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Footnotes
1Fear of failure can also be associated with motivating action (Cacciotti et al. 2016).
© The Author(s) 2018
Dean A. Shepherd and Holger PatzeltEntrepreneurial Cognitionhttps://doi.org/10.1007/978-3-319-71782-1_4
4. Attention and Entrepreneurial Cognition
Dean A. Shepherd1 and Holger Patzelt2
(1)University of Notre Dame, South Bend, IN, USA
(2)Technical University Munich, München, Bayern, Germany
While there are numerous possible reasons explaining why managers of incumbent firms have trouble recognizing and responding to strategically important discontinuous change (e.g., economic incentives (Christensen 1997), rigid routines (Levinthal and March 1993), and/or poor competitive analysis systems (Zahra and Chaples 1993; McMullen et al. 2009)), scholars have recently begun focusing on the role managerial attention plays in this context (Eggers and Kaplan 2009; Kaplan 2008; Maula et al. 2013). Attention refers to a non-specific and limited cognitive resource that is required for mental activities and differs across individuals and tasks (Kahneman 1973). What environmental stimuli direct individuals’ attention toward or away from entrepreneurial tasks ? How are knowledge and attention related? How do entrepreneurial individuals allocate attention across different entrepreneurial tasks , such as opportunity exploitation or poorly performing entrepreneurial projects, and how do cognitive processes impact entrepreneurs’ attention allocation? This chapter tries to answer these questions.
Transient Attention and Opportunity Identification
How managers allocate attention guides their engagement with the firm’s external context to identify changes that represent entrepreneurial opportunities. These processes can be more top down or more bottom up. Thus far, the majority of research has utilized top-down processes to explore the association between the allocation of attention (Cho and Hambrick 2006; Ocasio 1997) and the ability to recognize and make sense of new opportunities (Eisenhardt and Schoonhoven 1990; Tripsas and Gavetti 2000). Researchers have given these top-down processes different names, but each of these different conceptualizations generally outlines a set of knowledge structures that managers draw on to engage with their environment to recognize, make sense of, and respond to signals from the environment (Bogner and Barr 2000)—namely, signals that indicate potential opportunities. A knowledge structure is “a kind of mental template that individuals impose on an information environment to give it form and meaning” (Walsh 1995: 281). Top managers utilize knowledge structures as a foundation from which they can build subjective representations of the environment that can be used to shape decisions (Dutton and Jackson 1987; Starbuck and Milliken 1988).
Knowledge structures focus managerial attention on potentially relevant features of their organization’s environment (Kaplan and Tripsas 2008). Researchers have shown that such focused attention can trigger strategic persistence and improved performance when industries are changing at a slow pace (Nadkarni and Narayanan 2007). For example, consistent with these top-down explanations, Polaroid’s failure to profit from the commitment it made early to digital imaging technology stems from its top managers’ inability to utilize the most appropriate structure of knowledge for changes that had occurred in the organizational environment. Consequently, Polaroid ultimately ended up with “quite limited technical strength in this emerging market” (Tripsas and Gavetti 2000: 1157).
More recent work investigating bottom -up attention-allocation processes—where prominent features of the environment grab people’s attention whether or not they are anticipated (Ocasio 2011)—provides an alternative or possibly complementary mode to top-down processes. Rindova et al. (2010) showed that sequences of action with the gestalt characteristics of grouping, simplicity, and motif were connected to better evaluations received from potential investors for ventures trying to adjust to a radical change. They contended that rather than knowledge structures concentration attention on situational features that are projected to be important, managers use gestalt properties to look for and understand patterns within situations characterized by discontinuous change (Whitson and Galinsky 2008). These managers make sense of events as they occur (Ariely and Carmon 2000; Ariely and Zauberman 2000). In a similar vein, my (Dean) colleagues and I (Shepherd et al. 2007) investigated how a big-picture depiction of the environment (a gist) activates a bottom-up process. In this process striking environmental changes that would have gone unnoticed in top-down processing capture top managers’ attention. Research like this provides an alternative explanation to top-down processes for clarifying how managers discern the unanticipated while questing the comparative performance of top-down versus bottom-up processes in how individuals notice , make sense of, and use information to form opportunity beliefs.
High Levels of Top-Down Attention Allocation and Recognizing Environmental Change
Individuals learn core concepts from their prior experiences , which then become part of their knowledge structures (Nadkarni and Narayanan 2007; Walsh 1995). Core concepts generate particular environmental expectations that then guide how managers allocate attention in a top-down manner. Top-down attention allocation allows managers to attain predictability, efficiency, and reliability by focusing attention on environmental features that they believe to yield possible opportunities. In addition, these managers do attend less to features that are not believed to be important (Nadkarni and Barr 2008). Incremental environmental changes refer to changes in consumer preferences, design elements, competitive dynamics, and institutions that are in line with the firm’s present trajectory and require few modifications in how product components are combined and connected into a “big picture” (Henderson and Clark 1990). Since incremental environmental chan
ges generally take place where and when they are anticipated to do so (Sirmon et al. 2007), individuals are likely to notice such changes when they allocate transient attention to them by top-down processing. For these managers, the complexity of their knowledge structures additionally improves their ability to detect incremental change as they draw on knowledge of their firm’s current situation to allocate attention to environmental features they expect to be important.
While high top-down attention allocation enables managers to detect incremental change, it also prevents them from noticing discontinuous change (cf., Rosenkopf and Nerkar 2001; Tripsas and Gavetti 2000). Discontinuous environmental changes entail new formations of consumer preferences, design components, and/or competitive dynamics that do not match the firm’s present trajectory and could thus potentially disturb the present situation and initiate a new course of action (compare Gatignon et al. 2002).
Work on perception in the psychology literature has shown that when individuals put great emphasis on their knowledge structures when they allocate their attention, they are less likely to detect unanticipated stimuli. This is true even when stimuli are very striking. In numerous experiments , for instance, scholars have shown that individuals assigned a particular task often do not perceive information not relevant to that specific task regardless of how conspicuous the information is (e.g., Neisser 1976). Yet, when individuals are told that the task at hand is only slightly important, they will attend to the prominent stimulus, while individuals who are told the task is highly important are less likely to do so. Apparently, when individuals believe a task is only slightly important, they are more likely to ease up on top-down processing and engage in more bottom-up processing, which frees their transient attention to capture signals of unanticipated environmental change. On the other hand, when individuals believe a task is highly important, they are more likely to direct their attention to where change is anticipated, thereby tying up transient attention such that they do not perceive signals of unanticipated environmental change.
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