Cognitive-Affective Attributes and Biases in Pivot Decisions

Abstract

Founders play an essential role in entrepreneurial decision-making not only because they are sometimes the only human resource that a new venture has, but also because founders often feel personally responsible for the new venture. Consequently, entrepreneurs’ cognitive-affective attributes, biases, background, and psychological well-being affect risk perceptions, preferences, decisions, and firm performance. In this study, we aim to investigate which are the cognitive-affective attributes and biases that can affect pivot decisions. Pivots are deemed as one of the most common and crucial decisions that can determine the new ventures’ fate. We performed a literature review and assessed this body of research following a two-staged process. First, from the literature review, we identify which cognitive attributes and biases affect entrepreneurial decisions. Second, we analyzed these cognitive elements in the light of two central constructs: the transformative purpose of pivot decisions, and the failure as the triggering factor that leads to such decisions. We found that cognitive adaptability/flexibility, counterfactual thinking, optimism, risk-taking propensity, self-regulation, exploratory style, self-efficacy, entrepreneurial passion, and openness are the cognitive-affective attributes most related to pivots. Additionally, we found fear of failure, locus of control, overconfidence, over-optimism, psychological ownership, solution/product blind adherence, persistence bias, risk aversion, inertia, confirmation biases, failure-driven biases, and self-serving attribution as the biases most related to pivots. We argue that awareness of these aspects can contribute to improving such a critical decision, by promoting the establishment of more accurate metrics, or by enhancing some cognitive attributes that help entrepreneurs to make complex decisions during the entrepreneurial journey. Furthermore, we discuss how researchers can advance in this literature by proposing research opportunities.