possess is that it should be parsimonious. It is non-productive to produce a model, which has numerous explanatory factors. Also, different constructs constituting model should also be measurable with fair degree of reliability and validity (Vanderwerf and Brush, 1989). These are some of the standards that have been set for successful development of the model.

There have been several models; some of them are moderately successful, proposed in the past to explain entrepreneurial behaviour (Chandler and Hanks, 2004; Hornsby and Nafziger, 1994; Lumpkin and Dess, 1996; Krueger and Brazeal 1994, Gnyawali and Fogel, 1994; Katz, 1994, Covin and Slevin, 1991; Misra and Kumar, 2001). Some of the models developed based on the cognitive theory. For example; models proposed by Bird (1988), Ajzen's and Shapero's model (Krueger, Reilly and Carsrud, 2001) have been good predictors of entrepreneurial intentions. However But these models have been at best moderately successful in explaining entrepreneurial behaviour.

Whereas other models, like this model, have been conceptually proposed are yet to be empirically tested. The Author does not claim the superiority of the model over other models that have been proposed in the past because it has not been empirically validated. However, author believes that model provides a fresh perspective. It claims novelty because of following reasons:

1. A number of constructs that are used to build a model is limited. Hence, the model can be called parsimonious.

2. Some fresh concepts like "Threat to identity" (though not entirely new), "Cognitive complexity" and "Status inconsistency" are used to explain the success of enterprise creation. These are scarcely used in the existing literature.

3. The model is built around core concept of cognitive complexity with respect to information creating, handling, managing and manipulating capability for an individual. Phan (2004) says that an ideal theory of entrepreneurship should predict the origin of firm, their density, survival and death. This model can be extended to the level of the firm and industrial level. The analysis of the firm and industry level can be done with the help of similar model, where firm and industry in the model replace individual. The analysis at this level can accomplish the above-mentioned requirements of a good model. For example; Survival, Growth and Death rates of firms can be explained using notion of competition and co-operation for generating information (or knowledge management) among various players in the industry. The efforts in this direction could be seen as theories like complexity theory, which are becoming important tools for organization analysis Streufert and Swezey, 1986). Looking from this perspective, a comprehensive theory, based on the information processing ability of units at various levels from individual to firm to industry level, can be thought off.

4. The model is dynamic as it makes entrepreneurial success as interplay between individual capabilities and environmental requirements. Synchronization between cognitive complexity and environmental requirement can explain as to how an entrepreneur would be successful under some condition while fails under others. As environment changes its requirement from entrepreneurs, also changes, hence creating a mismatch. Use of self-efficacy, in the model, makes it dynamic. Success under some conditions can lead to excessive level of self-efficacy which can make entrepreneurs blind to new aspirational requirements of stakeholders. For example, a successful entrepreneur can develop habit of applying heuristics, which were successful in past. This heuristics might not be ecological rational in new environment. Similarly, if a person fails, his self efficacy might come down to the level where his identity can be affected beyond repair. Similarly, an entrepreneur who is successful in one industry can be a failure in others because there is no synchronicity between his cognitive complexity and environment requirements.

5. Though model has been developed from psychological and sociological concepts it also has elements of economic (information asymmetry, Austrian school). Hence, the model has multi-disciplinary approach.

6. Inclusion of the concepts like status inconsistency, cognitive complexity, threat to identity make this model a strong contender to connect mainstream "Entrepreneurship Research" with what Jennings, Perrings and Carter (2005) called "Alternative Perspective" in entrepreneurship.

LIMITATIONS OF THE CONCEPTUAL FRAMEWORK

The first problem with model presented above framework is lack of empirical proof. Unless empirical proof is found out the model cannot claim acceptability. Secondly, the more serious problem can be that the concepts developed in this paper can turn out to be difficult to measure in reliably and validly. In fact, many scholars feel that inability of scholars to develop a distinct theory of entrepreneurship is because of problem in measuring different concepts (Chandler and Lyon, 2001). The concepts in the model like competition and cultural requirements are difficult to measure exactly because of their highly qualitative nature. Even concepts like cognitive complexity are difficult to capture because of specific domains involved.

CONCLUSION

The paper has been written to explain the process of organization creation right from the beginning to the stage when enterprise reaches self sustaining stage (Hofer et. al, 1998). The paper is an attempt to challenge established thinking in entrepreneurship literature. These are: First, the paper highlights the importance of both negative emotions and positive emotions as reasons why entrepreneurs take decisions to create their organizations. This is contrary to current notion that decision to start an enterprise may be because of only one or sometimes two factors. The search for identity is manifestation of some kind of negative emotion being driver of action towards organization creation. Self efficacy and cognitive complexity provide individual with positive emotions towards action. The paper challenges the accepted belief that some entrepreneurs are driven by "necessity/ push (negative)" whereas others are "opportunity/pull (positive)" force. It proposes that both forces are involved in decision to start enterprise. The support for this argument could be mustered from the fact that many researchers have proved that one's ability to look for opportunity or information alertness (pull) is result of fear of negative outcome (Muramatsu and Hanoch, 2005). Threat to identity and cognitive complexity are new and different constructs proposed in this direction. Cognitive complexity in a particular field is a better way of representing previously used constructs like education, skills, competence, market knowledge etc. The various constructs are the measures of two fundamental requisite for organization creation- Emotions and Information. The framework in the paper has been developed considering the individual in synchronization with environment. It assumes that all the constructs are dynamic in nature. For example, if there is change in technology the cognitive complexity might reduce for an individual in new settings. Similarly, a person's self efficacy and threat to identity would change depending on perception of environment.

FUTURE DIRECTIONS:

The lessons that can be learnt from this model are summarized as follows.

1. The model can be empirically tested in future. The three questions- "Why a person becomes entrepreneur, How opportunity is identified and how is success created- could be taken as three independent stages". The constructs of self efficacy and threat to identity could be measured using instruments that are available. Instruments are also available for measuring cognitive complexity. However, cognitive complexity as construct poses important challenge if it has to be used in explaining entrepreneurial success. The available instruments cannot be used. An important bottleneck is that cognitive complexity is to a large extent is domain specific. It implies that if entrepreneurs have to be compared in a particular domain for cognitive complexity, it would require domain specific instrument for cognitive complexity. A related challenge is--What is going to be the domain? Is it going to be an industry or function(s)--Production, Marketing, Finance, etc.? The Author feels that instruments of cognitive complexity of entrepreneurs could be designed; taking industry to be domain. The weakness of this method is that it would require development of different instruments for measuring cognitive complexity in different industries that would render cross industry comparison redundant. However, work in this direction could give further insights to overcome above weakness.

2. The model can be extended to firm and industry level analysis where entrepreneur can be replaced by firm and industry in existing framework.

3. Alternative perspectives of looking at entrepreneurship could also be developed from the framework.

ACKNOWLEDGMENTS

The Author is grateful to Professor K.S. Mandal (IIM Calcutta). His guidance and direction was instrumental in shaping the paper.

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Munish Kumar, Indian Institute of Management, Calcutta
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