Page 121 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

110 Thomas S. Lyons, Gregg A. Lichtenstein, and Nailya Kutzhanova

manage, and act upon available information. In this regard, the cognitive
approach has advanced research beyond behavior analysis by attempting to
explain the causes of entrepreneurial behavior. For example, Shane and
Venkataraman (2000) assert that there are two categories of factors influ-
encing the probability that particular people will discover business oppor-
tunities: (1) the possession of the information necessary to identify an op-
portunity and (2) the cognitive properties required to utilize it.
Studies in the field of human cognition have found a limitation on the
information-processing capability that people have and use and that entre-
preneurs face a shortage of information on possible market outcomes on a
regular basis. The cognitive school of thought suggests that entrepreneurs
have mental visions, scripts, and maps of desirable outcomes that guide
them through the process. People making a decision use various kinds of
mental maps or scripts, using scripts, schema, and heuristics based on pre-
vious experience to deal with uncertainty.
Siegel, Siegel, and MacMillan (1993) explored characteristics separating
high- and low-growth companies. They found that substantial industry ex-
perience is an important characteristic of high-growth companies. High-
growth companies also focused more than low-growth companies on at-
tempts to generate higher revenue with a single product; as a result, the
high-growth companies demonstrated a higher level of expertise in market
and product diversification. High-growth companies operate with fewer
managerial resources and are more efficient and effective. They also develop
close contacts with customers. The authors argue that these capabilities can
serve as objective, measurable criteria and can be used in predicting busi-
ness performance when studied in a more quantifiable way.
Several studies provide insights into the decisionmaking processes of en-
trepreneurs. For example, Minniti and Bygrave (2001) maintain that entre-
preneurs make decisions based on two different types of knowledge. One is
the specific knowledge of the market in which they operate. This type of
knowledge can be described as technical expertise regarding products and a
specific market.
Another type of knowledge is a more general expertise on “how to be en-
trepreneurial,” which is acquired by doing or observing. The entrepreneur-
ial process is described as a learning process where entrepreneurs filter the
signals from competing hypotheses, and, as a result of learning in action,
receive support from positive outcomes. Negative outcomes teach entrepre-
neurs to avoid other types of actions. The positive actions eventually com-
pose the knowledge base upon which entrepreneurs make decisions (Min-
niti and Bygrave 2001).
Mitchell and Chesteen (1995) suggest that entrepreneurial expertise is
presented in the form of an “expert script,” and this script can be used to
improve entrepreneurial expertise. The expert script is advanced and struc-