How does the use of heuristics by entrepreneurs in their long-term strategic decision-making influence firm performance?
This research proposal suggests a positive relationship between the use of heuristics in decision-making and entrepreneurial firm performance. Consequently, the findings of this study could have important implications for the academic area concerned with heuristics. These findings could also provide meaningful implications for the success and sustainability of entrepreneurial firms that are currently facing substantial challenges. Moreover, this study provides valuable information for entrepreneurial and strategic decision-making, and, given the economic importance of entrepreneurial activity, strongly benefits society as a whole.
To answer the research question at hand, this paper is structured as follows. Firstly, the literature review will incorporate existing research on strategic decision-making, heuristics, and the research gap, after which the proposed hypothesis will be derived. Secondly, the methodology and research design will be outlined. This section is followed by a description of how to execute the data analysis of the research model. Afterwards, this paper outlines potential findings and contributions in terms of theoretical and practical implications. Moreover, possible limitations will be examined, and an outlook for future research will be provided. Lastly, a brief conclusion will be given.
Table of Contents
1. Introduction
2. Literature Review
2.1. Strategic decision-making in times of uncertainty
2.2. The role of heuristics in the decision-making process
2.3. Assessment of previous literature
2.4. Hypothesis development: the value of heuristics
3. Methodology and Research Design
3.1. Sample Design and Data Collection
3.2. Variables and Measurement
3.2.1. Independent Variable: Heuristics
3.2.2. Dependent Variable: Firm performance
3.2.3. Control Variables
3.3. Reliability Constructs
3.4. Data Analysis
4. Potential Results
5. Discussion
5.1. Theoretical Implications
5.2. Practical Implications
5.3. Limitations and Future Research
6. Conclusion
7. References
8. Appendix
8.1. Appendix A: Business cases
Research Objectives and Themes
This thesis investigates how entrepreneurs utilize heuristics in their long-term strategic decision-making and examines the resulting impact on firm performance within an increasingly uncertain global business environment.
- The influence of cognitive heuristics on strategic decision-making processes.
- Resolution of the "great rationality debate" regarding heuristic application.
- Quantitative assessment of the relationship between heuristic usage and firm performance.
- Challenges of decision-making under uncertainty and time constraints.
- The role of heuristics as tools for cognitive simplification and flexibility.
Excerpt from the Book
2.1. Strategic decision-making in times of uncertainty
Good strategic decisions are the basis for the success of every enterprise, and strategy is defined as the outcome of a firm’s decision-making in relation to its external and internal environment (Krabuanrat & Phelps, 1998). Consequently, a firm’s long-term strategic decision-making process is strongly influenced by how well its organisational processes deal with the external environment’s ambiguity (Bingham & Eisenhardt, 2011). However, strategic decision-making is not an easy practice in real life, as strategic decisions generally lack structure and are characterized by complexity and open-endedness (Mintzberg et al., 1976). In addition to the general complexity of strategy decisions, Krabuanrat and Phelps (1998) argue that because of the increasing amount of information, increasing pace of change, increasing variability and options of decisions, and the need for quick decisions in order to adapt to the firm’s environment, it is becoming increasingly difficult to derive appropriate strategic decisions. Enterprises who want to stay in a competitive position need to adapt fast and proactively influence their external and internal environment (Krabuanrat & Phelps, 1998).
Summary of Chapters
1. Introduction: Introduces the research problem of making strategic decisions under uncertainty and defines the central research question regarding the impact of heuristics on firm performance.
2. Literature Review: Provides an overview of strategic decision-making, the definitions and types of heuristics, and assesses existing research gaps to derive the study's hypothesis.
3. Methodology and Research Design: Describes the quantitative research design, sampling strategies using the European Startup Network, measurement of variables, and the regression model used for analysis.
4. Potential Results: Outlines the expected outcomes of the analysis and explains how they relate to the hypothesis and the broader 'rationality debate'.
5. Discussion: Discusses the theoretical and practical implications of the findings and addresses the study's limitations alongside suggestions for future research.
6. Conclusion: Synthesizes the main findings and reiterates the significance of heuristics as a strategic tool for entrepreneurs in complex environments.
7. References: Lists all academic sources and literature cited throughout the research proposal.
8. Appendix: Presents practical business cases used to assess heuristic application in the study.
Keywords
Heuristics, Strategic Decision-Making, Entrepreneurship, Firm Performance, Uncertainty, Bounded Rationality, Quantitative Research, Cognitive Strategies, Management, Business Strategy, Innovation, Strategic Flexibility, Decision-Making Process
Frequently Asked Questions
What is the core subject of this thesis?
The thesis explores how entrepreneurs apply cognitive heuristics during strategic decision-making processes, particularly in highly uncertain business environments.
What are the primary themes discussed?
Key themes include the impact of uncertainty, the "great rationality debate" in management, the role of heuristics in simplifying complex decisions, and their measurable effects on firm performance.
What is the central research question?
The study asks: How does the use of heuristics by entrepreneurs in their long-term strategic decision-making influence firm performance?
Which scientific method is applied?
The author employs a quantitative research design using a self-administered online questionnaire and linear regression modeling to test the relationship between bundled heuristics and revenue growth.
What does the main body cover?
The main body moves from a comprehensive literature review to the research methodology, followed by a discussion of potential results, theoretical/practical implications, and study limitations.
How would you characterize the keywords?
The keywords emphasize the intersection of behavioral economics and strategic management, focusing on cognitive tools like heuristics and their performance-based outcomes in startups.
How are heuristics measured in this study?
Heuristics are measured by bundling four types (representativeness, availability, anchoring, and adjustment) and coding them based on a five-point Likert scale to determine the extent of their use.
Why is "firm performance" difficult to measure in this context?
As the study targets entrepreneurial ventures, traditional financial ratios like ROA are often inconsistent or unavailable; therefore, the author uses three-year average, industry-adjusted revenue growth as a proxy.
What is the role of the Appendix?
The Appendix contains specific business cases designed to illustrate the heuristic decision-making process, which are adapted for the study's survey instrument.
- Quote paper
- Felix Pütz (Author), 2021, Embracing Uncertainty. How Heuristics Can Assist Entrepreneurs in their Long-Term Strategic Decision-Making to Enhance Firm Performance, Munich, GRIN Verlag, https://www.grin.com/document/1119132
