Copyright © 2008 by Nelson, a division of Thomson Canada Limited
ENTREPRENEURSHIPA PROCESS PERSPECTIVE
Robert A. BaronScott A. ShaneA. Rebecca Reuber
Slides Prepared by:Sandra Malach, University of Calgary
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
3 Cognitive Foundations of
Entrepreneurship: Creativity and
Opportunity Recognition
1
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
LEARNING OBJECTIVES1. Explain why cognitive processes provide an
important foundation for understanding creativity and opportunity recognition.
2. Describe working memory, long-term memory, and procedural memory, and explain the roles they play in creativity and opportunity recognition.
3. Explain why we tend to use heuristics and other mental shortcuts, and how these shortcuts can influence entrepreneurs.
4. Define creativity and explain the role that concepts play in it.
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
LEARNING OBJECTIVES
5. Distinguish between analytical, creative, and practical intelligence, and explain how all three are combined in successful intelligence.
6. List several factors that influence creativity, as described by the confluence approach.
7. Explain the role of access to information and utilization of information in opportunity recognition.
8. Describe signal detection theory and distinguish between hits, false alarms, and misses.
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
LEARNING OBJECTIVES
9. Explain the difference between a promotion focus and a prevention focus, and describe the effects these contrasting perspectives may have on entrepreneurs’ efforts to discover valuable opportunities.
10. List several steps you can take as an individual to increase your skill at recognizing potentially valuable opportunities.
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
“When written in Chinese the word crisis is composed of two characters. One represents danger and the other represents opportunity.”
--John F. Kennedy, 1959
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Why are some successful?
IndividualsOpportunities
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Right Person, Right Place, Right Time
Better access to crucial information—information helpful in recognizing opportunities or formulating new ideas
Better able to utilize information—to combine it or interpret in ways that reveal the opportunities overlooked by others
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Three Key Processes
Idea generation Creativity Opportunity recognition
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
IDEA GENERATION, CREATIVITY & OPPORTUNITY RECOGNITION
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
A Cognitive Perspective
Human cognition—the mental processes through which we
Acquire information Enter it into storage Transform it Use it to accomplish a wide range
of tasks
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Ideas
Occur when individuals use existing knowledge they have gained (and retained) from their experience to generate something new—thoughts they did not have before.
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
The Raw Materials
The raw materials for new ideas and for recognizing opportunities are present in the cognitive systems of specific persons as a result of their life experience.
Unique experience Knowledge Idea generation
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Memory
Working memory—holds limited amount of information for brief periods
Long-term memory—retains vast amounts of information for long periods
Procedural memory—automatic knowledge gained through practice
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Mental Frameworks
Mental scaffolds help us to understand new information and to integrate it (often in original ways)—with information we already possess
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Types of Frameworks
Schemas—cognitive frameworks representing our knowledge and assumptions about specific aspects of the world
Prototypes—abstract, idealized mental representations that capture the essence of a category of objects
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Mental Shortcuts
Heuristics—simple rules for making complex decisions or drawing inferences in a rapid and seemingly effortless manner
Availability heuristic—the more easily we bring information to mind, the more importance we assign to it
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Thinking “Tilts”
Optimistic bias— Expect things to turn out well
Confirmation bias— Notice, process, and remember
information that confirms current beliefs
Illusion of control— Assume that our fate is in our control
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
DANGER! PITFALL AHEAD!
Don’t become trapped in bad decisions Sunk Costs Escalation of Commitment
New ventures can’t afford to absorb mounting losses of money or resources.
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Creativity
Items or ideas produced are both Novel (original, unexpected) and Appropriate or useful
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Concepts Building blocks of creativity Internal mental structures
developed to organize information
Categories for objects or events that are somehow similar to each other in certain respects
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
EMERGENCE OF CREATIVITY
Creativity emerges when basic mental processes allow for the expansion or transformation of concepts so that something new appears.
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
CONCEPT TRANSFORMATION
Concepts can be stretched in several different ways Combination Expansion Analogy
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
“An old thing becomes new if you detach it from what usually surrounds it.”
--Robert Bresson
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Human Intelligence
Individuals’ abilities to Understand complex ideas Adapt effectively to the world Learn from experience Engage in various forms of
reasoning Overcome a wide range of obstacles
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Intelligence Analytic intelligence
Critical and analytical thinking Creative intelligence
Ability to formulate new ideas & gain insight Practical intelligence
Street smart Social intelligence
Interpersonal relations
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Successful Intelligence
PracticalIntelligence
CreativeIntelligence
AnalyticIntelligence
SuccessSuccessfulIntelligence
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Confluence Approach
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Broad, Rich Knowledge Base
Having varied work experience
Having lived in many different places
Having a broad social network
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Opportunity Recognition
Some people are more likely to recognize opportunities because They have better access to certain
kinds of information They are able to utilize the
information once they have it
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
ACCESS TO INFORMATION
Varied work & life experience Type of work experience
International Social network
Family, friends, colleagues & neighbours Opportunity search
Schema assist in recognizing opportunities
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
OPPORTUNITY RECOGNITION
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Signal Detection Theory
HITOpportunity present
and recognized
FALSE ALARMOpportunity not
present, but judged to be present
MISSOpportunity is
present, but not judged to be present
CORRECT REJECTION
Opportunity not present and judged to
be absent
Yes No
Actual Presence of Opportunity
Yes
No
Judgment About Presence
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Regulatory Focus Theory
Perspectives in regulating behaviour to achieve desired results Promotion focus—attain positive
outcomes Prevention focus—avoid negative
outcomes Successful entrepreneurs adopt a
mixture of these two perspectives
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
Increasing Opportunity Recognition
Build a broad, rich knowledge base Organize your knowledge Increase your access to information Create connections between the
knowledge you have Build your practical intelligence Temper eagerness for hits with
wariness of false alarms
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
THOUGHT TO PONDER As in many other spheres of life, victory
does not necessarily go to the strongest or the swiftest, but rather to those whose judgment is most closely aligned with reality.
Top Related