Blinded by passion: how entrepreneurial passion biases towards extreme risk-taking

Abstract

Entrepreneurial emotions often predict entrepreneurial behavior, thereby determining how a venture is lead. The resulting behavior can influence a myriad of stakeholders. Hence, scholars have highlighted the importance of researching consequences of entrepreneurial passion. Drawing on identity theory, we develop a research model investigating the relationship between harmonious and obsessive entrepreneurial passion and extreme risk propensity, moderated by illusion of control. We investigate the relationship between passion and extreme risk propensity because risk is strongly attributed to entrepreneurship yet can be harmful. In addition, we incorporate illusion in the model, a cognitive bias explaining how entrepreneurs make decisions in risky environments. To examine our research questions, we rely on a sample of 446 entrepreneurs. We find both harmonious and obsessive entrepreneurial passion positively relate to extreme risk propensity. The interaction effect with illusion of control is negative significant for harmonious entrepreneurial passion and positive for the obsessive manifestation. We contribute to research by advancing theory on outcomes of harmonious and obsessive entrepreneurial passion. We also provide evidence to identity theory showing that identities with lower salience are not necessarily reflected in behavior.