Effective Entrepreneurial Choice: The Role of Rationality and Non-Rationality in Three Entrepreneurs Success Stories

Good entrepreneurship is important for economic growth and productivity in any modern economy. The purpose of this dissertation is to research how good entrepreneurial decisions are made. In theory, optimal or rational decision making means choosing the best alternative in response to the problem. However, in reality, people do not act rationally because they often cannot make rational choices. The reason is that people do not have enough brain power, time or resources to process the complex information available to make the rational choice. These problems lead people such as entrepreneurs to make non-rational choices which have three components. The first is the use of procedures and routines. Secondly, non-rational decision makers are automatic pattern seekers and rely on their intuitions. Thirdly, they use their emotions to guide their decision making. These choices are cheap and quick but are prone to errors and biases. In practice, which of these alternative ways of making decisions is used depends on the circumstances of choice. Entrepreneurial decision making takes place under uncertainty and continuous change. Also, the entrepreneur often faces great risks and time pressure. Under these conditions, the entrepreneur goes through a number of stages of decision making from identifying opportunities, committing resources to managing the new venture. The decisions the entrepreneur makes are also influenced by their innate personality traits, background, social pressures and childhood experiences. Cognitive theories suggest that entrepreneurs are special in the way that they make decisions. The autobiographies of three successful entrepreneurs, Victor Kiam, Richard Branson and Anita Roddick, suggest that while they are different from each other in terms of what decision making styles they rely on most, each also employs a mixture of all styles under different circumstances. The conclusion is that entrepreneurs cannot rely on single decision making styles but need to adapt to the nature of the decision. However, it may not be possible to `choose how to choose', as the choice styles are closely related to the entrepreneurs individual personalities