Uncertainty, Learning and Error Elimination: Taiwanese Entrepreneurs in Mainland China

Abstract

ABSTRACT This article presents a dynamic model of the entrepreneurial process based on Weber's and Schutz's theories of human agency. It argues that human agents accumulate experience as they make sense out of their everyday business life. Experiences from everyday life are assembled into a stock of knowledge that can be used to interpret incoming events as well as problem solving. If incoming events are repeated and familiar, the entrepreneur can utilize the rule of thumb to solve problems without difficulties. If incoming events are novel, the entrepreneur's interpretative framework will fail to give an adequate account of the new situation. Encountering this situation, some agents may continue to use old methods to solve new problems. This response does not catch up with market's expectation and is doomed to fail. Most entrepreneurs will devise new methods to solve new problems by trial and error, and experimentation. They will cope with their knowledge deficiency by creating temporary expectations. This knowledge surrogate will be later tested in the market. If a new strategy works, then it will be adopted and further routinized as a rule of thumb. This theoretical framework is applied to Taiwanese entrepreneurs investing in mainland China. Two case studies in the food and catering industries are conducted. This article concludes that the theory of entrepreneurial process in terms of learning, experimentation, and revision of plans provides us with useful understanding of survival, growth, expansion of an enterprise.