Heuristics and cognitive biases in entrepreneurs: a review of the research

Abstract

The aim of this research is to highlight the main characteristics of empirical studies into the heuristics and cognitive biases of entrepreneurs, and to determine what could and should now be done. To review past research, we used ProQuest and the 31 databases to which it gave us access. Only 25 empirical papers were identified, mostly published since 2006. Among other things, the findings from these papers show that overconfidence and optimism, two biases often confused, are those that have received by far the most attention from researchers. Factors explaining or explained by them were highlighted. The only other biases to have received attention, albeit limited, were the law of small numbers, the illusion of control, the planning fallacy, escalation of commitment, the status quo bias, and the hindsight bias. Research on heuristics was rare, but the findings suggest that they tend to vary according to the context (stage in the entrepreneurial process, activity sector, country, etc.). As for the methodologies, most were structured around a synchronic design. A broad range of samples and data collection techniques were used, but analysis was mainly statistical. The findings suggest that the focus in future should be on which heuristics and biases are most used or present in a given context (and why), how they are formed and configured, and how to deal effectively with them. More in-depth studies would also be useful.

L'objectif de la présente recherche est de mettre en évidence les principales caractéristiques des travaux empiriques sur les heuristiques et biais cognitifs des entrepreneurs et, conséquemment, de déterminer ce qui pourrait et devrait maintenant être fait. Pour tracer un tel bilan, nous avons eu recours à ProQuest et aux 31 bases de données auxquelles il nous a donné accès. Seulement 25 travaux empiriques ont été repérés, la majorité d'entre eux publiés depuis 2006. Les résultats montrent notamment que les chercheurs ont surtout concentré leur attention sur les biais d'excès de confiance et d'optimisme, deux biais souvent confondus. Les seuls autres biais à avoir fait l'objet d'une attention, bien que très limitée, sont la loi des petits nombres, l'illusion de contrôle, le biais de planification, l'escalade dans l'engagement, le biais du statu quo et le biais de rétrospective. Les rares travaux empiriques portant sur les heuristiques adoptées par les entrepreneurs suggèrent qu'ils auraient tendance à varier selon le contexte (phase du processus entrepreneurial, secteur d'activité, pays, etc.). Quant aux cadres méthodologiques, ils reposent le plus souvent sur un devis synchronique, mais les échantillons et les techniques de collecte de données sont d'une grande variété; l'analyse est généralement statistique. Ces résultats laissent penser que la recherche devrait s'orienter vers quelles heuristiques et quels biais sont le plus souvent utilisés ou présents dans tel contexte (et pourquoi), comment ils se forment et se transforment et comment composer avec eux. Plus d'études en profondeur sont requises.

Keywords:

• heuristics
• biases
• entrepreneur
• systematic review
• decision-making

Mots clés:

• heuristiques
• biais
• entrepreneur
• revue systématique
• prise de décision

Acknowledgments

I am very grateful to Christine Gardner for translating the French version of this text. I also want to thank both reviewers for their very helpful comments.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. I am extremely grateful to Jean-François Tremblay, a professor at UQAM, for his help with this aspect.

2. In view of this observation, and to avoid duplication, as of now we will take the view that there have been only 25 studies (not 26) of the heuristics and cognitive biases of entrepreneurs. The paper by Busenitz (1999) will not be considered for this analysis.

3. Other biases were also treated mainly as independent variables, including the law of small numbers, the illusion of control, and the planning fallacy. Opinions concerning the impact of the law of small numbers on the perception of risk were not unanimous. The findings of Simon, Houghton, and Aquino (2000) suggested that it reduces the perception of risk, whereas Keh, Foo, and Lim (2002) did not find a link between these two elements. Researchers also agreed that the illusion of control appeared to reduce the perception of risk, whereas the planning fallacy did not.

Additional information

Notes on contributors

Pierre Cossette

Pierre Cossette, although retired, is still an associate professor at ESG UQAM. His interests include issues relating to the publication process and research integrity.