Texas Tech University

Perceptions Matter for New Business Ventures

January 10, 2019 | By: Staci Semrad 

Once upon a time, a venture team of entrepreneurs built an Internet video-sharing platform that could have beat to market the 2005 introduction of YouTube, had their perceptions aligned; but the team's rocket of revolutionary technology never launched.

"They were first movers into this space, but they didn't continue, due to conflicting perceptions of what action to take next," explained a team of researchers, including Jerry S. Rawls College of Business Professors Ron Mitchell and Roy Howell and Associate Professor Keith Brigham, in their article published last year in the Journal of Business Venturing.

This study is among the first to account for how an entrepreneur's perception of distance to a goal influences how abstract or concrete their own actions are. It uses the above anecdote to illustrate the importance of the study's main findings: that the less perceived (psychological) distance there is between an entrepreneur and a socially-based or planning-based (hypothesized) target, the more concrete the entrepreneur's actions will be.

people collaborating

In the example above, the entrepreneurs differed in their perceptions of how far they were from their goals, which prevented them from taking the necessary concrete actions to move the venture forward. Specifically, the founder/inventor viewed perfecting the technology as critical before going to market because his psychological social distance to other engineers in his social reference group was "near," while his social distance to the market was "far." So for him, technology perfection needed concrete action. Other co-founders perceived the technology as sufficiently ready, and market entry to be critical, because their psychological social distance to other engineers was "far"; but it was "close" to the market. The venture team ultimately yielded to the inventor and, in doing so, missed its window of opportunity.

"So, as a technology, it progressed, but as a venture, it didn't," said Mitchell, a professor of entrepreneurship and the Jean Austin Bagley Regents Chair in Management in the Rawls College.

Mitchell, Brigham and Howell conducted the research with lead author Shawna Chen, a recent doctoral graduate of the Rawls College who is now an assistant professor at Brock University in Canada, and Robert Steinbauer, who is also an assistant professor at Brock University. Their findings suggest how much can go wrong when a new venture's leaders differ in their perceptions of the psychological distance to their goals.

Mitchell recommends that entrepreneurs communicate better to align their perceptions of the distance to their social and hypothesized goals so that they will be unified in their actions: "It's important for entrepreneurs to understand how profoundly their perceptions affect their actions so that they don't fail to act, or 'launch a rocket to oblivion.'"

Read more:"Perceived psychological distance, construal processes, and abstractness of entrepreneurial action" is published in the Journal of Business Venturing.

ABOUT THE TEXAS TECH AUTHORS

H. Shawna Chen is an assistant professor of entrepreneurship at Brock University's Goodman School of Business in Ontario, Canada. She earned her doctorate in business administration in the area of management with an entrepreneurship concentration from the Jerry S. Rawls College of Business. She also holds an MBA from American University and a Bachelor of Science in nursing from the National Taiwan University. 

Ronald K. Mitchell, CPA, is a professor of entrepreneurship and the Jean Austin Bagley Regents Chair in Management in the Rawls College. He earned his doctorate from the University of Utah and his Bachelor of Commerce from the University of Calgary in Alberta, Canada.

Keith H. Brigham is an associate professor of entrepreneurship and the Kent R. Hance Professor in Entrepreneurship in the Rawls College. He earned his doctorate from the University of Colorado at Boulder, his MBA from Oklahoma State University, and his Bachelor of Science from the University of Oklahoma.

Roy Howell is a professor of marketing and supply chain management in the Rawls College. He earned his doctorate from the University of Arkansas and his MBA and Bachelor of Business Administration from Eastern New Mexico University.