A NEW MEASURE OF ENTREPRENEURIAL DECISION-MAKING STYLE

Abstract

ABSTRACT This study examines the development of new measure: The Entrepreneurial Decision-Making Inventory to investigate previously neglected area of research, namely entrepreneurial decision-making style. Questionnaires were distributed to 578 Victorian New Enterprise Incentive Scheme graduates resulting in 255 useable responses. Confirmatory factor analysis using AMOS 4.0 (Arbuckle and Wothke, 1999) indicated three distinct dimensions in the instrument: Convergent, Divergent, and Inventive decision-making styles. Semi-structured interviews were conducted to gather qualitative data which supported the confirmatory factor analysis and confirmed the multidimensional nature of the construct. The new instrument should assist researchers and practitioners to further understanding of the role of decision-making in small business development and growth. INTRODUCTION The decision-making process underlies business activity and has fundamental importance for problem-solving, the development of business plans, and goal-directed behavior. Mintzberg, Rasinghani, and Thearet (1976:246) defined decision process as a set of actions and dynamic factors that begins with the identification of stimulus for action and ends with specific commitment to action. The importance of decision-making has been well recognized by researchers: If one process in particular characterizes the manager's or entrepreneur's job it is that of making decisions or solving problems (Mosley, O'Brien and Pietri, 1991:5). Given the importance of decision-making in business, the current study investigates entrepreneurial decision-making based on the assumption that decision-making plays central role in small business performance. While considerable research has focused on decision-making in organizations (eg., Buttner and Gryskiewicz, 1993; Hoy and Hellreigel, 1982; Nutt, 1989), the extant literature often views small businesses as merely smaller versions of large organizations. However, the use of various business and economic principles that assist in explaining corporate manoeuvres may be of little assistance in understanding the successes and failures of small business. While the conditions that influence the decision to establish business have been given adequate attention in the entrepreneurship literature, Amit, Gosten and Muller (1990:1233) commented that there has been surprisingly little theoretical, quantitative and rigorous literature [which] focuses on decisions of entrepreneurs to develop their ventures. In meta-analysis of studies which examined small business failure, Berryman (1994) recommended that further research should be conducted to observe the processes and decision-making within small firms. The current study examines decision-making as process in order to address the deficiencies identified in the literature, and to make contribution to the development of theories of small business management. There are number of difficulties in attempting to discover best prescriptive procedures for decision-making. For example, human decision-making processes cannot be repeated to test the effects of different approaches (Lipshitz, 1995), and different paradigms cannot be compared in terms of the goodness of their results (Watson, 1992). Several approaches to decision-making are evident in the literature. The 'scientific method', where prescriptive frameworks featuring stages or steps in the decision-making process has been described in detail by many researchers (e.g., Bantel and Jackson, 1989; Dewey, 1933; Robbins, 1994). The scientific method provides logical foundation for decision-making, but fails to ensure good outcomes (Nutt, 1989). Further, in study of 150 people including fire chiefs, tank platoon leaders, and design engineers making decisions under time pressure, Klein (1989:51) concluded that ... relatively few decisions are made using analytical processes, such as generating variety of options and contrasting their strengths and weaknesses. …