Master’s Thesis
The prototypical viability of a new venture idea and the moderating role of positive and negative affect on opportunity confidence: An experimental approach.
By
Joris Veldt
Student number: S3252434 jorisveldt@gmail.com
University of Groningen
Business Administration: Small Business & Entrepreneurship Faculty of Economics & Business
25 June 2018
Supervisor: Dr. Sílvia Dos Santos Fernandes Costa Co-assessor: Dr. Olga Belousova
Abstract1
Opportunity confidence is an important antecedent of entrepreneurial action. It could explain why different individuals facing the same new venture idea (NVI) show differences in opportunity confidence and, potentially, entrepreneurial action. The purpose of this study is threefold. The first aim is to broaden our understanding in how individuals develop confidence in NVIs by looking at the mental representations of NVIs. The second aim is to investigate the moderating role of affective states on opportunity confidence. The third aim is to answer recent calls for more research using experimental designs in entrepreneurship research (e.g., Frederiks, Englis, Ehrenhard, & Groen, 2018; Acs, Audretsch, Desai, & Welpe, 2010; Crook, Shook, Morris, & Madden, 2010). In this study, we use an experimental design. The results demonstrate that the prototypical viability of a NVI has positive significant effects on opportunity confidence. Affect did not moderate the relationship between prototypical viability of the NVI and opportunity confidence. Interestingly, additional analysis demonstrated that positive affect also has positive significant effects on opportunity confidence. Finally, we provide possible explanations for these results, as well as limitations and implications of this study.
Keywords: entrepreneurship, opportunity confidence, affect, prototypical viability of NVIs, experimental design
1 This research project was approved by the Faculty of Economics and Business Ethics Committee (reference:
Table of Contents
1. Introduction ... 4
2. Literature Review ... 7
2.1 Opportunity Confidence as a Distinct Phenomenon ... 7
2.2 Characteristics of a New Venture Idea as Influencer for Opportunity Confidence ... 9
2.3 Affect as Moderating Factor Between a New Venture Idea and Opportunity Confidence ... 11
3. Methodology ... 14 3.1 Study Design ... 15 3.2 Participants... 16 3.3 Measurements ... 17 4. Results ... 22 4.1 Pre-test ... 22 4.2 Manipulation Checks ... 23 4.3 Descriptive Statistics... 25
4.4 The Effect of Viability of a New Venture Idea on Opportunity Confidence... 25
4.5 The Moderating Role of Affect on Prototypicality of the NVI in Opportunity Confidence ... 27
5. Discussion ... 31
5.1 Practical Implications ... 33
5.2 Limitations and Directions for Future Research ... 34
6. Conclusion ... 36
7. References ... 37
1. Introduction
Why do some individuals and not others act on an opportunity? This question has been of interest in entrepreneurship literature for decades. Therefore, it is no surprise that entrepreneurial opportunities have become one of the most researched topics within entrepreneurship literature after Shane and Venkataraman’s (2000) seminal article on entrepreneurship as a research field (e.g., Short, Ketchen, Shook, & Ireland, 2010). Furthermore, entrepreneurial opportunities are central to entrepreneurship research and to understand entrepreneurial activity. Entrepreneurial opportunities involve the introduction of new products, services or ways of doing business (cf. Venkataraman & Sarasvathy, 2001). This stresses the importance of opportunities in the entrepreneurial process; opportunity recognition (or identification), evaluation, and exploitation are crucial to trigger the entrepreneurial process. Although these distinctive modes have been studied extensively, the overall progress on entrepreneurial opportunities has been disappointing (Davidsson, 2015). A possible explanation for this is the lack of construct clarity (Davidsson, 2015). For instance, authors fail to apply a consistent view of “opportunity” within individual works which makes it an elusive concept.
suggested a way to study the nexus differently by proposing the notion of new venture ideas (NVI), opportunity confidence, and external enablers. Hence, in this study we adopt this new perspective by addressing other constructs (e.g., opportunity confidence and new venture ideas) because these can facilitate theoretical precision and can guide empirical investigation towards more fruitful designs. Thus, we contribute to a clarification on how individuals and opportunities interact.
Grégoire, Cornelissen, Dimov, & Burg, 2015; Mitchell et al., 2007), no study examined how affect moderates the relationship between the characteristics of an opportunity and its evaluation.
To address the mentioned literature gaps, an experimental design will be conducted. The contribution of this study will be threefold. First, in the field of entrepreneurship, there is a need for a different approach by investigating how new constructs, such as new venture ideas and opportunity confidence, could explain why individuals act upon an opportunity. The mental representation of a NVI’s viability might explain why an individual has more or less confidence towards a NVI. For instance, an individual might have more or less accurate and developed mental representations of a NVI viability and, therefore, showing either a higher or lower level of opportunity confidence. Second, there is need to understand affect as a factor in the entrepreneurial process, because it may explain individual differences in opportunity confidence towards the same NVI. Hence, affect could explain why different individuals act differently on the same NVI (Grégoire, Cornelissen, Dimov, & Burg, 2015; Mitchell et al., 2007). For instance, it could be the case that someone in a pleasant atmosphere has more positive attitudes towards a new venture idea which enhances someone’s opportunity confidence. Third, there is a lack of experimental research in the entrepreneurship field (e.g., Frederiks et al., 2018; Acs et al., 2010; Crook et al., 2010). Most studies rely on experienced entrepreneurs or retrospective events and using experiments can address this. Furthermore, experiments ensure that alternative causes are not cofounded with a unit’s treatment condition. Additionally, it reduces the plausibility of threats to validity by distributing participants randomly over the conditions (Cook, Campbell, & Shadish, 2002). Hence, central to this research is the following research question:
“What is the influence of the prototypical viability of a new venture idea on opportunity confidence and how does affect influence this relationship?”
2. Literature Review
2.1 Opportunity Confidence as a Distinct Phenomenon
After the seminal paper ‘Entrepreneurship as research field’ of Shane and Venkataraman (2000), entrepreneurial opportunities became (and still is) one of the most popular topics in entrepreneurship literature (e.g., Hansen, Schrader, & Monllor, 2011; Davidsson, 2015). It is not surprising that entrepreneurial opportunities are studied extensively, simply because they are the foundation for every venture and eventually for our daily economy. According to Venkataraman and Sarasvathy (2001), entrepreneurial opportunities involve the introduction of new products, services or ways of doing business. Accordingly, opportunities have been conceptualized as the unfolding of a process that consists of three distinctive modes: opportunity recognition, evaluation, and exploitation (Grichnik, Smeja, & Welpe, 2010; Shane & Venkataraman, 2000). Tumasjan, Welpe, and Spörrle (2013) showed that evaluation and exploitation can be studied separately whereas Grégoire and Shepherd (2012) argue that opportunity recognition and evaluation are conceptually and empirically distinct from each other.
and other factors are decisive for opportunity confidence. Important to mention, an Actor is an extension of individuals and also includes teams, relay of champions, or organizations. In this study, we use individuals and Actors interchangeably.
Haynie, Shepherd, and McMullen (2009) highlighted that the question why someone decides to act on ‘Opportunity X’ instead of ‘Opportunity Y’ still remains unanswered due to the absence of empirical and conceptual frameworks that consider how the attractiveness of an opportunity is evaluated. In this notion, opportunity confidence might be an attractive alternative to assess how the attractiveness – as the basis for entrepreneurial activity – is evaluated. Thus, opportunity confidence may explain why someone decides to act on ‘Opportunity X’ instead of ‘Opportunity Y’. In this context, an important concept for explaining why someone has more or less opportunity confidence are new venture ideas, which strictly refers to “an ‘imagined future venture’; i.e., an imaginary combination of product/service offerings, markets, and means of bringing the offering into existence” (Davidsson, 2015, p. 675). This emphasizes that a new venture idea is an imaginary state that is created through cognitive frameworks (e.g., Grégoire et al., 2011; Walsh, 1995) and pattern recognition (Baron & Ensley, 2006). This suggests that through the use of cognitive frameworks someone might evaluate that ‘this is a suitable and attractive opportunity for me’ and, thus, has opportunity confidence to act on it. Taken together, these assumptions highlight the importance for delineating the characteristics and type of cognitive frameworks that are likely to influence one's opportunity confidence.
affected by NVIs and affect at early stages of the entrepreneurial process. Taken together, the conceptual assumptions form a foundation to outline the cognitive structures that are likely to influence an Actors’ opportunity confidence.
2.2 Characteristics of a New Venture Idea as Influencer for Opportunity Confidence
A new venture idea – an imagined future venture – is in most cases triggered by ‘external enablers’ which represent changes to technology, demography, culture, human need and wants, institutional framework conditions, macro-economic conditions, and the natural environment (Davidsson, 2015, p. 683). In addition, a new venture idea is a representation of what an Actor aims to explore, instead of materializing the venture itself. This underlines the importance of cognitive frameworks which, in turn, are the foundation for detecting and connecting seemingly unrelated trends or events (Baron & Ensley, 2006). In addition, it is also suggested that the cognitive frameworks advance the understanding of how opportunities are evaluated (Keh, Foo, & Lim, 2002; West, 2007). Taken together, individuals are exposed to external information (Dutton, 1993) and use cognitive frameworks to process, produce, and evaluate (Baron, 2006; Krueger, 2000; Mitchell & Chesteen, 1995; Dutton & Jackson, 1987) a new venture idea. This can be illustrated with a simple example. For instance, an individual can interpret a ‘chair’ as prototype with the following common features: seat, legs, and backrest. Therefore, an unknown object that looks like a chair is most likely to be approached by the ‘chair’ prototype. For their part, Baron and Ensley (2006) provided empirical evidence that the cognitive frameworks can do the same for “business opportunities”.
three characteristics – solves customers’ problems, ability to generate positive cash-flow, and manageable risk – are related to the viability of a NVI. In other words, viability involves the need for a given product or service, the perceived chances for survival over a period of time, and the ability for long-term profits. In turn, the remaining two characteristics – superiority of product/service and potential to change the industry – are related to distinctiveness. In other words, what makes it different from other existing services or products (Santos et al., 2015). Santos and colleagues (2015) argue that prototypical viability is more likely to be identified at early stages of the entrepreneurial process and experience, than distinctiveness because distinctiveness is more likely to be identified when an individual possesses greater prior knowledge and/or experience. As detailed earlier, this study focuses on the early stages of entrepreneurship and, therefore, adopts the three characteristics solves customers’ problems, ability to generate positive cash-flow, and manageable risk because they address the prototypical viability of a new venture idea. Thus, these characteristics represent a prototypical new venture idea and might explain why an individual has higher opportunity confidence compared to a non-prototypical new venture idea. In that way, the prototypical characteristics of the new venture idea and the way individuals perceive them may be of importance for an individual’s opportunity confidence about that NVI.
individual will be higher in case of a prototypically viable NVI than a non-prototypically viable NVI, because an individual might perceive the NVI as more viable due to these characteristics. Therefore, the more prototypically viable a NVI is, the higher the opportunity confidence will be. Hence, on the basis of this reasoning, we propose the following hypothesis:
H1: Participants identifying a NVI with high prototypical viability demonstrate higher opportunity confidence in comparison to participants identifying a NVI with a lower prototypical viability.
2.3 Affect as Moderating Factor Between a New Venture Idea and Opportunity Confidence As discussed before, the characteristics of a new venture idea are crucial to better understand how the content is decisive for opportunity confidence. While it has been proven that the characteristics of a new venture idea dawned upon the cognitive framework are of importance for understanding opportunity evaluation, the importance of other factors influencing the opportunity confidence has been neglected (Foo, 2011). Especially the contribution of affect (e.g., moods and feelings) in the field of entrepreneurship has been limited (Mitchell et al., 2007) but slowly starts to gain attention in entrepreneurship research (Foo, 2011). Thus, while existing literature primarily focuses on how cognitive factors influence opportunity evaluations (Simon, Houghton, & Aquino, 2000; Mitchell et al., 2007; Baron, 1998), the contribution of affect has been limited while there is some evidence that affect predicts entrepreneurial activity (Robinson, Stimpson, Huefner, & Hunt, 1991; Foo, Uy, & Baron, 2009). Previous studies demonstrated that entrepreneurial activity is primarily driven by a complicated series of thoughts that shape the evaluation of an opportunity (Oaksford, Morris, Grainger, & Williams, 1996; Beal, Weiss, Barros, & Macdermid, 2005; Isen & Labroo, 2003). In turn, studies focused on affect also demonstrated that affect can influence cognition (Forgas, 2008). Hence, both the content of a NVI and affect are related to cognition and may be decisive for opportunity confidence. Taken all together, studying the role of affect is interesting since it has the potential to influence entrepreneurial endeavors.
1988, p. 1063). A high level of positive affect is a state of high energy, full concentration, and pleasurable engagement, whereas a low level of positive affect can be seen as a state of sadness and lethargy (Watson et al., 1988). Negative affect is “a general dimension of subjective distress and unpleasurable engagement that subsumes a variety of aversive mood states, including anger, contempt, disgust, guild, fear, and nervousness” (Watson et al., 1988, p. 1063). Additionally, in literature there is a distinction made between two types of affect, namely state affect and dispositional affect. Dispositional (trait) affect are stable tendencies across many situations in which someone tends to experience particular affective reactions. State affect induces changes in current moods that are primarily driven by external events (Baron, 2008). Although there is evidence that both produce parallel effects in many situations (e.g., Lyubomirsky, King, & Diener, 2005; Baron, 2008), it is clear that both types of affect refer to something different. In this study, we will take the perspective of state affect because it is more convenient for the setting of this study since participants will be manipulated in such a way that their perceived mood at a particular time may influence their evaluation and, thus, can be regarded as state affect. In addition, dispositional affect is more related to the personality of an individual while we want to see in this study how people feel in a particular way. Therefore, we will use state affect and refer to it as positive or negative affect.
2007; Lerner, Small, & Loewenstein, 2004; Schwarz & Clore, 1996). In this notion, although the characteristics of a new venture idea may help an individual to shape their cognitive tasks which, in turn, influences their opportunity confidence, it might be the case that opportunity confidence increases on a more pleasant day due to more positive affect and decrease on an unpleasant day due to more negative affect. Grichnik et al. (2010) affirm that positive affect positively influences opportunity confidence and that negative affect negatively influences opportunity confidence. In addition, they demonstrate that negative affect significantly decreases the preferences of entrepreneurs to invest additional time and resources. In turn, Baron, Hmieleski, and Henry (2012) demonstrated that positive affect could enable entrepreneurs to ‘see’ a good new venture idea. In sum, it shows that affect is related to opportunity confidence.
confidence. All taken together, we are interested in understanding how the combination of affect and prototypical viability may influence opportunity confidence. Therefore, we hypothesize that:
H2a: Positive affect positively moderates the relationship between the prototypical viability of
the new venture idea and opportunity confidence. The relationship will be stronger when positive affect is high than when positive affect is low.
H2b: Negative affect negatively moderates the relationship between the prototypical viability of
the new venture idea and opportunity confidence. The relationship will be stronger when negative affect is high than when negative affect is low.
Figure 1. Conceptual model.
3. Methodology
In this study, an experimental design was conducted. Students and recently graduated students (< 3 years) were selected as participants for this study because they can be regarded as potential entrepreneurs (Block, Hoogerheide, & Thurik, 2011; Unger, Rauch, Frese, & Rosenbusch, 2011; Frese & Gielnik, 2014). Potential entrepreneurs are defined as “individuals who ‘need not have any salient intentions toward starting a business; their potential is latent and is causally and temporally prior to intentions” (Krueger & Brazeal, 1994, p. 91). Although students are regarded as potential entrepreneurs, the results may differ when applied to entrepreneurs. Therefore, the results should be interpreted with caution.
Prototypical viability of the new venture idea
+ H1
Opportunity Confidence
Affect + H2a
3.1 Study Design
Before participants were randomly assigned to one of the two conditions, they were asked to answer questions about their demographic information.
Following their demographic information, participants were first randomly assigned to one of the two induction conditions of positive affect or negative affect. For each condition, the participants received a questionnaire with two questions. The first question asked participants to read a list with ten words that described different feelings and emotions. This list was adopted from Watson et al. (1988). Then, participants were asked to pick three of these different feelings and emotions that they experienced before and to describe these situations in no more than a few words. For example, participants in the positive affect condition needed to describe briefly a situation in which they felt excited, inspired or enthusiastic. The second question asked participants to pick one of the three situations they had just indicated and to describe it as specifically as possible and in such a way that it transmitted their own emotions during this episode, especially by indicating the feelings they experienced during that situation. Specifically, participants in the positive affect condition were asked to write one of their previous answers in more detail and in such a way that if someone else would read their answer that they might become excited as well just by reading their situation. This procedure replicated the affect induction technique of Lerner and Keltner (2001) and Foo (2011) since they proved the effectiveness of this affect induction technique (see Appendix I for the affect induction technique). Labelling affect may influence its effect on judgement (Keltner, Ellsworth, & Edwards, 1993); thus, we followed the steps described above to address this.
After reading the scenario, participants were asked to describe in their own words the new venture idea that was presented in the scenario (see Appendix II for the scenarios).
Afterwards, participants needed to indicate their level of opportunity confidence towards the NVI they had just identified. Additionally, participants were asked to answer control questions regarding their start-up self-efficacy, general self-efficacy, and start-up motivation. Furthermore, due to ethical concerns we asked participants in the negative condition to complete the positive affect task as well, as that is a common procedure to minimize potential long-lasting effect of the manipulation, even though it has no purpose for the research design. Figure 2 describes the study design’s task flow and the variables observed at each data collection point.
Figure 2. Experimental setting.
3.2 Participants
Two hundred forty-four students and recently graduated students currently living in the Netherlands from different study backgrounds participated in the experiment. All participants voluntarily participated in our study and were assured of confidentiality. Students were selected as participants because they can be regarded as potential entrepreneurs (Block et al., 2011; Unger et al., 2011; Frese & Gielnik, 2014). From the total of 244 participants, we were able to analyze 181 participants for several reasons (e.g., incomplete and/or incorrect survey completion, not defined as target group). Of those 181 responses, 9 who failed to meet the requirements of this study were removed from the analysis. For example, respondents who reported that they were far above the average age were
Positive affect Prototypical NVI Non-Prototypical NVI Negative affect Identify an NVI in scenario Opportunity confidence Affect manipulation worked? Is the NVI manipulation working?
R
R
Affect manipulation NVI manipulation Independent variable:
dropped from analysis because they did not fall inside the specified target group (students). Of those 172 responses, 21 failed to identify the presented new venture idea and were removed from the analysis. For example, respondents who reported a different NVI than presented or reported that they did not recognize a NVI, were dropped from further analysis since they did not identify the presented new venture idea. The detailed descriptions of the experiment groups can be found below in Figure 3.
In this study, 110 (72.8%) respondents were male and 41 were female (27.2%). The average age of the participants in this study was 25. In total, 54 (35.8%) respondents indicated that they were students with a side job and another 9 (6.0%) participants indicated that they were employed (part-time). Furthermore, 5 (3.3%) participants indicated that they were graduated, 55 (36.4%) recently employed and the other 28 (18.5%) participants indicated that they were students without a side job. In total, there were 100 (66.2%) participants who were attending or finished their undergraduate degree. Additionally, 51 (33.8%) participants indicated that they were attending or finished their post-graduate degree. In this study, students had different study areas: ‘Economics and Business’ (49.7%), Health (13.9%), Engineering (8.6%), Behavior and Society (6.0%), Education and Training (5.3%), Law and Governance (5.3%), Art and Culture (2.6%), Language and Communication (2.6%), Interdisciplinary (2.6%), Earth and Environment (2.0%), and Exact and Informatics (1.3%). From all participants, 38 (25.1%) participants were randomly assigned to the condition of positive affect and to the condition of the prototypically viable new venture idea, 43 (28.5%) participants were randomly assigned to the condition of positive affect and to the condition of the non-prototypically viable new venture idea, 30 (19.9%) participants were randomly assigned to the negative affect condition and the to the condition of the prototypically viable new venture idea, and 40 (26.5%) participants were randomly assigned to the condition of negative affect and to the condition of the non-prototypically viable new venture idea. Figure 3 gives a clear overview of the number of participants in each condition.
3.3 Measurements
back-Figure 3. Participant distribution per condition (N = 151).
Positive and negative affect. Participants were randomly assigned to an induction condition of positive or negative affect, following the procedure of Lerner and Keltner (2001) and Foo (2011). To measure positive and negative affect, a multi-item scale (Positive and Negative Affect Schedule – PANAS) of Watson et al. (1988) is used in this research. It is a self-report questionnaire that consist of one 10-item scale (“interested”, “excited”, “strong”, “enthusiastic”, “proud”, “alert”, “inspired”, “determined”, “attentive”, and “active”) for positive affect and one 10-item scale for negative affect (“distressed”, “upset”, “guilty”, “scared”, “hostile”, “irritable”, “ashamed”, “nervous”, “jittery”, and “afraid”). Furthermore, we used the PANAS scale as a way to check whether the affect induction was effective. All items are scored on a 5 point-Likert scale, ranging from 1 = Not at all to 5 = Very much. The PANAS-scale is a reliable and valid instrument for measuring positive and negative affect (Watson et al., 1988). Example items for activating affect are ‘enthusiastic, ‘proud’ or ‘active’. The alpha reliability coefficient for PA was .88 and .87 for NA.
New venture idea prototypical viability. Participants read a scenario in which a new venture idea could be identified. This scenario was comparable to other studies in the field of entrepreneurship, which also used scenarios to study how cognitive frameworks are used to process, produce, and evaluate a new venture idea (e.g., Costa, Ehrenhard, Caetano, & Santos, 2016; Grégoire, Shepherd, & Shurer
Positive Affect Negative Affect
Prototypical N = 38 N = 30
Lambert, 2010). Before reading the scenario, participants were asked to imagine that they were the person in the story. In this study, a scenario was adopted from a previously validated scenario of Costa et al. (2018) to manipulate prototypical viability. This scenario is based on real events describing a setting that is convenient to recognize a new venture idea and is originally adopted from a real business idea (Duarte & Casimiro, 2010). The scenario suggests the creation of a device that generates energy with the help of people who are walking around a shopping center and produce energy with their activity (see Appendix II for the scenarios).
The prototypical NVI condition contained implicit information concerning three characteristics of the new venture idea’s prototypical viability: solves customers’ problems, generates positive net cash flow, and manageable risk, whereas the non-prototypical NVI condition did not contain implicit information on either of this viability aspects. These characteristics are chosen for this study because these are the most significant to explain business opportunity prototype in the early entrepreneurial stages (Baron & Ensley, 2006). In addition, these characteristics did not require individuals to make comparisons with other products or the need to have knowledge of a complete industry. Moreover, the characteristics ‘solves customers’ problems’, ‘generates cash flow’, and ‘manageable risk’ are associated by meaning similarity (Santos et al., 2015). This means that the three characteristics refer to the prototypical viability of a new venture idea. A manipulation check was used to check the effectiveness of the scenarios.
new venture idea were asked to read the scenario again and to describe the new venture idea they may have recognized. If they did not find a new venture idea after reading the scenario for a second time they were asked to answer “No” and were excluded from the dataset. This also functions as a control question to guarantee that participants understood the new venture idea that was present in the scenario.
After participants described the new venture idea they recognized in their own words, they were asked to characterize the business idea according to the viability dimensions of the prototypical NVI. To measure the prototype’s viability dimensions, participants were asked to complete a 14-item scale that is adopted from Costa et al. (2018) and is originally derived from Baron and Ensley (2006). The prototype’s viability dimensions consist of three dimensions: solves customer problems (5 items, i.e. “Meets customers’ needs” and “Is wanted by customers”, α = .80), generates positive net cash-flow (5 items, for example “Is profitable” and “Can make lots of money”, α = .80), and manageable risk (4 items, i.e., “Has risks in production”, α = -.09). Respondents were asked to characterize the business idea they had just identified on a five-point Likert scale (1 = not at all to 5 = very much). Since the dimension manageable risk showed poor reliability and did meet the threshold of 0.7 (Nunnally, 1978), we excluded it from further analysis.
confidence to have a complete measure of the construct and not just a few sub dimensions. The alpha reliability coefficient for opportunity confidence was .79.
Control variables. In this study, we controlled for the potential influence of several variables on opportunity confidence. Because cognitive development may vary with age and by gender (Ardila et al., 2011), and thus important for recognizing new venture ideas and opportunity confidence, we controlled for the respondent’s age and gender, coded 0 men and 1 women. Because human capital may also influence opportunity confidence (Dimov, 2010), there is controlled for the participants’ education, which was coded using a seven-point scale, ranging from ‘secondary school’ to ‘PhD’, and there is also controlled for the educational background, which was coded using a 11-point scale, ranging from ‘economics and business’ to ‘engineering’. There is also controlled for involvement in prior entrepreneurial activities, coded 0 no involvement and 1 for involvement.
4. Results
4.1 Pre-test
Before distributing the survey to participants, it was checked for potential errors (e.g., misunderstanding of manipulation). Therefore, a pre-test has been conducted to check whether the manipulation for the prototypicality of the NVI was effective and also to check whether the affect induction technique was effective. Additionally, the decision has been made to distribute the pre-test in hardcopy to receive additional feedback for further improvements of the manipulation. A number of changes were included in the survey after the pre-test. For example, it was not always clear for respondents that they had to imagine that they were the person in the scenario. In other occasions, participants misread the information in a particular condition. To check whether the manipulation was effective for both conditions, means were compared across conditions and an independent t-test was conducted to check the significance of the manipulation method for both prototypicality and affect.
Thirty-five participants answered the pre-test survey. We were able to analyze the answers of 33 participants for several reasons (e.g., incomplete and/or incorrect survey completion). Initially, all manipulations were tested together. However, during the data collection process a lot of adjustments were made (e.g., instructions) to make it clearer for respondents. Therefore, to avoid confusions, we distributed different manipulations to people.
In total, 29 responses could be analyzed for the affect manipulation (14 participants in the positive affect condition and 15 participants in the negative affect condition). Participants who were asked to complete the positive affect condition reported significantly greater positive affect (M = 34.64, SD = 4.91) than negative affect (M = 12.21, SD = 2.01, t(27) = 3.07, p < .01). In the negative affect condition, participants reported significantly greater negative affect (M = 25.27, SD = 10.38) than positive affect (M = 21.40, SD = 9.23, t(27) = -3.62, p < .01).
of prototypical viability clearly indicated that participants in the prototypical condition (M = 3.77, SD = .34) showed that they recognized significantly more characteristics of the viability of the NVI than participants in the non-prototypical condition (M = 2.39, SD = .43, t(15) = 7.43, p < .001).
These results show that both manipulations were effective and, therefore, are useful to include as manipulation methods for both affect and new venture idea prototypical viability in the hypotheses testing study.
4.2 Manipulation Checks
To confirm that the manipulation was also effective for the final sample of the study, we conducted another round of manipulation checks with the final sample. To test whether the manipulation was effective for both independent and moderator variable, means were compared of all conditions, similarly to what we had done in the pre-test. Participants in the positive affect condition reported significantly greater positive affect (M = 33.15, SD = 6.73) than negative affect (M = 25.56, SD = 9.44, t(149) = 5.74, p < .001). Participants in the negative affect condition reported significantly greater negative affect (M = 22.11, SD = 7.07) than positive affect (M = 14.96, SD = 5.96, t(149) = -6.74, p < .001).
Table 1. Descriptive statistics and correlations (N = 151). Variables Mean SD 1 2 3 4 5 6 7 8 9 10 11 1 Gender .27 .45 - 2 Age 25.61 2.36 -.28** - 3 Educational level .34 .48 -.03 .15 - 4 Educational field 5.64 2.23 .02 -.08 -.02 -
5 (Prior) involvement in entrepreneurial activities 1.79 .41 .16* -.19* -.09 .18 -
6 Start-up efficacy 3.55 .65 -.26** .15 .12 -.10 -.25** -
7 General efficacy 4.11 .57 -.30** .21* .09 .07 -.06 .32** -
8 Start-up motivation 3.09 .85 -.19** .09 -.07 -.12 -.25** .58** .27** -
9 Prototypical viability of the NVI .45 .50 -.01 -.26** -.08 .17* .07 .06 .00 -.06 -
10 Affect .46 .50 .06 .05 .01 -.06 -.02 .12 -.11 .16* -.04 -
11 Opportunity confidence 4.61 1.01 -.10 .11 -.06 -.05 -.02 .18* -.05 .12 .26** -.09 -
4.3 Descriptive Statistics
Table 1 shows the means, standard deviations, and correlations coefficients of the study variables. Age was significantly correlated with prototypicality of the NVI, r = -.26; educational background was also significantly correlated with prototypicality of the NVI, r = .17; start-up motivation was significantly correlated with affect, r = .16; start-up efficacy was significantly correlated with opportunity confidence, r = .18; prototypicality of the NVI was also significantly correlated with opportunity confidence, r = .26 (all ps < .05). No significant correlations are found between prototypicality of the NVI and negative affect, positive affect, and opportunity confidence and also not between negative affect and opportunity confidence which is good for the assumption of multicollinearity.
4.4 The Effect of Viability of a New Venture Idea on Opportunity Confidence
In order to analyze whether or not the prototypical viability of the NVI influences opportunity confidence, we performed two analyses. First, we performed an independent t-test to determine whether the participants in the prototypical scenario with viability dimensions indicated a higher level of opportunity confidence than participants in the non-prototypical scenario. The independent samples t-test was significant t(149) = -3.28, p < .001. The average opportunity confidence of participants in the prototypical condition with implicit information concerning the prototypical viability of a new venture idea (M = 4.90, SD = .87) was significantly higher than the average opportunity confidence of participants in the non-prototypical scenario without implicit information concerning the prototypical viability of a new venture idea (M = 4.38, SD = 1.06).
Additionally, we conducted a regression analysis to test the main effect of the prototypical viability on opportunity confidence. The values 0 and 1 were given to non-prototypical and prototypical, respectively. We started by checking whether the means were similar to the means when performing an independent t-test. Therefore, we did not include the control variables at this point. The regression model was significant R2 = .07, F(1,149) = 10.36, p < .01. The prototypicality of the new venture idea had a
regression equation: Y = a + bX, where Y represents the dependent variable (opportunity confidence) and X represents the independent variable (prototypicality of the NVI). In this equation, a and b are substituted from the statistics provided in the coefficients output table, a being a constant coefficient and b being the coefficient associated with prototypicality of the NVI. For the prototypical NVI, the mean average of opportunity confidence is: 4.38 + (0.52 × 0) = 4.38 and, 4.38 + (0.52 × 1) = 4.90 for the non-prototypical NVI. Hence, the means were similar to the means that were calculated with the independent t-test which means that errors are excluded in our analysis.
Table 2. Summary of regression analysis (N = 151). Model 1 Model 2 B SE B SE Intercept 2.68* 1.29 1.80 1.26 Control Gender -.10 .20 -.05 .20 Age .04 .04 .08* .04 Educational level -.20 .18 -.16 .17 Educational field -.01 .04 -.03 .04
(Prior) involvement in entrepreneurial activities .11 .22 .10 .21
Start-up efficacy .28 .16 .19 .16
General efficacy -.05 .16 -.06 .16
Start-up motivation .01 .12 .06 .12
Main effects
Prototypical viability of the NVI .60** .17
R2 .05 .13*
ΔR2 - .08**
Note. Dependent variable: opportunity confidence. *p < .05; **p < .01.
4.5 The Moderating Role of Affect on Prototypicality of the NVI in Opportunity Confidence To test Hypothesis 2a and 2b, we performed two analyses. The independent variable and moderator variable were both dummy variables because both variables had two categories. For instance, the independent variable has two categories: prototypical and non-prototypical, where 0 referred to the absence of viability dimensions (non-prototypical NVI) and 1 to its presence (prototypical NVI). In turn, affect also has two categories: positive and negative affect, where 0 referred to positive affect and 1 to negative affect, respectively.
plot of the analysis. People identifying a NVI with higher viability indicated higher opportunity confidence (M = 4.90) than people identifying a NVI with lower viability (M = 4.38). In turn, people in the positive affect condition showed greater opportunity confidence (M = 4.70) than people in the negative affect condition (M = 4.51). People in the prototypical condition with positive affect induction showed greater opportunity confidence (M = 4.96) than people in the non-prototypical condition with positive affect (M = 4.48). Furthermore, people in the non-prototypical condition with negative affect showed lower opportunity confidence (M = 4.28) than people in the prototypical condition with negative affect (M = 4.82). However, only the main effect of prototypicality of the NVI appeared to be significant (F(1,147) = 10.03, p < .01), that again provides evidence to support Hypothesis 1. On the contrary, the main effect of affect is not significant (F(1,147) = 1.07, p > .05). The interaction effect also appeared to be not significant, F(1,147) = .03, p > .05. Hence, there is no evidence found to support Hypothesis 2a and 2b.
Figure 4. Profile plot of the interaction of prototypically viable NVI and affect.
opportunity confidence. In this model, the prototypicality of the NVI was a significant predictor of opportunity confidence (B = .60, p < .01). In contrast, affect was not a significant predictor of opportunity confidence. In Model 3 (see Table 3), we added the interaction effects of prototypicality of the new venture idea with affect. This model was significant (F(11,139) = 2.04, p < .05) and was able to explain 14.7% of the observed variance in the sample in terms of opportunity confidence. In this model, the prototypicality of the NVI was a significant predictor of opportunity confidence (B = .62, p < .01). In contrast, affect was not a significant predictor of opportunity confidence. In addition, also the moderating effect of prototypical viability of the NVI and affect was not a significant predictor of opportunity confidence. All taken together, there was no evidence found to support hypothesis 2a and 2b.
Table 3. Summary of regression analysis (N = 151).
Model 1 Model 2 Model 3
B SE B SE B SE Intercept 2.68* 1.29 1.81 1.26 1.78 1.30 Control Gender -.10 .20 -.03 .19 -.03 .20 Age .04 .04 .08 .04 .08 .04 Educational level -.20 .18 -.15 .17 -.15 .17 Educational field -.01 .04 -.03 .04 -.03 .04
(Prior) involvement in entrepreneurial activities .11 .22 .11 .21 .12 .21
Start-up efficacy .28 .16 .21 .16 .21 .16
General efficacy -.05 .16 -.10 .16 -.10 .16
Start-up motivation .01 .12 .08 .12 .08 .12
Main effects
Prototypical viability of the NVI .60** .17 .62** .23
Affect -.25 .16 -.24 .23
Two-way interaction
Prototypical viability of the NVI * Affect -.04 .34
R2 .05 .15* .15*
ΔR2 - .09** .00
Since we were surprised by the results, we decided to further explore for existent relationships in the data. Therefore, we tested the main effect of the reported affect to analyze the strength of affect felt during the experiment on opportunity confidence. A regression analysis was performed to test the main effect of reported positive and negative affect on opportunity confidence after controlling for gender, age, educational level, educational field, (prior) involvement in entrepreneurial activities, start-up efficacy, general efficacy, and start-start-up motivation (see Table 4). The model was significant (R2 = .14,
F(10,140) = 2.35, p < .05). There was a significant positive relationship between positive affect (B = .04, p < .01) on opportunity confidence. This means that an increase in positive affect will lead to an increase in opportunity confidence of an individual. As expected, we did not find a significant relationship between negative affect (B = .01, p > .05) on opportunity confidence.
Table 4. Summary of regression analysis (N = 151).
Model 1 Model 2 B SE B SE Intercept 2.68* 1.29 1.52 1.31 Control Gender -.10 .20 .04 .20 Age .04 .04 .06 .04 Educational level -.20 .18 -.14 .17 Educational field -.01 .04 -.01 .04
(Prior) involvement in entrepreneurial activities .11 .22 .12 .21
Start-up efficacy .28 .16 .24 .16 General efficacy -.05 .16 -.16 .16 Start-up motivation .01 .12 .03 .12 Main effects Positive affect .04** .01 Negative affect .01 .01 R2 .05 .14* ΔR2 - .09**
5. Discussion
Our experimental study on the effects of prototypicality of a NVI on opportunity confidence and the moderating role of affect demonstrated that the way new venture ideas are mentally represented and perceived, influence the levels of confidence of an individual about a new venture idea. These results suggest that when individuals have information on whether a NVI meets customer needs and has the potential to generate profit, that it is more likely that a high level of opportunity confidence will be perceived which could be an indicator for further actions and eventually exploitation of the NVI. Interestingly, no interaction effect was found between the prototypicality of NVIs and affect on opportunity confidence. There should be noted that the results and conclusions should be interpreted with caution. Simply because, in order to assess opportunity confidence as a complete construct (and not just one sub dimension of it), we decided to include all sub scales despite some concerns with the reliability measures.
Regarding the content of the new venture idea that we studied, or more specific the viability dimensions of the new venture idea, our results suggest that students in our sample did not view manageable risk as an internally consistent construct. This result is not surprising because Costa et al. (2018) also found that manageable risk was not internally consistent. A possible explanation for this might be that manageable risk is a complex notion and not representative for the early stages of entrepreneurial activity. Furthermore, our participants – university students and young professionals without a lot of entrepreneurial experience – may not see risk as an important aspect of a prototypical idea. This is in line with the suggestion of Baron (2006), who suggested that individuals with little experience tend to focus less on analyzing risks than experienced entrepreneurs do. Proceeding linearly, individuals who tend to identify high levels of risk in general may be reluctant to identify any new venture idea as a promising one (Baron, 2006). In terms of risk analysis, previous studies showed that there are not only differences among entrepreneurs and non-entrepreneurs but also between entrepreneurs which underlines the difficulty of risk analysis (Block, Sandner, & Spiegel, 2015). This leads us to believe that there are more factors influencing the risk analysis (e.g., experience). Further, it raises the question whether manageable risk should be included in studies that study the identification of a NVI among potential and/or nascent entrepreneurs and could perhaps better be included in studies with experienced entrepreneurs. We also found a significant relationship between age and opportunity confidence meaning that the older, the more confident someone feels. A possible explanation for this might be that the older, the more confident someone feels due to their experiences (Ucbasaran, Westhead, Wright, & Binks, 2003).
1988). Hence, our results imply that the cognitive processes (“head”) have an effect on the opportunity confidence of an individual whereas affect (“heart”) does not. Another possible explanation could be that we did not control our experiment in a lab which may have caused that people were distracted during the survey and did report differently than when they were fully concentrated and committed to the survey. Future studies could take a different perspective and study the direct effect of both prototypical viability of a NVI and affect on opportunity confidence and, then, compare these effects. This could help us to understand what source of information is more important to individuals (e.g., affect: “How do I feel about it?” or prototypical viability of a NVI: “How do I think about the NVI?”). Furthermore, future research could conduct a similar study in a controlled environment (e.g., a lab) to either rule out that affect and prototypical viability of a NVI do not interact and are used as different sources of information instead or to prove that affect indeed moderates the relationship between a NVI and opportunity confidence when it is conducted in a controlled environment. Moreover, in this study we have investigated the effect of affect on entrepreneurial cognition and specifically on opportunity confidence, future studies can also focus on the effect of entrepreneurial activity on affective states and traits, as suggested by Shepherd (2015). Additionally, other studies could conduct field experiments by following entrepreneurs in the field and see how their moods influences their daily activities.
Since we were surprised that we found no interactional effect between the NVI and opportunity confidence, we performed an additional analysis. We found that positive affect had an effect on opportunity confidence. Thus, the higher the levels of positive affect the higher the opportunity confidence will be. Here we support the affect-as-information model which proposed that affect is a simple and direct route to cognition (Forgas, 1995). Thus, in line with the AIM model we provide evidence that people use affect as a source of information.
5.1 Practical Implications
confidence in the NVI and hence increase chances to continue pursuing the opportunity. Furthermore, for entrepreneurship education it implies that besides stimulating the cognitive structures of individuals it is also important to teach them how to gather information about customer problems and how to define it. In that way, individuals can develop a prototypical idea that solves customers problems which contributes to a higher opportunity confidence. Furthermore, it is also important to teach (potential) entrepreneurs the basics of finance so that they can derive whether their NVI is able to generate a positive net cash-flow or not.
Concerning affect, we provide empirical evidence that positive affect influences opportunity confidence. This finding is relevant and interesting for (potential) entrepreneurs because we can make (potential) entrepreneurs aware that their feelings may influence the level opportunity confidence towards a NVI. This does not mean that we can teach (potential) entrepreneurs how to feel since this would be very difficult, but we can tell them to be aware of their feelings. In that way, individuals can use their emotional awareness when they assess a new venture idea.
5.2 Limitations and Directions for Future Research
In this study, we used experimental conditions and induction methods to manipulate the prototypicality of a NVI and affect. Although we were aware that our experiment was different from most experiments because normally experimental designs are closely controlled and conducted in a laboratory, we made all efforts to control them and to consider possible limitations in our analysis. Given this design, we acknowledge that what people reported might differ from their actual behaviors which is a limitation of experiments in general (Cook et al., 2002) and of this study. Furthermore, we were not able to confirm the manipulation of manageable risk as a dimension of prototypicality due to the low internal consistency reliability of the manipulation check items. Therefore, it would be interesting if future research analyzed risk using other measures and manipulation techniques.
have proven to be more effective (e.g., Lyubomirsky et al., 2005; Zhang, Yu, & Barrett, 2014). For example, it would be interesting to explore whether there is an interaction between a new venture idea prototypicality and affect when adopting a visual appearance method that engages in visual and auditory modalities. Further, because we did not have the resources to control our experiment in a lab, we acknowledge that people could have been distracted during the survey and as a result, might have reported differently than when they were fully concentrated and committed to the survey. It could be interesting for future research to conduct a fully controlled experiment in a lab to rule out such distractions. Further, in our sample people reported higher negative affect in the positive condition than in the negative condition. It is important to mention here that even if we excluded these people from our analysis, the results were not different. A possible explanation for the fact that people reported higher negative affect in the positive condition than in the negative condition is that we used a self-report induction technique. For instance, people tend to report different scores than their actual feelings which is a propensity to give socially or personally desirable responses (Donaldson, 2002). This is a limitation of this study and is almost inevitable for every study in psychological research.
Concerning measuring affect, we limited ourselves by measuring one level of affect (PANAS scale) while there are different activation levels that either support or hinder the cognitive processes that grasp knowledge from broad and narrow domains (Foo, Uy, & Murnieks, 2015). Notwithstanding with this shortcoming, we specifically made the decision to use the PANAS since most studies studying positive and negative affect have used Watson et al.’s (1988) scale (e.g., Song, Foo, & Uy, 2008; Judge & Ilies, 2004; Zohar, Tzischinski, & Epstein, 2003). Additionally, this measure has been used more often which makes it easy to compare our findings with existing studies. Future studies could use more flexible measures that incorporate different activation levels.
our study was focused on the individual-level while it would also be interesting to study the effects on a group-level. For instance, the evaluations of a group might differ from the evaluation of an individual since in a group you share various thoughts which may change your initial thoughts that otherwise would not have been changed.
6. Conclusion
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8. Appendices
• Appendix I: Affect induction technique
Appendix I: Affect inductiontechnique Negative affect
Please carefully read the list of emotions below and think of 3 situations that made you experience one or more of the following emotions. Please describe these situations in no more than a few words in the boxes below:
Note: you may use multiple emotions for one situation if you desire so. 1. Distressed 2. Upset 3. Guilty 4. Scared 5. Hostile 6. Irritable 7. Ashamed 8. Nervous 9. Jittery 10. Afraid
Emotion that you experienced Short description (few words) of the situation Situation 1
Situation 2 Situation 3
Please select one situation from your list above and recall a specific experience when this has happened to you. In your own words, please briefly describe this event. Try to be as specific as possible, especially indicating the feelings you experienced during this episode. Imagine that your text needs to transmit your own emotions during this episode and write it as such.
