INTUITIVE DECISION MAKING AND USE OF HEURISTICS IN ENTREPRENEURSHIP EDUCATION

Rodica IanoleViorel Cornescu

University of BucharestFaculty of Business and Administration

CONTEXT

The creative dominant trait of entrepreneurs is commonly associated with a more flexible process of decision-making

The behavioral economics literature on cognitive biases and heuristics explores in depth the decisional mechanisms and intuitive shortcuts within the entrepreneurial behavioral

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SCOPE

Entrepreneurial decisions are inclined to be more susceptible to certain biases and heuristics, compared to the adherence to the framework of rational decision-making?

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SPECIFIC FOCUS OF OUR RESEARCH

Students preparing to become potential future entrepreneurs (study profile – Business Administration)

Critical thinking upon different decision theory problems.

Method: content analysis of their framing and some arguments for certainty, risk and uncertainty environmental conditions.

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CONTENT ANALYSIS The sample 161 undergraduate Business

Administration students, in their second year of study, split in two series of 78 and respectively 83 students.

The „experimental” frame through which we have collected the data was represented by their final examination at the discipline Decision Theory

The first section of the exam consisted in five open questions regarding particular situations and their characterization in terms of decisional environments, normative and descriptive models of decision, types of decision, rationality and types of utility.

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The question was asking the students to explain if the decision presented through a particular affirmation was a decision under certainty, under risk or under uncertainty.

1. You decide to buy a lottery ticket for the extraction that will take place next week

2. You decide to apply for a master program in corporative finances at a US top university

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RESULTS

First question: 55,12% of the students have coined the right answer of risky environment (43 papers), 23,07% have inclined towards uncertainty (18 papers) and 17, 94% stated certainty (14 papers); there were also three blank answers.

Second question: 30,14% (25 papers) of the students have recognized the right answer of uncertainty in terms of two possible main results, being accepted or not, but without the possibility of associating a specific probability value. 57,83% of students stated certainty and a very small slice of 1% stated risk, admitting there is a probability of not being accepted.

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DISCUSSION

Only from this incipient part of the analysis, we can notice that intuitive thinking is a strong resort when making decisions.

We can postulate that this type of intuition is formed on the standard premises of economic knowledge, triggering some automatic responses and leaving too little space to a proper analysis of a problem in terms of individual and the environment.

The overconfidence bias, along with the status-quo may partially explain these preliminary results.

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LIMITATIONS

Locus of control - it might be that the groups that chose “certainty” might have gone for this answer because they focused strictly on what they can control and beyond that the world is “given”.

Methodological issues - the association with the three types of decision environment can be detrimental in the long-run because it focuses too much on the idea that the student answering the questions actually know what the three environments actually entail.

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