The role of emotions in entrepreneurial actions and imagination: A subjectivist perspective

1. The role of emotions in entrepreneurial actions and imagination: A subjectivist perspective Sanjay Goel University of Minnesota Duluth Ranjan Karri University of Illinois Springfield ICSB 2007

2. Research Question • What do emotions have to do with entrepreneurial imagination and entrepreneurial action? ICSB 2007

3. Key premises • Emotions are the basis for action (e.g.Barbalet, 1998). • Entrepreneurial actions are based on expectations of the future, i.e. imagining future possibilities rather than extrapolating the past (e.g. Shackle, 1972). • Entrepreneurs create opportunities with an active interaction with other actors (potential stakeholders). ICSB 2007

4. Domain of entrepreneurship • Characterized by fundamental (Knightian) uncertainty. • Entrepreneurial vision is evolving in nature. • Imagination and action are fundamental to opportunity creation and exploitation. • Entrepreneurial imagination and action helps build entrepreneurial resources in shaping the entrepreneur’s vision. ICSB 2007

5. Subjectivist approach • Entrepreneurial actions (or decisions) are best understood as “the focal, creative, psychic event where knowledge, thought, feeling and imagination are fused into action” (Shackle, 1962, p.105). • Entrepreneurial action theory from a subjectivist lens as opposed to rational choice models. ICSB 2007

6. Conceptual origins • Subjectivity of entrepreneurial action in dealing with fundamental uncertainty and the unpredictability of the future. (In contrast to rational choice models that deal with estimating probabilities and forecasting) • “Unknowledge” about the future. Thus future can only be imagined as rival courses of action, and expectations comprise ‘hope and imagination’ (Shackle, 1972). • Imperfect and uncertain applicability of previously learned scripts of action or established procedures to deal with future contingencies. ICSB 2007

7. Emotions - Overview • Emotions are specific action tendencies. • e.g. Anger – urge to attack; Fear – urge to escape etc. • Whether the action tendencies result in actions depends on a combination of intents, control, coping, cultural norms as well as the nature of particular contexts (e.g. Frederickson, 1998). ICSB 2007

8. Emotions - categories • Two categories: Negative and Positive emotions. • Negative emotions are associated with specific action tendencies (mainly physical). Narrow a course of action to cope with the threat perceived from a negative emotion. • Positive emotions are associated with nonspecific action tendencies (primarily cognitive). In contrast to negative emotions, positive emotions broaden the thought-action repertoire. ICSB 2007

9. Emotions – Relevant Types • When action is inhibited under conditions of rationality (due to uncertainty), positive emotions such as confidence and optimism provide a feeling of certainty that is necessary for action to occur. • On the contrary negative emotions such as fear and pessimism increase anxiety towards the uncertain future and thus inhibit action. ICSB 2007

10. Emotions - Overview • Positive emotions broaden the scope of action. • Negative emotions narrow the scope of action. • Positive emotions that are concerned with future (anticipatory) are confidence and optimism. • Other types of positive emotions – joy, interest, contentment and love (e.g. Fredrickson, 1998). ICSB 2007

11. Emotions and Entrepreneurship • Emotions as inputs to entrepreneurial imagination. • Shaping the entrepreneurial aspiration and vision • Emotions as inputs to entrepreneurial action. • Creation and exploitation of opportunities. ICSB 2007

12. Emotions and Entrepreneurship (Contd..) • Expectations represent the underlying perception of uncertainty (product of the probability of the event and the payoff associated with the event). • Given that probability distribution is unknown, emotions play a role in forming expectations. • Expectations are associated with “anticipatory emotions” (Kemper, 1978) such as confidence, optimism and pessimism. • Optimism and pessimism are anticipatory emotions when considering the past. • Confidence is the anticipatory emotion when considering the present. ICSB 2007

13. Emotion of Optimism • It is an emotion when considering the past in anticipating the future (e.g. Kemper, 1978). • Previous knowledge is the basis for forming expectations about the future in emotional terms. • Optimism forms the basis for entrepreneurial aspirations and imagination. • Optimism assists in action via its effect on imagination (and therefore opportunity creation). ICSB 2007

14. Optimism and entrepreneurial imagination • It reframes the past in terms that protect (in case of negative historic events) and enhances (in case of positive historic events) the capacity for entrepreneurial imagination. • It increases the domain of positive expectations from status quo in the latitude of imagination. • It increases the scale and scope of entrepreneurial imagination. • Pessimism has the opposite effects on entrepreneurial imagination. ICSB 2007

15. Emotion of Confidence • Confidence is a “projected assured expectation” that is brought back and felt in the present to get a sense of certainty about the future (Barbalet, 1998). • When facing fundamental uncertainty, confidence allows projecting one’s imagination about the future. • Thus giving a preparedness to act by emotionally reducing uncertainty. ICSB 2007

16. Confidence and Entrepreneurial Action • It provides the affective basis for action that substitutes for analytical rigor in a Weickian sense, and is cognitively parsimonious in an effectual sense. • It makes action possible where inaction would be institutionally accepted and even rewarded by inputting entrepreneurial expertise to substitute for real or imagined information gaps. • It reduces the cost of entrepreneurial action, and increases the opportunity cost of inaction, which forms the basis for persistence. • It increases the scale and scope of entrepreneurial action. ICSB 2007

17. Implications: Broaden and build • Broaden scope of entrepreneurial thought-action or imagination. • Enlarges the cognitive context. • Broadens the range of possibilities. • Enhances creative thinking. • Build resources ICSB 2007

18. Other Implications • Building networks • Shaping the future through pre-commitments. • Contractual linkages at the micro level • Serial and global entrepreneurship at the macro level • Structure and content of entrepreneurial vision • Innovation and risk-taking. ICSB 2007