Lecture 2 Flashcards
What does scarce resources mean?
Unlimited human wants in a world of limited resources
Requires people to make decisions about how to allocate resources
Scarcity can be considered the fundamental economic problem
What is the liability of newness?
Mortality among young organizations is higher than for older organizations
Organizations with new types of organizational forms exhibit even higher mortality rates
A start-up that survive the first couple of years will often preserve and strengthen the initial strategy (imprinting)
Why is liability of newness a thing?
Entrepreneurs often lack:
Relations to important resource owners
Knowledge and competencies related to the role as manager
Knowledge about how to structure the organization in the industry
Limited legitimacy and reputation to attract important resources
How do you reduce liability of newness?
Experienced entrepreneurs have knowledge about the establishing phase
This knowledge might help reduce liability of newness (clusters, business angels, Silicon Valley)
Access to resources from experienced entrepreneurs
What are the imprint thesis?
A combination of two forces: imprinting forces and traditionalizing forces
What are the imprinting forces?
economical, political and cultural conditions in society that have an impact on the entrepreneurial firm
What are the traditionalizing forces?
events subsequent to founding that tend to preserve previously adopted organizational characteristics
What are the strengths of imprinting forces?
- Dominant initial strategy
- Distribution of influence
- Management ownership
What are the strengths of traditionalizing forces?
- Performance
- Organizational age
- Entrepreneur’s tenure
What is Boekers findings?
First-mover and niche strategies combined with a high level of ownership by founding managers was associated with low change in initial strategy.
Firms that adopt a dominant strategy at founding will maintain this initial strategy over time, compared to firms with no dominant founding strategy.
Minimal support for the hypothesis that entrepreneur’s tenure is associated with less change in strategy since founding.
Moderate support for the prediction that poor firm performance results in greater pressure for deviation from a founding strategy.
That older organizations demonstrate more change.
What is behavioral economics?
The psychological, social, cognitive, and emotional aspects of economic decision making.
Neo-classical economics suggests that humans seeks to optimize utility and are rational - homo economicus.
Humans make 95% of their decisions using mental shortcuts (heuristics) – hence not always rational.
When talking about the hidden traps in decision making, what are the heuristics?
Simplifying strategies to make decisions, especially in uncertain and complex conditions
When talking about the hidden traps in decision making, what are the bias?
Decision-making flaws and misjudgments due to that we hold a partial perspective and refuse/ignore/do not pay attention to alternative views
