Decision making behavior in smaller entrepreneurial and larger professionally managed firms

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Abstract

The main findings in this study are that: • Entrepreneurs from smaller firms are less comprehensive in their decision behavior than professional managers from larger firms, with comprehensiveness defined as the degree to which an individual follows a formal rational decision process; • As decision comprehensiveness declines, so too does organizational performance, both among entrepreneurs and professional managers.

The present study was based on the responses of 15 entrepreneurs from smaller firms averaging 25 employees and 13 CEOs and other top level corporate executives from larger, more professionally managed firms averaging 740 employees. The firms were randomly selected from a list of mid-Atlantic electronic manufacturing firms. Field interviews and questionnaires were employed, as well as a decision scenario involving a series of questions to which the entrepreneur or professional manager responded.

After reviewing the literature on entrepreneurship, the researchers noted that most of it focused on developing profiles of entrepreneurs—for example, that they were high achievers, impatient and made decisions quickly. However, little—if any—research has focused on the behavior of entrepreneurs, particularly when compared to that of professional managers. Given this gap in the research, a field study was designed to compare the decision behavior of entrepreneurs and professional managers. It was expected that entrepreneurs would be less comprehensive than professional managers, but given previous research on comprehensiveness, it was difficult to predict the consequences of this less comprehensive model for performance.

The researchers note in the discussion and conclusion that the results of the study have major implications for entrepreneurs and professional managers. Granted that decision comprehensiveness should be emphasized, they question the ability of entrepreneurs to change their decision behavior. It is argued that many of the drawbacks of comprehensiveness can be overcome by more sophisticated planning techniques and information processing systems. The paper concludes by stressing the need for research on techniques and ways to train entrepreneurs and managers to be more comprehensive.

In summary, the present study has produced some important preliminary findings. It confirmed in larger scale studies, they could have major implications for the manner in which entrepreneurs and professional managers are trained and developed.

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