Differences between Entrepreneurs and Managers in Large Organizations: Biases and Heuristics in Strategic Decision-Making

Posted: 17 Nov 2009

See all articles by Lowell W. Busenitz

Lowell W. Busenitz

University of Oklahoma - Michael F. Price College of Business

Jay B. Barney

University of Utah - David Eccles School of Business

Date Written: 1997

Abstract

Investigates the differences in decision-making processes used by managers in large organizations and entrepreneurs. These differences are examined with respect to two biases and heuristics: overconfidence and representativeness. Overconfidence is defined as overestimating the probability of being right, while representativeness is defined as the tendency to overgeneralize from a few characteristics or observations. The following two hypotheses were studied: 1) entrepreneurs will demonstrate more overconfidence than managers in large organizations, and 2) entrepreneurs will show a greater tendency toward representativeness than will managers in large organizations. Data were obtained via surveys of two populations: 1) entrepreneurs from plastic, electronics, and instrument manufacturing firms, and 2) managers who are responsible for two functional areas (such as marketing or finance) and work for publicly owned organizations with more than 10,000 employees. Results from the logistic regression analysis support both hypotheses and show that there are substantial behavioral differences between managers in large organizations and entrepreneurs. (SFL)

Keywords: Overconfidence, Management decisions, Managers, Heuristics, Individual traits, Manufacturing industries, Large firms, Established firms, Cognition, Psychological traits, Self-efficacy

Suggested Citation

Busenitz, Lowell W. and Barney, Jay B., Differences between Entrepreneurs and Managers in Large Organizations: Biases and Heuristics in Strategic Decision-Making (1997). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship, Available at SSRN: https://ssrn.com/abstract=1504519

Lowell W. Busenitz (Contact Author)

University of Oklahoma - Michael F. Price College of Business ( email )

307 West Brooks
Norman, OK 73019-4004
United States

Jay B. Barney

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

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