Making rational use of ‘irrationality’? Exploring the role of need for cognitive closure in nascent entrepreneurial activity

Abstract

A fundamental question of interest to both researchers and practitioners alike focuses on why some individuals discover and elect to exploit opportunities to create future goods and services while others do not. Past studies have focused on the role knowledge-based resources play in the early stages of new venture creation, yet few have considered the role cognitive motivations play in impacting the processing and use of information during this process. In this study, we theorize that a cognitive need for closure (NfC), or possessing a desire for an answer on some topic as opposed to enduring confusion and ambiguity, is an important aspect of the entrepreneurial judgment formation process. We hypothesize that the need for closure will be positively related to nascent entrepreneurial activity because it provides a cognitive mechanism for dealing with the opened-ended nature of opportunity pursuit. Data drawn from the Panel Study of Entrepreneurial Dynamics (PSED) support this hypothesis. More specifically, results suggest that a high NfC is likely to foster the exploitation of discovered opportunity irrespective of their age, gender, position in the family birth order, or unique personal knowledge base. Implications for future research and practice are discussed.

Keywords:

• nascent activity
• new venture creation
• closure
• cognition