Seeing through the fog of ambiguity: Entrepreneurial judgments under decision settings of complexity

Abstract

A most elemental concern of entrepreneurship pertains to how they make judgments under uncertainty. Empirical evidence has found that most new ventures result in failure, yet entrepreneurs tend to form judgments about their venture's success in highly optimistic terms. As entrepreneurs operate in a context of ambiguity, the concepts of “ambiguity” and “ambiguity aversion” from the decision sciences are drawn upon to develop a theoretical model of entrepreneurial overconfidence. In this proposed theoretical model, the entrepreneur operates under uncertain settings characterized by complexity. Complexity is argued to yield a distinct overconfidence bias in an entrepreneur's judgments of future events. This study concludes with its contributions and implications to entrepreneurial research.