The impact of judgment and framing in entrepreneurs' decision making

UNCG Author/Contributor (non-UNCG co-authors, if there are any, appear on document)
Dianne H.B. Welsh, Distinguished Professor of Entrepreneurship (Creator)
The University of North Carolina at Greensboro (UNCG )
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Abstract: This study investigates entrepreneurs’ judgment and decision-making when faced with decision anomalies in the context of mental accounting and the framing effect. Both contexts can pave the way for the evaluation of entrepreneurs’ judgment and decisions in terms of anomalous situations and comparison with nonentrepreneurial judgment and decision-making. This study aims to identify the behavior of entrepreneurs in two distinct studies. Study 1 shows that mental accounting bias has little impact on entrepreneurs' judgment. Specifically, the effects of cognitive bias, task framing, endowment, and the integration of information did not affect entrepreneurs' decision-making. However, cognitive biases of sunk cost and extra-cost influenced entrepreneurs’ judgments. In Study 2, data on the framing effect comparing inexperienced and experienced entrepreneurs' decisions using an online survey reveal that experienced entrepreneurs’ judgments were less affected by the framing effect while inexperienced entrepreneurs were more biased toward loss aversion.

Additional Information

Journal of Small Business & Entrepreneurship
Language: English
Date: 2019
Decision anomalies, framing effect, mental accounting, decision-making, uncertainty, cognitive bias, entrepreneurs

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