Entrepreneurial Cognition

by Dean A Shepherd

  Frustration happens when “an instigated goal-response (or predicted behavioral sequence) is interrupted or interdicted” (Fox and Spector 1999: 916). Stemming from the basic emotion of anger (Ekman 1992), frustration frequently causes counter-productive behaviors (Fox and Spector 1999) and poor performance (McColl-Kennedy and Andersson 2002). As a result, managers need to neutralize employee frustration as soon as they notice it (Humphrey 2002). When managers themselves indicate their frustration, they signal that the group is not meeting performance standards for the current project stage. Thus, employees are likely to feel that the project is more uncertain, so only individuals with an exceedingly high propensity for risk taking will see the project as feasible and become involved. Furthermore, if the team does not meet previously set goals for the project stage at hand, these goals may be diminished, which offsets the motivational influence of high goals that trigger entrepreneurial action (Baum et al. 2001). In addition, reducing goals also lessens employees’ willingness to put effort into the project (Shane et al. 2003).

  Further, worry is a negative emotion -laden and uncontrollable chain of thoughts and images (Borkovec et al. 1983). It is a common characteristic of anxiety disorder (Langlois et al. 2000) and often causes feelings of insecurity and intolerance of uncertainty (Francis and Dugas 2004). Worry emerges when people try to resolve problems with uncertain outcomes that could ultimately be negative (Borkovec et al. 1983). Managers displaying worry signal to employees that they feel project development is uncertain and could result in failure . With more worry displayed by managers, the uncertainty employees attach to the project and their negative expectations of the project’s future will increase. High uncertainty has a detrimental effect on entrepreneurial motivation (similar to frustration, as discussed above). Moreover, the imagined uncertainty employees feel about the entrepreneurial project’s progress will likely cause them to set lower performance goals for the entire project, ultimately reducing their motivation to act entrepreneurially (Baum et al. 2001).

  Stemming from insufficient understanding, bewilderment is an ambiguity experience that is considered unacceptable by others (Meyerson 1990). Meyerson (1990) showed that bewilderment is a frequent emotional experience among hospital social workers that is regularly kept secret because it is seen as an indication of being weak. Yet, settings that are less formal and more relaxed can constitute “safe havens,” where people are free to show their bewilderment openly (Meyerson 1990). Displays of bewilderment indicate that managers are having trouble understanding a project’s current challenges due to its complexity . Since employees frequently view managers as experts, in such cases, they are likely to feel that they too will have trouble understanding their own task within the project. Therefore, employees will perceive the tasks and outcomes associated with the project as ambiguous, so only employees with a high tolerance for uncertainty will become involved (similar to frustration, as discussed earlier).

  Strain is another important negative emotion in the managerial context. People experience strain as tiredness, exhaustion, and sometimes even depression with results from overly high job demands (Karasek 1979; Fineman 2003). Researchers have found that continuous strain may result in dangerous physical symptoms including high blood pressure and as a consequence various cardiovascular diseases (Schnall et al. 1994). Displays of strain indicate that managers perceive the current project stage places overly high demands on him or her. Thus, employees are likely to believe the project demands very high effort. These employees are only likely to continue their commitment and motivation in the project when they have high drive (Shane et al. 2003) and tolerance for uncertainty .

  The Moderating Role of Managers’ Emotional Displays

  Brundin et al. (2008) argued that, from employees’ viewpoint as receivers of managers’ signals, displayed positive and negative emotions interact with displayed confidence in explaining employees’ entrepreneurial motivation . Consider, for instance, a manager who signals to employees a particular confidence level regarding a specific project. This signal shows employees that the project’s outcome is under their collective control (Barbalet 1996). If the manager additionally signals a positive emotion , he or she indicates that the project is currently performing well. Because people tend to extrapolate past success into the future (Levinthal and March 1993), employees are likely to believe that the project’s future is less uncertain. Thus, since the effect of the level of confidence a manager displays on employees’ willingness to act entrepreneurially is influenced by the project uncertainty perceived, the additional display of satisfaction strengthens this signal because it lessens the uncertainty employees perceive regarding managerial displays of confidence .

  In contrast, managers’ displays of negative emotions are likely to have a negative impact on the effect of signaled confidence on employees’ entrepreneurial motivations . For instance, bewilderment displays suggest that the manager is having trouble understanding the actual project stage’s complexity (Meyerson 1990). When a manager shows bewilderment, his or her employees may think the manager is unable to effectively explain the goals and tasks for this project stage and will thus perceive the project as more uncertain. Along the same lines, when a manager shows strain, thus signaling that his or her current job duties are at the high end of his or her tolerance (Parker and Sprigg 1999), employees are likely to assume that the project requires more personal effort on their part and will be unsure whether those efforts will be enough for project success. As a result, employees will likely feel there is more uncertainty regarding the actual level of signaled confidence than when there is no display of negative emotions .

  Interestingly, and opposite our expectations, we and our colleagues (Brundin et al. 2008) found that managers’ displays of frustration boost the positive association between managers’ confidence displays and employees’ entrepreneurial motivation . In other words, managers’ displays of control over outcomes are more positively related to employees’ motivation to act entrepreneurially when the managers also signal that present goals are not being met and that the team is underachieving. Therefore, when employees perceive (from managerial signals) below-expectation performance of the project, it is even more important for managers to indicate that they are confident and that the project is likely to succeed in the future. Seeing this confidence despite current underperformance potentially motivates employees to even enhance their efforts in order to turn the project around and realize successful project outcomes. A study of radical organizational change supports this conjecture, showing that perception of frustration among leaders propel change activities when the leaders seem to truly believe the project will succeed (Brundin 2002). It appears that confidence is important in this context not only because it positively affects employees’ willingness but also because when it is displayed outwardly, it influences the effect of outward display of other positive and negative emotions . These results add to prior findings reported by Shea (1999) which revealed that highly confident supervisors have a stronger impact on team members than those with less confidence . However, Shea (1999) did not consider contingencies between confidence displays and displays of positive and negative emotions, which, as we and a colleague (Brundin et al. 2008) showed, can have a substantial influence on subordinates’ motivation .

  Above, we introduced the role negative emotions play in the entrepreneurial context—namely, managers’ displays of negative emotions and the impact thereof on employees’ entrepreneurial motivation (Brundin et al. 2008). However, negative emotions can also have a more straightforward and impactful influence on entrepreneurial cognition, which we discuss next.

  Negative Emotions, Affective Commitment, and Learning from Experience

  There has been a significant theoretical movement toward developing a better understanding of organizational knowledge . In this literature, organizational knowledge is viewed as the assumptions and expectations organizational members hold about the cause-and-effect relationship in the
domains in which the firm operates (Huber 1991; Walsh and Ungson 1991). While there has been increased research on knowledge at the level of the organization, this stream of work has mainly concentrated on transfer and acquisition of knowledge from sources outside the firm (Ahuja 2000; Hansen 1999). In contrast, scholars have focused less on the ways new knowledge is generated (McFadyen and Cannella 2004). One significant exception is work on how an individual’s interpersonal relationships can contribute to knowledge creation (e.g., McFadyen and Cannella 2004; Yli-Renko et al. 2001). Despite these recent studies, however, we know little about how members of an organization create new knowledge that is actionable based on their own experiences. Actionable knowledge in organizations is generated when a member of the organization learns from his or her experience (Huy 1999; Kim 1993) and is then dedicated to act to aid his or her organization based on the newly acquired knowledge (Kanter 1968; Leonard-Barton 1995).

  Researchers believe that failure is an experience that can trigger individuals’ learning . Project failure is an especially common event, in particular for individuals in innovation (Burgelman and Valikangas 2005; Shepherd and Cardon 2009; Sminia 2003) and research-based firms and organizations (DiMasi et al. 2003). Moreover, project failures are common for people in organizations facing contexts that are quickly changing (Deeds et al. 2000; McGrath et al. 2006) and complex (Gassmann and Reepmeyer 2005; Iacovou and Dexter 2005). Here, project failure is the termination of an endeavor that was aimed to generate value for the organization but did not meet its intended goals (Shepherd et al. 2009a). For example, in interviews we conducted and reported in Shepherd et al. (2011), research scientists referred to project failure as the project being “over” (a research scientist in chemistry), “buried” (a research scientist in theoretical physics), and having reached a “dead end” (research scientist in biochemistry). They also reported that the termination of projects is an implicit part of their jobs. Since failure “upsets the status quo” (Chuang and Baum 2003) and causes individuals to seek potential solutions (McGrath 2001; Petrovski 1985), often people within organizations, including scientific researchers (Popper 1959), engineers (Petrovski 1985), and organizational leaders (Sitkin 1992), learn more from failing than from succeeding. Thus, we refer to learning from failure as “the sense that one is acquiring, and can apply, knowledge and skills” (Spreitzer et al. 2005: 538) and in doing so stress people’s subjective learning perception (Huy 1999; Kim 1993; Weick 1979), which is in line with sensemaking studies. However, opportunities to learn from failure may not always end in knowledge the organization can act on because the individuals may have trouble effectively processing information revealed by the failure (Weick 1990; Weick and Sutcliffe 2007). In addition, the failure may cause negative emotions that lessen individuals’ dedication to acting for the organization’s benefit. Indeed, we and our colleague (Shepherd et al. 2011) built on psychology research on coping with loss (Archer and Freeman 1999; Stroebe and Schut 2001; Shepherd 2003) to explore how individuals learn from failure and maintain their affective organizational commitment as a prerequisite to move past project failure . The study used psychological theories of loss (Archer and Freeman 1999; Stroebe and Schut 2001) to theorize a model explaining how individuals within organizations move on after project failure .

  Moving on after project failure requires individuals to view projects as a means to explore held assumptions, approach project failure as feedback to test these assumptions, and make decisions on following projects based on that feedback (McGrath 1999). These actions require individuals to learn from the failure of their previous project and be willing to adapt their beliefs to reach organizational goals. Specifically, we explore how individuals process project failure as feedback—influenced by the time passed since the project has failed, individuals’ coping orientation , and their beliefs regarding the extent to which the organization normalizes failure —to facilitate learning from the failed project. We also investigate how negative emotions stemming from project failure can influence individuals’ affective commitment to reaching organizational goals, how time passed since the failure and perceptions regarding the extent to which the organizational environment normalizes failure directly impact negative emotions, and how individuals’ coping orientations —namely, loss, restoration, and oscillation orientations —impact the association between time since project failure and the resulting negative emotions about the failure event.

  Entrepreneurial Project Failure and Negative Emotions

  Employees in organizations tend to form feelings of psychological ownership (Pierce et al. 2001) for projects such that they believe they have control over and deep knowledge of the project based on heavy investments of effort, time, and energy. As a result of these feelings of psychological ownership, individuals’ self-identities often become interwoven with that of the project and/or project team . When resources are reallocated after a project failure, the team is likely split up and allocated to other projects, thus leading to the loss of close relationships. In such situations, part of an individual’s self-identity can be lost; this loss can result in dysfunctional effects for the individual (Pierce et al. 2001).

  There are a number of examples of employees who describe project failure to yield substantial negative emotions; these individuals see project failures as the low point of their career (Eggen and Witte 2006), experience bitter disappointment (Cunningham 2004), and feel emotionally devastated (Dillion 1998). Further, research team members have reported feeling a variety of emotions after project failure, including denial, anger, personal pain, sadness, dismay, worry, anxiety, annoyance, frustration, and depression (Dillon 1998; Murray and Cox 1989). In our study with a colleague (Shepherd et al. 2011), interviews with research scientists also revealed several negative emotions caused by project failure. For example, when asked about their feelings after their most recent project failure, the scientists interviewed reported the following: “To see that you and the team were not able to lead it [a project] to a successful completion was altogether disappointing” (economics); “There was this huge effort put into the project, and to accept that is was for nothing was really difficult” (economics); “I was completely frustrated” (chemistry); “It was really painful. … I think we were all equally depressed” (biochemistry); “When the project does not work out, you start thinking whether your work makes any sense or not. … You start doubting [the work] more and more” (mechanical engineering); “It was really frustrating, I was quite furious. … For example, to reduce the anger whenever I got an email [from a project team member], I read it only the next day. I had to sleep on it to deal with all the frustration” (theoretical physics).

  However, does every project failure lead to overly negative emotions? Is there variation in the level of negative emotions generated by project failures? With these questions in mind, we employ self-determination theory (SDT) to theorize on how people generate negative emotions from project failure because SDT (1) centers on individuals’ psychological well-being, which has been associated with emotions; (2) focuses on criteria of importance based on the person’s context; and (3) has been explored at length in organizational settings. In this context, psychological well-being is the degree to which a person experiences self-acceptance, positive relationships with other people, mastery, autonomy, personal growth, and purpose in life (Ryff 1989).

  The goal of SDT is to explain the psychological processes that enable optimum psychological functioning and well-being (Ryan and Deci 2000; Deci and Ryan 2000: 262). A person’s environment provides nutriments that satisfy three needs associated with psychological well-being: competence , relatedness , and autonomy . When these needs are not met, psychological well-being decreases. Meeting these needs varies between project team members and within the individual team members across projects (Sheldon et al. 1996). Overall, people are driven to achieve high performance on projects that will help them satisfy their psychological needs. The motivation behind these performance desires mirror
s intrinsic motivation since it entails active involvement in tasks that the person considers as interesting and that enable personal growth (Deci and Ryan 2000).

  While projects that help individuals meet their basic needs will lead to higher intrinsic motivation compared to projects that fulfill these needs less, they are also likely to lead to more substantial negative emotions if they fail. This idea of project salience based on how much it fulfills these psychological needs is in line with previous scholarly work on commitment via people’s psychological ownership and personal work engagement. Specifically, psychological ownership occurs when a person believes that a specific project belongs to him or her in a way that identity bonding between the person and his or her project has emerged and meaning and emotions related to possessiveness and ownership have formed despite the fact that the person has no legal right to the project (Pierce et al. 2001). Moreover, personal work engagement describes how much of their personal selves people bring to their work roles (Kahn 1990) and the degree to which there is “the simultaneous employment and expression of a person’s preferred self in task behaviors that promote connections to work and to others, personal presence, and active, full role performances” (Kahn 1990: 700). Main elements of psychological ownership include autonomy and relatedness , and main elements of personal engagement include relatedness and competence . Kahn (1990) denotes these latter elements as meaningfulness, which occurs when individuals feel useful, worthwhile, and valuable when participating in some type of activity. When projects satisfy people’s needs for autonomy , relatedness , and competence , those people will start to feel psychological ownership for those projects and will be to a great extent personally engaged in the projects. Thus, higher psychological ownership and personal engagement for a project will cause stronger negative emotional reactions in the case of failure.