Self-efficacy and effort in new venture development
Rose Trevelyan
Australian School of Business, Sydney NSW
Abstract
There is lots of evidence to suggest that Entrepreneurial Self-Efficacy influences intentions and performance, but little research on ESE and actual activities. In this paper the possible dual impact of ESE on task effort is explored. On the one hand self-efficacy boosts motivation and persistence, but on the other hand high confidence in one's abilities can lead to decision-making shortcuts and reduced effort on key tasks (the overconfidence hypothesis). Propositions about the relationship between self-efficacy and effort on different types of task (action and judgment tasks) are developed and tested with a small sample of active entrepreneurs. Results support a positive impact of self-efficacy on effort regardless of the type of task, thereby raising questions about the overconfidence hypothesis. Understanding types of confidence (in one's ability, knowledge and judgment) and effort (cognitive effort) may explain these results. Further research on these topics, and on entrepreneurial experience and the use of heuristics are suggested.
Keywords
self-efficacy; effort; new venture development; entrepreneur; task type; overconfidence
Article Text
Research on entrepreneurship recognizes the importance of the individual in the success of new ventures (Shane & Venkataraman, 2000). Much attention has been paid to the cognitions of entrepreneurs (Mitchell et al., 2007) and we now understand much more about the impact of different thought processes on decisions and action. Entrepreneurial self-efficacy has emerged as an important construct in understanding entrepreneurial action. Many empirical studies support the key role played by self-efficacy in shaping entrepreneurial intentions to start a new venture (Chen, Greene, & Crick, 1998; DeNoble, Jung, & Ehrlich, 1999; Markman, Balkin, & Baron, 2002; Zhao, Seibert, & Hills, 2005) and in influencing venture performance (J. Robert Baum & Locke, 2004; Keith M. Hmieleski & Baron, 2008; K.M. Hmieleski & Corbett, 2008).
There is much less research on the impact of individual differences, like self-efficacy, on actual entrepreneurial activities when establishing a venture. We understand some of the predictors of the intention to start a venture, and some of the predictors of the outcomes of starting a venture. However, understanding actual entrepreneurial activity is 'perhaps the most under-researched aspect of the individual and venture creation' (Shook, Priem, & McGee, 2003, p. 390). Two theoretical contributions in this space inform the debate here. First, Boyd & Vozikis (1994) propose that self-efficacy positively influences entrepreneurial action. Higher self-efficacy, they argue, promotes greater commitment to entrepreneurial tasks, and greater persistence in the face of adversity. Second, Hayward, Shepherd & Griffin (2006) identify hubris as a key individual difference that influences the choices entrepreneurs make about how to resource their ventures. They argue that excess confidence in themselves and the business opportunity can lead entrepreneurs to overestimate the likelihood that their ventures will succeed. Excessively confident entrepreneurs therefore put less effort into attaining and mobilizing resources, in the belief that the venture doesn't need high levels of, for example, investment, cash, social networks or legal protection.
These propositions suggest that, on the one hand entrepreneurial activity requires a certain degree of confidence and motivation. But on the other hand entrepreneurial activity is less effective when confidence is too high. The entrepreneur's belief in his / her abilities, i.e. their self-efficacy for entrepreneurship, can both help and harm efforts to establish and grow the venture.
The aim in this paper is to explore this apparent paradox. What is the impact of self-efficacy on entrepreneurial effort? The situations in which high self-efficacy has a positive effect on effort, and the situations in which it has a negative effect are explored. Distinctions between different types of task as the moderating variable between self-efficacy and effort are introduced. Propositions about the relationship between self-efficacy and effort on different tasks are developed and tested using a small sample of entrepreneurs engaged in developing live business ventures.
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