MSc Business Administration
Entrepreneurship and Innovation Track
Master Thesis
Mindfulness and Opportunity Recognition: The
Mediational Role of Entrepreneurial Alertness
in Entrepreneurship
Author: Bence Szilvassy Student Number: 11128631
Supervisor: Yuval Engel June 25th, 2016
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Table of Content
ABSTRACT ... 3
INTRODUCTION ... 4
THEORETICAL BACKGROUND AND HYPOTHESES DEVELOPMENT ... 7
Opportunity recognition ... 7
The nature of entrepreneurial opportunities ... 8
Antecedents of entrepreneurial opportunities ... 9
Entrepreneurial Alertness ... 10
Alert Scanning and Search... 11
Alert Association and Connection ... 13
Evaluation and judgment ... 15
Mindfulness ... 18
Mindfulness in entrepreneurship ... 20
Mindfulness and Alert Scanning and Search ... 22
Mindfulness and Association and Connection ... 23
Mindfulness and Evaluation and Judgment ... 24
METHOD ... 27
Sample and Procedures ... 27
Measures ... 28 Trait mindfulness ... 28 Entrepreneurial Alertness ... 28 Opportunity Recognition ... 28 Control variables ... 29 Analytical Strategy ... 30 Main Analysis ... 32
Mindfulness and Alertness Components ... 32
Mediational Model ... 33 DISCUSSION ... 36 Theoretical contribution ... 38 Future research ... 40 Practical Contributions ... 41 Limitations ... 42 CONCLUSION ... 42 REFERENCES ... 44 APPENDIX... 52 Cover letter ... 52 Survey ... 53
3 Assumption Testing ... 57 Explanatory Factor Analysis ... 58
Statement of Originality
This document is written by Bence Szilvassy who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
ABSTRACT
The study aims to answer the research question that why some individuals and not others recognize entrepreneurial opportunities. Previous research suggests that mindfulness is a relevant construct for explaining this question. As mindfulness is a relatively new concept in science, there is no empirical evidence about its effects in entrepreneurship yet. Thus, this empirical study examines the relationship between trait mindfulness and opportunity recognition. Furthermore, the paper augments the theories of entrepreneurial alertness, and discusses many benefits of mindfulness that facilitate the three dimensions of alertness. First of all, I tested the relationships between mindfulness and the three components separately, then I examined the effect of mindfulness on opportunity recognition in a mediational model. The results obtained with a sample of founding entrepreneurs indicate that trait mindfulness is positively related to all three dimensions of alertness, however it did not have a significant relationship with opportunity recognition through those dimensions. Finally, I interpreted the findings in the context of individual opportunity recognition.
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INTRODUCTION
Nowadays, the alignment of several factors such as globalization and technological improvement allows people to change the existing way of doing things and create new values through novel combinations. Before people could engage in entrepreneurial activities, they must recognize opportunities for creating new processes, products or markets. As opportunities do not appear in a straightforward way, the process of identifying opportunities is inherently novel and full of uncertainty (Shane, 2000). Most people fail in entrepreneurial activities because either they do not recognize a profitable opportunity or they identify a wrong one. In line with that, researchers identified that if entrepreneurship as a field of research want to contribute distinctively to the broader domain of business studies, it must concern the discovery and exploitation of profitable opportunities (Shane & Venkataraman, 2000). Scholars realized that entrepreneurship must involve both lucrative opportunities and enterprising individuals (Venkataraman, 1997). Although many researchers examined the basic question that why, when and how some people and not others discover and exploit opportunities, the cause of opportunity recognition has remained a mystery. In this paper, I want to contribute to the works of researchers that addressed the very complex and multidisciplinary problem of why some individuals and not others recognize opportunities.
First of all, we must understand the nature of entrepreneurial opportunities if we want to find where they come from and how individuals can discover them. People who have ambitions for creating new goods or services must face unforeseeable challenges and quickly adapt their strategies to emerging situations. They try to create new means-ends combinations by forming subjective beliefs about how to reallocate resources in a better way than the existing allocation (Sarasvathy et al., 2003). Furthermore, entrepreneurs must bear risk that derives from uncertainty and from the fact that many relevant information may not exist at the moment of discovery such as future customer needs. Entrepreneurs engage in acquiring and sharing information, which continuously forms the entrepreneurial opportunity (Eckhardt & Shane, 2003). Thus, recognizing an opportunity is rather a process by nature than a one-time act. Entrepreneurs respond to and create change through entrepreneurial actions (McMullen & Shepherd, 2006). Consequently the perception of opportunities is evolving over time as entrepreneurs meet novel situations (Corbett & McMullen, 2007). Scholars studied empirically numerous concepts to find an answer to the question that why, when and how some people discover and exploit opportunities. Some of them pointed to the importance of prior knowledge, entrepreneurs’ social network, and a wide range of cognitive capacities such as entrepreneurial
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alertness (Shane & Venkataraman, 2000; Ozgen & Baron, 2007; Gaglio & Katz, 2001). Although these models may define some aspects of opportunity recognition, the process of opportunity identification is much more complex in reality. Entrepreneurial alertness is a concept that explains how alert individuals with the proper perception and processing abilities identify opportunities (Kirzner, 1979). On the other hand, it fails to demonstrate why certain people are more alert than others. Predominantly, those models explain only how opportunities emerge, but cannot illuminate the underlying mechanisms and answer that why those opportunities emerge. In this study, I will augment the theories of entrepreneurial opportunities, and introduce mindfulness as a facilitator of opportunity recognition.
Recognizing entrepreneurial opportunities requires more than changes in the environment and the appropriate knowledge how to exploit those changes. People seek promising opportunities in order to fulfill certain desires such as becoming wealthy, advancing the society and so on. Therefore, what someone considers an opportunity is dependent on his/her motives as well. As a consequence, an entrepreneurial opportunity is a result of three distinct pillars: the individuals’ means (prior knowledge, past experience, social network, etc.) motives (goals, desires), and the environment (technological change, changes in customer needs, etc.) (Corbett & McMullen, 2007).
Thus, I introduce mindfulness as a potential facilitator of opportunity recognition. Being mindful of those essential elements enhances the alertness with which individuals perceive the world, and in turn it results in better opportunity recognition abilities. Thus, I contribute to the studies of entrepreneurship from a psychological point of view, I argue that entrepreneurs recognize different opportunities due to their unique perceptions of the world and themselves. Essentially, I build and test a model, which presents mindfulness as an antecedent of opportunity recognition. Furthermore, I argue that entrepreneurial alertness fully mediates the effect of mindfulness on opportunity recognition. Mindfulness is a state of consciousness and it can be characterised with enhanced and receptive awareness of and attention to the present moment (Brown & Ryan, 2003). In my research, I consider mindfulness as a dispositional trait rather than a state, since I investigate the differences between entrepreneurs, and not the differences in a person over time (Brown & Ryan, 2003). Entrepreneurial alertness can be defined as “the ability to notice without search opportunities that have hitherto been overlooked" (Kirzner, 1979, p. 48). The rationale of my model is that mindfulness facilitates attention to, awareness of and acceptance of all three pillars of opportunities, and leads to better opportunity recognition (Corbett & McMullen, 2007). Additionally, mindfulness has many
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beneficial effects on human cognition such as increased attention, creativity and awareness. Those enhanced abilities in turn facilitate entrepreneurial alertness that enable individuals to discover opportunities more consciously (Tang et al., 2012; Corbett & McMullen, 2007).
To more fully explain the basis of my research, I briefly introduce the importance of mindfulness. Mindfulness is an ancient construct, which gains popularity in science nowadays. A rapidly expanding body of research argues that being mindful has great practical benefits in a wide array of fields. This state of mind advances human well-being through improving psychological and physical health (Fjorback et al., 2011; Kabat-Zinn, 1982). Additionally, it has great advantages for work and learning as well through increased job satisfaction and self-regulation, and improved cognitive capabilities (Hülsheger et al., 2013; Tang et al., 2007; Bargh & Chartrand, 1999; Brown et al., 2007). Surprisingly, the relationship between mindfulness and entrepreneurship has not been investigated empirically, however this concept has beneficial effects on several personal traits and cognitive attributes that facilitate entrepreneurial activities such as self-regulation, increased attention and cognitive flexibility (Moore & Malinowski, 2009; Chiesa et al., 2011; Amato et al., 2015). On the basis of those empirical research, I would like to contribute to the theories of entrepreneurial opportunities, and explain how mindfulness positively influences entrepreneurs’ both mental and physical processes and actions aiming at recognizing opportunities. More specifically, mindfulness increases awareness of inner and outer processes, situations and changes that are perceived in the present moment (Kabat-Zinn, 2003). As entrepreneurs understand the inner and outer mechanisms more fully, they become able to react more consciously to those phenomena, and perceive and form potential business opportunities objectively. I argue that individuals with higher mindfulness acknowledge their own means and motives, the changing nature of environment and the environment itself better than individuals with lower mindfulness. This higher awareness of the three pillars in turn contributes to the recognition of entrepreneurial opportunities (Corbett & McMullen, 2007). Furthermore, I suggest that entrepreneurial alertness totally mediate the effect of mindfulness on opportunity recognition. Entrepreneurial alertness involves several cognitive abilities such as attention, association and evaluation (Tang et al., 2012). Mindfulness enhances those cognitive processes and improves entrepreneurial alertness. My research contributes to the theories of entrepreneurial opportunities by filling the following theoretical gap. While scholars could not explain why some individuals are more alert to entrepreneurial opportunities than others, this model introduces mindfulness as an antecedent of entrepreneurial alertness.
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Furthermore, the paper provides a great practical contribution for everyone, since mindfulness is a simple and promising trait to enhance.
Before I introduce the whole model, the remainder of the paper proceeds as follows. First, I present the origin of entrepreneurial opportunities and the process nature of their recognition (McMullen & Shepherd, 2006). After that I discuss its antecedents that scholars have identified so far. Then, I describe entrepreneurial alertness as a potential explanation about how some people and not others discover and exploit opportunities. Next, I discuss the cognitive processes that constitute the model of entrepreneurial alertness (Tang et al., 2012). After that, I introduce mindfulness as a dispositional trait that facilitates opportunity recognition and answers why some individuals are more alert than others (Wood et al., 2012; Tang et al., 2012). Based on the relationships between the concepts, I form my hypotheses. Then, I describe the methodology of this research and conduct the analysis. Finally I interpret the findings, discuss the implications and draw the conclusions
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THEORETICAL BACKGROUND AND HYPOTHESES
DEVELOPMENT
Early studies on entrepreneurship examined this field in terms of who the entrepreneurs are and what they do. Mostly, they were preoccupied with the relative performance of individuals or firms in the context of small and new businesses. However, this approach lacked a very important aspect: the presence of entrepreneurial opportunities (Venkataraman, 1997). Venkataraman (1997) identified and integrated these two interrelated dimensions of entrepreneurship into a conceptual framework. His work created new possibilities for scholars to augment the theories of entrepreneurship, and explain why, when and how opportunities for creating value come into existence, and why, when and how some people and not others discover and exploit them(Shane & Venkataraman., 2000).
Opportunity recognition
Identifying and selecting the right opportunities are one of their most important skills of entrepreneurs. Extant literature offered numerous research on entrepreneurial opportunity, specifically on the process and antecedents of opportunity recognition. Some authors defined opportunity recognition as the process of introducing new products or services to the market that have the capability to create value and profit (Shane & Eckhardt, 2003). Some emphasised that the opportunities are waiting for alert individuals to recognize them, just like blowing dollar bills on the side-walk waiting for being picked up (Kirzner, 1979). There is not a single
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appropriate definition, however I conclude that opportunity recognition requires the objective knowledge of environmental conditions, one’s own means (prior knowledge, social network and cognitive abilities) and one’s own motivation (Hansen et al., 2011; Corbett & McMullen, 2007).
The nature of entrepreneurial opportunities. In order to understand the theories of entrepreneurship fully, we must clearly see where opportunities come from. Firstly, due to imperfect information distribution, societies and markets are inefficient (Hayek, 1945; Kirzner, 1997). This implies that individuals have the potential to improve them by creating better combinations of resources. Additionally, markets are in a state of disequilibrium (Venkataraman, 1997; Schumpeter, 1934). Venturing individuals are always trying to change the current status quo, and for this reason they propel markets towards equipoise. As a consequence, markets are in a state of continuous change. Thus, I claim that entrepreneurial opportunities for increasing both social and personal wealth exist because of those mechanisms.
Furthermore, we must keep in mind that entrepreneurship is a process by nature, since entrepreneurs constantly react to and facilitate change. This action comes from a subjective judgment whether it is worthy to bear the uncertainty for potential profit or not (McMullen & Shepherd, 2006). Entrepreneurial opportunities come to life from a complex pattern of changing conditions (Baron, 2006). Thus, entrepreneurial action includes the interpretation of environment, decisions about possible actions, how to do them, and why to do those (Wood et al., 2012). Furthermore, as I conduct this research from a cognitive perspective, it is important to understand the interactions between environment, cognition and action (Grégoire et al., 2011). The process of entrepreneurial action consists of two stages. The first stage is called the third-person opportunity, where entrepreneurs’ domain-specific knowledge plays a key role (McMullen & Shepherd, 2006). Entrepreneurs acquire and utilize information in order to compare that with their individual belief-system. If they consider that the market situation represents an entrepreneurial opportunity for someone who possesses the appropriate means and motives, they form a third-person opportunity. This perception of opportunity shows the strategy of the individual. It means that the environmental change exists, but that represents an opportunity only to those who have the necessary knowledge and motivation. The second stage is the first-person opportunity. Entrepreneurs who have already formed a third-person opportunity belief, must evaluate the benefits and costs of engaging in entrepreneurial actions. They must face the risk that arises from uncertainty and decide if the desired end state is worth bearing the risk. If one is motivated to act under uncertainty, he/she forms a first-person
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opportunity belief, in other words one believes that there is an opportunity for oneself (McMullen & Shepherd, 2006).
Antecedents of entrepreneurial opportunities. However, opportunities are not straightforward most of the times; they have to be discovered. Thus, the one of the most fundamental questions still remains unanswered: why, when, and how some people and not others discover and exploit these opportunities? A potential explanation is that individuals are different, and these differences matter (Venkataraman, 1997). The antecedents of opportunity recognition drew a lot of research, however these theories have not come to consensus yet. We can categorize them into two broad groups that aim to explain the basic questions of entrepreneurship. Those are prior knowledge and cognitive properties (Shane, 2000). Many scholars argue that the differences in stocked information, prior knowledge and personal experience are the reasons why not everyone identifies the same opportunities. They build their model on Austrian economics and information asymmetry (Hayek, 1945). This presumption implies that all opportunities must not be obvious to everyone at any point of time (Kirzner, 1979). Individuals’ unique prior knowledge creates knowledge corridor (Hayek, 1945; Ronstadt, 1989). This corridor allows them to recognize new information and new entrepreneurial opportunities. However, the new information must be related to the prior information and the entrepreneur must be able to use that knowledge (Von Hippel, 1994). So I conclude that some people are more susceptible for new information and certain entrepreneurial opportunities based on their prior knowledge (Shane, 2000; Ardichvili et al., 2003).
In spite of having the appropriate prior knowledge for opportunity recognition, many people cannot see the relationships between seemingly unrelated and distinct mental concepts. That is the reason why many inventors failed to commercialize their inventions (Rosenberg, 1998). So I argue that differences in cognitive skills determines if someone identifies certain opportunities. Cognitive abilities are responsible for perceiving and interpreting the external and internal processes, so they play a critical role in entrepreneurial opportunity recognition as well. Scholars’ greatest interest is how entrepreneurs acquire information and use their knowledge structures to evaluate and decide on opportunity evaluation and venture creation and growth (Mitchell et al., 2002). In their works, opportunity recognition stems from cognitive properties such as attention (Shepherd et al., 2016; Wood et al., 2012), creativity (Ward, 2004), information processing, information acquisition (Gielnik et al., 2014) and pattern recognition (Baron, 2006). In line with that, I introduce entrepreneurial alertness as the antecedent of opportunity recognition.
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Kirzner (1979) argued that entrepreneurs who identify profitable opportunities, must have a state of entrepreneurial alertness. He described this concept as an ability to notice opportunities without active search after them, or as a set of processing abilities that facilitates the recognition of opportunities (Kirzner, 1979). Despite Kirzner’s (1979) theory remained relatively vague in terms of practical propositions, his model has the potential to embrace the previously mentioned explanations into a comprehensive model. Consequently, this concept drew the attention of numerous researchers (Gaglio & Katz, 2001; Tang et al., 2012). Gaglio and Katz (2001) elaborated the model further by suggesting a number of psychological propositions. Although their model is a theoretical concept, they laid down the foundations that explain how and why cognition drives the process of identifying opportunities. Furthermore, a recent research elaborated an empirically justified measurement of entrepreneurial alertness (Tang et al., 2012). In my research, I do not want to decide which studies explain better the process of opportunity recognition, however I would like to augment these models and build those fragmented concepts into an overarching model that argues how mindful behaviour enhances the recognition of profitable opportunities.
Entrepreneurial Alertness
In the following section, I will introduce the concept of entrepreneurial alertness and discuss its role in the process of opportunity recognition. Kirzner (1979, 1985) laid down the theoretical foundations of entrepreneurial alertness. He defined it as "the ability to notice without search opportunities that have hitherto been overlooked" (Kirzner, 1979, p. 48). In his later works, it was mentioned as a set of psychological characteristics such as boldness, determination and creativity (Kirzner, 1999). Others explained entrepreneurial alertness in terms of a specific chronic schema, which is a mental model that represents individuals’ perceptions and interpretations about the world (Gaglio & Katz, 2001). These dynamic and evolving chronic schemas derive from individuals’ prior knowledge and past experiences. They are responsible for directing attention, information processing and reasoning to certain situations. Gaglio and Katz (2001) argued that chronic schemas are inherently unique for everyone, since those are the complex mental system of personal experiences and knowledge. Different schemas (contents, complexity and activation) result in different perceptions and interpretations about markets, which in turn lead to different assessments and opportunity recognitions. Entrepreneurial alertness is a specific chronic schema that allows individuals to think in new and unusual ways. More specifically, they proposed that alert individuals to be more sensitive to signals of market disequilibrium, more willing to change their mental schema to accommodate non-matching information, and to have more complex schema about change,
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their industry, social environment or market processes than non-alert individuals (Gaglio & Katz, 2001). Finally, a more recent work elaborated a model that explains how entrepreneurial alertness works along the process of opportunity recognition. The model consists of three sequential dimensions: (1) alert scanning and search, (2) alert association and connections and (3) evaluation and judgment (Tang et al., 2012).
Alert Scanning and Search. This dimension is responsible for the acquisition of a wide array of domain-specific and general knowledge. Additionally, alert scanning and search create the foundation for the following stages, when entrepreneurs process the acquired information and evaluate whether the evolving business idea represents a business opportunity. At this phase, the newly acquired information is stored in the short-term memory in its original form. After the information becomes a part of the sensory store, it expands one’s knowledge base that can be both tacit and explicit (Tang et al., 2012). Tacit knowledge refers to the information that is gathered through implicit learning from one’s own personal experience, and often non-codified (Reber, 1989). This process is independent of conscious effort. A typical example for tacit knowledge is how humans recognize people’s faces. During scanning the environment, they are not conscious about the characteristics of a person’s face, but they can identify it among thousands most of the times. Another example for purposeless scanning occurs when an individual is walking on the street and identifies a new advertisement at the wall of a building. That information may be very useful for the individual because of his/her mental model and may trigger further searching activities. Essentially, scanning often leads to deliberate search, which is the other way of acquiring information. Through deliberate search, individuals acquire explicit knowledge, which refers to the information that is codified, easy to share and articulate. Examples for this are facts and rules, documents, manuals and procedures. People who search deliberately, look for answers for specific questions. This activity is a conscious effort (Masters, 1992). Usually people search for information that is related to their chronic schemas in order to expand their understanding about certain things (Tang et al., 2012). Generally, people acquire skills by engaging in explicit learning initially, which can be characterized by high level of mental processing. As the practitioner builds the foundation of that skill, the learning transform into a rather effortless implicit encoding (Masters, 1992).
The most important cognitive mechanism at this stage is attention. Attention can be described as the focalization of consciousness and the allocation of limited processing resources (Anderson, 2000; Ocasio, 1997). Scholars identified early that the limits of attention make it a scarce resource in the contexts of entrepreneurship and organizations (Gifford, 1992).
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Entrepreneurs allocate their attention between projects and tasks in order to improve profitability and performance. As their capabilities for acquiring information is limited, they must be selective about what information to be absorbed. This selection inevitably leads to ignoring some information. Thus, entrepreneurs must allocate their attention well in order to acquire important and ignore irrelevant information (Wood et al., 2012). For example, entrepreneurs not only have to allocate their attention among going issues, however they must attention to new programs that may have the potential to renew the company (Gifford, 1992). As a consequence, characteristics of attention such as control, stability and flexibility are likely to determine entrepreneurial performance. Flexibility of attention refers to the mechanism when people switch their perspective from specific environmental details to what is happening currently in the environment as a whole. On the other hand, stability of attention means that individuals can maintain their attention on specific tasks or on the environment (different perspectives) without engaging in mind-wandering or getting lost in mental concepts (Brown et al., 2007).
According to another classification, entrepreneurs can allocate their attention in two different ways: (1) bottom-up and (2) top-down (Shepherd et al., 2016). The allocation of attention in turn greatly defines the characteristics of acquired information and identified opportunities during the process. Firstly, bottom-up attention is the process of the selection of information signals from the environment even when individuals do not deliberately search for them (Wood et al., 2012). The concept explains how salient informational cues draw attention and generate additional mental processes. If the information contrasts with the mental models of entrepreneurs, they acknowledge the novel information, and accordingly investigate potential changes in the environment (Wood et al., 2012). This dimension rather facilitates the recognition of discontinuous change that represents change in configuration of different components as a whole. Discontinuous change is inconsistent with the current trajectory and results in disruption. However, this allocation of attention sometimes leads to the wrong direction, and leads to repeated mistakes that could be evaded by recalling past experiences (Shepherd et al., 2016; Wood et al., 2012). Secondly, top-down attention derives from chronic schemas and is directed by certain expectations about the environment. It allows people to select information of one kind or from one source rather than another based on their existing information (Shepherd et al., 2016). For example entrepreneurs may look for some specific aspects of a domain that are thought to reveal a potential opportunity, and not others. As a consequence, individuals are able to focus their attention on relevant information by filtering
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out irrelevant stimuli (Posner & Boies, 1971). However, they are unlikely to recognize novel and unexpected signals for environmental change while applying top-down attention allocation. Rather this allocation results in incremental changes such as changes in design components, but not in the integration of different components as a whole. Additionally, people who possess more complex schemas are likely to detect more incremental changes (Shepherd et al., 2016). The focus of attention defines the objects that entrepreneurs want to gain more information about. Furthermore, it facilitates action towards those prioritized issues. Consequently, both dynamics of attention is relevant for entrepreneurs as they work in dynamic and complex environments.
As a conclusion, attention facilitates the recognition of opportunities in a number of ways. The information perceived through the sensory organs becomes a part of the previously mentioned mental schemas in the forms of knowledge, experience and beliefs. These knowledge structures are important for processing and utilizing the stored information (Tang et al., 2012). Entrepreneurs who have better abilities in alert scanning and search have more complex chronic schemas about specific domains, are more sensitive to signals of market disequilibrium, and ultimately more alert to business opportunities (Gaglio & Katz, 2001).
Alert Association and Connection. At the second stage, entrepreneurs generate novel ideas for potential business opportunities and clever ways how to market them. The process results in a third-person opportunity belief, which means that the idea represents an opportunity for someone with the appropriate means (McMullen & Shepherd, 2006). This dimension fosters the application of the perceived information by building that into individuals’ chronic schemas. Thus, this process is responsible for extension in logic and making the schemas about the environment more complex (Tang et al., 2012). In this phase, individuals harmonize external information with their current chronic schema that is accumulated from past experiences and knowledge to make sense of the world. Thus, alert association and connection facilitates the connection of newly acquired information to the big picture. Cognitive processes of association, conceptual combination, connecting the dots are dominant at this stage (Wood et al., 2012). Consequently, entrepreneurs form initial beliefs about a business opportunity through these processes (Wood et al., 2012; McMullen & Shepherd, 2006). Once some components of the big picture are connected, individuals may go back to the first stage and look for additional information in order to clarify their ideas. After they have found new information, they must make sense of that by engaging into creative associative thinking again (Tang et al., 2012).
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Association involves mental considerations of parallels and relationships between two seemingly unrelated objects (Wood et al., 2012). Through this process, individuals merge separate concepts into a new unit that has novel characteristics. This process results in the formation of new product and service ideas, or market niches. Basically, creativity and creative ideas are the outcomes of drawing connections in one’s knowledge structure (Ward, 2004; Amabile et al., 2005). It is a truly proactive process and involves the manipulation of information through adding, deleting and interpreting from different perspectives (Tang et al., 2012). Similarly to alert scanning and search, these cognitive processes often occur automatically and outside of conscious awareness (Bargh & Ferguson, 2000). Thus, the results of these processes often appear as intuition or insight (Wood et al., 2012. Mitchell et al., 2005). During this stage, entrepreneurs apply different cognitive styles that help them organize and process information, but they affect the information gathering, learning and decision-making as well. Cognitive styles can be categorized into two groups, (1) intuitive and (2) analytical cognitive styles (Kickul et al., 2009). Intuition is considered to be an important tool of expert idea generators. Intuitive people observe novel and unexpected information signals on system level (Milner, 1997). People who use this cognitive style allocate their attention in a bottom-up manner and let salient information cues grab attention. Analytical cognitive style allows individuals to extend their schemas through logic and sequential information processing. Top-down attention allocation in this process allows entrepreneurs to engage in activities of evaluation and implementation. Consequently, a study found that entrepreneurs who rather apply intuitive cognitive style than analytical identify more opportunities (Corbett, 2002). According to the above reasoning, I argue that during the stage of association and connection intuitive cognitive style enables individuals to come up with novel business ideas better than analytical style.
Cognitive phenomena such as pattern recognition, structural alignment and conceptual combination are dominant at this phase (Tang et al., 2012; Wood et al., 2012; Baron, 2006; Grégoire & Shepherd, 2012). Pattern recognition means the identification of meaningful patterns in complex environments. Individuals may recognize opportunities through perceiving connections and patterns between seemingly independent events underlying many new business opportunities. For instance, a trend shows that people in their thirties and forties have increasing number of babies. Besides that, many of the parents are highly educated and believe that exposing infants to intellectually educating environment is greatly beneficial for the baby. One who identifies the connections between the two processes may engage in further search and
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finally form an opportunity belief that there is a business opportunity for producing intellectually stimulating toys and games for babies. This business is a real success story and called Baby Einstein Company (Baron & Ensley, 2006). Structural alignment refers to the cognitive process of drawing inferences about new ideas by comparing them with other existing offerings that individuals know and understand better. Thus, entrepreneurs may form opportunity beliefs based on the similarity of a new technology to the market (Grégoire & Shepherd, 2012). Despite that creativity is an inherent human capability, people tend to stuck in the realm of conventional thinking. Sometimes knowledge does not set people free, but bond them into habitual thinking patterns that is not able to yield novel ideas. In this case, revolutionary connections may come to life by combining dissimilar and sometimes opposing concepts, such as non-alcoholic beer or affordable luxury. This is called bisociation or conceptual combination (Ko & Butler, 2006; Ward, 2004). This deliberate method of thinking helps people who would otherwise engage in habitual associative thinking and often could not come up with novel ideas discover revolutionary ideas. Scholars found that bisociative thinking had a positive relationship with the number of opportunities entrepreneurs have identified (Ko & Butler, 2006).
Thus, association is a very important cognitive ability for entrepreneurs in order to draw valuable mental connections and form opportunity beliefs. Additionally, it has an interesting attribute: based on our mental models, new information that fits our schema are incorporated more quickly than information that contradicts that. Unfitting information is often discarded. On the other hand if the new information is not discarded automatically, it allows individuals to reconsider their existing mental models and create new connections and possible means-ends combinations (Tang et al., 2012). Gaglio & Katz (2001) proposed that alert individuals change their mental schema to accommodate information instead of changing the information to accommodate the mental schema. As a consequence they build more complex mental schemas about their environment than non-alert individuals. Ultimately alert association and connection facilitates the process and novelty of opportunity recognition.
Evaluation and Judgment. At the last stage of entrepreneurial alertness, entrepreneurs translate data into understanding, assess if a business opportunity emerges from a new idea and make judgements about the personal attractiveness of the opportunity (Wood & Williams, 2014). This process ends in the formulation of a first-person opportunity belief. However, before that entrepreneurs must engage in a decision-making process in order to make the transition from third-person to first-person opportunity belief. Thus, entrepreneurs form beliefs
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regarding potential rewards and costs of the opportunity, the uncertainty of their actions and the strength of their motivations whether to do particular actions or not (McMullen and Shepherd, 2006). If an individual assesses that one’s willingness and capabilities are appropriate to take the risk that comes from uncertainty, one considers the idea as a first-person opportunity (Tang et al., 2012). During this process, entrepreneurs make judgments about the content of new information, ignore irrelevant information and assess if the new information represents a real opportunity. They often collect additional related information regarding the opportunity in order to reconsider many alternatives. Thus, they engage in scanning and search again to acquire information. As entrepreneurs want to make accurate judgments, they recall the information many times and try to make sense of it through association and connection. So entrepreneurs go back to previous cognitive processes during evaluation and judgment in order to decide if the market situation represents a business opportunity (Tang et al., 2012).
Entrepreneurs must engage in a structured way of thinking in order to assess if the business idea is an opportunity (Wood & Williams, 2014). Evaluation and judgment requires entrepreneurs to do at least minimally conscious and deliberate effort. Thus, they rely on rule-based cognitive processes that they developed from day-to-day activities, past experiences and social conventions consciously or unconsciously. They assess whether the new information fits into their own mental schemas by comparing the information with a series of rules and beliefs about opportunities. As these rules derive from personal experiences and person-situation interactions, those are very much idiosyncratic just like chronic schemas. Based on their schemas, entrepreneurs project the information into possible future states (Wood et al., 2014). If they consider that the opportunity does not match with their rules in terms of for example profitability or risk, they discard that. Shane (2000) found that entrepreneurs who received exactly the same invention, discovered different business opportunities based on their prior knowledge. Thus, I argue that rule-based processing drive decision-making especially in uncertain and complex environments, where entrepreneurs operate. Although rule-based decision making is unconscious sometimes, entrepreneurs must think critically and deliberately to form first-person opportunity beliefs, self-centred mental images of opportunities. These beliefs aim at reducing ignorance and doubt by understanding the situation (Shepherd et al., 2007). Individuals make judgments based on opportunity-related characteristics such as feasibility and desirability. Those attributes can be categorized into three groups: demand-side attributes (window of opportunity, novelty), supply-side attributes (resources, prior knowledge) and personal considerations (goals, risk) (Wood & Williams, 2014). Entrepreneurs create
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several rules routinely and formulate templates in order to make the evaluation process more efficient and quick (Wood et al., 2012). These rules allow entrepreneurs to identify opportunities and choose the most promising one from them.
As entrepreneurs operate in dynamic and uncertain environments and have limited cognition to process all the acquired information, they developed several cognitive shortcuts, so called heuristics in order to make their decision-making quick and simple (Keh et al., 2002). However, those heuristics do not show the real relationships between objects in reality all the time, and sometimes they lead to bias (Busenitz & Barney, 1994). Cognitive biases affect how entrepreneurs perceive the risk, evaluate opportunities, and finally influence the outcomes of entrepreneurial actions. In order to make the best and most efficient decisions, they use beliefs regarding the likelihood of uncertain events such as future prices, customer desires and so on (Tversky & Kahneman, 1974). Due to biases, entrepreneurs often engage in risky activities because they misjudge the possibilities of potentially negative events (Kahneman & Lovallo, 1993). Despite that entrepreneurs tend to take more risk, their risk propensity, the tendency to take actions that one considered risky is not higher than others’ (Brockhaus, 1980). They often ignore potential factors that they cannot control, and make decisions based on non-rational heuristics such as overconfidence, illusion of control and representativeness or belief in the law of small numbers (Simon et al., 2000). A study revealed that two cognitive biases (illusion of control and belief in the law of small numbers) significantly influence opportunity evaluation through less perceived risk (Keh et al., 2002). Illusion of control means that individuals believe that they can control outcomes with their skills in situations where chance is an important factor (Langer, 1975). Belief in the law of small numbers is a common decision-making bias that allows entrepreneurs to generalize from small and non-random samples, often based on a few attributes (Busenitz, 1999). As a consequence, they often search for and cling to positive information that they elicit from the customers. These cognitive mechanisms are dangerous for entrepreneurs, because those make them overoptimistic and motivated to start a venture.
Thus, learning how and which rules to apply is a very important skill of entrepreneurs that can be developed. By the time, entrepreneurs realize that some rules have not been appropriate in certain situations. Next time, they may think twice how to respond to similar stimuli in a better way. The previous example clearly illustrates that entrepreneurship resembles a learning process, where past experience is transformed into knowledge. This style of learning is called experiential learning (Kolb, 2014). Entrepreneurs consciously or unconsciously engage in experiential learning, since they often introduce an offering to an uncertain market
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without having definite clues how customers will respond to that. Based on the early feedback, they may adapt their strategies how to serve that segment. Experiential learning has many dimensions, from which divergent learning style is the most useful during the evaluation and judgment stage. Entrepreneurs who apply this way of acquiring new knowledge prefer concrete experience and reflective observation. People-orientation, strong imagination and empathy are the most important characteristics during this process (Corbett, 2005). People with these attributes truly understand the customers and their needs, furthermore their information does not comes from market analysis but field observation most of the times. Consequently, they are likely to make the best decision whether engaging in entrepreneurial actions or not.
As a conclusion, entrepreneurial alertness is a very valuable skill that facilitates the process of opportunity recognition by organizing the fragmented pieces of information acquired from the environment and forming meaningful implications for introducing a new solution to the market (Wood et al., 2012). On the other hand, the model only explains how alert individuals identify opportunities. The main question why certain people and not others recognize them is still unanswered. Thus, I introduce mindfulness as a potential facilitator of entrepreneurial alertness. I present the beneficial effects of trait mindfulness and I argue that this characteristic is a significant predictor of individuals’ entrepreneurial alertness.
Mindfulness
Mindfulness is an ancient concept coming from Buddhism, where people actively cultivate this mind-set (Brown & Ryan, 2003). Mindfulness can be defined as clear-minded attention to, an intentional awareness and non-judgmental acceptance of what is perceived in the present. (Kabat-Zinn, 2003; Quaglia et al., 2014). Essentially, mindfulness is an attribute of consciousness and its main characteristics are enhanced, open and receptive awareness and present moment orientation (Brown & Ryan, 2003). However, mindfulness has many definitions and some scientists examine slightly different constructs when they refer to mindfulness. Thus, before I can proceed I would like to make it clear that in this article I refer to mindfulness according to the definition that I stated above. As a consequence, I do not investigate this construct as a cognitive style, which involves additional processes of distinguishing things mentally by putting label on them and creating new subcategories in order to structure problems better besides what I mentioned already (Sternberg, 2000; Langer & Moldoveanu, 2000).
It is easier to understand mindfulness through examining mindlessness, the relative absence of mindfulness. Mindlessness derives from the habituation and automatization of tasks
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and processes (Corbett & McMullen, 2007). Mindless people behave automatically, do not acknowledge their thoughts, emotions or objects of perception (Brown & Ryan, 2003). As the process of opportunity recognition is inherently novel to the actor, it requires certain amount of mindfulness to see the big picture and perceive the opportunity (Corbett & McMullen, 2007).
Mindfulness is conceptualized in two forms according to seeing it as a state or a trait. Firstly, mindfulness can be described as a state that individuals can practice in mindfulness mediation or in other mindfulness techniques. Secondly, it is often mentioned as a trait, one’s predisposition to be mindful in daily life (Kiken et al., 2015). The difference between the two interpretations is that trait mindfulness is relatively stable over time, while state mindfulness is highly fluctuant around the baseline of trait mindfulness even in one day. A study revealed that state mindfulness can be enhanced greatly through meditation or other mindfulness intervention techniques, while the baseline can be advanced in a smaller pace (Kiken et al., 2015). These interventions affect state and trait mindfulness differently for every person over time. The development in dispositional mindfulness is dependent on the increase of state mindfulness. Trait mindfulness is mostly used to highlight differences between people, while state mindfulness is used to illuminate differences in a person over time (Brown & Ryan, 2003). In my research, I examine trait mindfulness and its effects on opportunity recognition.
Over the past 40 years, mindfulness became more and more popular in the West, thus a wide range of research examined its effects in various domains (Batchelor, 1994). The studies can be categorized into three distinct fields: health, learning, and working. Regarding health, advantageous affects were found in stress reduction (Fjorback et al., 2011), anxiety and depression therapy (Hofmann et al., 2010) and chronic pain reduction (Kabat-Zinn, 1982). Secondly, it impacts the work through increased job satisfaction, reduced chance of burnout (Hülsheger et al., 2013), enhanced qualities of attention (stability, control and efficiency) (Mrazek et al., 2013; Tang et al., 2007), advanced job performance (Dane & Brummel, 2013) increased cognitive capacity and cognitive flexibility (Smallwood & Schooler, 2015; Tang et al., 2007; Mrazek et al., 2013) and superior self-regulation (Bargh & Chartrand, 1999; Chiesa et al., 2011; Brown et al., 2007). Finally, studies found evidence that mindfulness has great benefits in learning through improving attentional functions (Moore & Malinowski, 2009), working memory capacity (Mrazek et al., 2013) and reducing mind wandering (Smallwood & Schooler, 2015). Empirical research in the domain of entrepreneurship is yet to be conducted. Thus in the following paragraphs I explain how trait mindfulness affects entrepreneurship, state several hypotheses, and investigate its relationship with alertness and opportunity recognition.
20 Mindfulness in entrepreneurship. Despite the fact that mindfulness has a wide range of beneficial attributes that are related to entrepreneurship (i.e. stress reduction, enhanced attention, creativity, cognitive flexibility, self-regulation etc.), empirical evidence is still missing that could confirm the advantages of being present during the process of opportunity recognition. Entrepreneurial cognition consists of important processes such as information gathering, information processing, evaluation and decision-making that I have already introduced. It is important to see that these cognitive processes derive from entrepreneurs’ perception and interpretation of the environment, and determine entrepreneurial action (Kickul et al., 2009; Mitchell et al., 2002). Entrepreneurs’ perception, cognitive processes and actions often operate at the margin of control and consciousness. I argue that mindfulness plays a role in bringing those automatic processes under conscious control. An increasing number of scholars argue that entrepreneurs can enhance their performance in opportunity recognition and exploitation by being more mindful (Wood et al., 2012; Corbett & McMullen, 2007). Corbett & McMullen (2007) delineated a conceptual model based on Gaglio and Katz (2001)’s entrepreneurial alertness concept that aims to explain the relationship between mindfulness and opportunity recognition. While entrepreneurial alertness as a chronic schema determines if someone is able to recognize entrepreneurial opportunities, mindfulness implies why individuals are alert to those (Gaglio and Katz, 2001; Corbett & McMullen, 2007). As a consequence, mindfulness is an antecedent of entrepreneurial alertness. In turn, it increases sensitivity to market disequilibrium and allows individuals to change or contradict their chronic schemas and to resist accepting beliefs as facts (Corbett & McMullen, 2007; Gaglio and Katz, 2001).
As mindfulness is able to increase the perception and awareness of mental and physical processes, it has great benefits in the domain of entrepreneurship. Thus, in the following section I introduce the mechanisms how mindfulness facilitates entrepreneurial action. Mindfulness is responsible for directing the attention and facilitating clear awareness of inner and outer phenomena at the present moment such as thoughts, feelings, sensations, environmental changes, etc. (Bishop et al., 2004). According to a Zen metaphor, this state of mind is like a polished mirror, the mind only reflects what is happening before the mirror without mental labelling and judgment of phenomena (Brown et al., 2007). In terms of entrepreneurship, it enables individuals to be more aware of their own means, motivations and the environment, which are the three pillars of an entrepreneurial opportunity (Corbett & McMullen, 2007). Moreover, as individuals who have high trait mindfulness are likely to apply the principle of
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effectuation as well during entrepreneurial action, since they take their set of means as given and concentrate on the possible outcomes that those means enable (Sarasvathy, 2001). This effect of mindfulness is important on the level of individual and on the level of organization as well. As the more mindful an individual is, the greater awareness one has on means and resources on both levels. Mindfulness also sheds light on entrepreneurs’ motivation, whether their desire is fuelled by money, replacing a wrong product or service or advancing the society.
Furthermore, mindfulness is associated with self-regulation of attention that allows entrepreneurs to maintain and switch their attention on and between objects, tasks and projects (Bishop et al., 2004; Chiesa et al., 2011). The stability of attention enables individuals to avoid considering concepts, ideas and opinions as facts, to recognize if they are mind wandering on past events and future states, and to bring their attention back to the present moment. The flexibility of attention helps entrepreneurs have the large perspective in their minds and concentrate on special detailed tasks at the same time. (Brown et al., 2007).
Next, scholars consider mindfulness as a metacognitive skill, which refers to the cognition about one’s cognition (Bishop et al., 2004). Additionally, metacognition is the antecedent of cognitive flexibility or cognitive adaptability that is the foundation of entrepreneurial mind-set (Haynie et al., 2010). This fact implies that people who have higher trait mindfulness are likely to have greater cognitive adaptability. Cognitive adaptability is the ability to adapt cognitive processing strategies to manage new situations and be dynamic, self-regulatory and flexible in cognition under dynamic and uncertain environment (Moore & Malinowski, 2009; Haynie et al., 2010). Many people do not see beyond their ideas and beliefs about themselves and the world. If they acquire an information signal that contradicts with their chronic schema, they discard the information instead of reconsidering their understanding about the world. Mindfulness allows them to break loose from their conditioned mind and let the signals from the environment change their chronic schemas. Ultimately, they may adapt their cognitive processes every time when the environment change and approach the new situation from a clear state of mind.
Finally, scholars found that entrepreneurship resembles the process of learning (Cope, 2005; Corbett, 2005). During the process of opportunity recognition, entrepreneurs consciously or unconsciously engage in an experiential learning process, where past experiences alter into the individuals’ knowledge structure (Corbett, 2005; Kolb, 2014). Mainly the critical and unexpected learning events shape the individuals’ understanding about the world, themselves, cognitive processes and business management as well (Cope, 2005). I argue that mindfulness
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has beneficial effects on experiential learning through a number of mechanisms. First, it enables people to experience and observe the present moment as it is without any distracting mental processes. Furthermore, enhanced qualities of attentions such as stability, control and efficiency helps them maintain their attention on the experience and certain tasks and eliminate mind-wandering (Mrazek et al., 2013). Finally, mindfulness allows entrepreneurs to accept their mistakes non-judgmentally, which in turn leads to reflection that brings meaning to the experience and facilitates learning processes (Cope, 2005). I must add that the ability for learning and adapting is strongly interconnected. As a conclusion, I argue that mindfulness is indeed a relevant construct in the domain of entrepreneurship, and have great effects on entrepreneurial alertness and opportunity recognition.
Mindfulness and Alert Scanning and Search. In the following section, I introduce mindfulness as a facilitator of entrepreneurial alertness by contributing to its three stages during the process of opportunity recognition (Tang et al., 2012). First of all, I argue that mindfulness has positive effects on alert scanning and search. Attention is the underlying principle in this phase, where entrepreneurs scan the environment for salient information signals and build a wide range of domain-specific knowledge. The basic reasoning behind the relationship between mindfulness and alert scanning and search is that the prior concept facilitates attention to and awareness of what is happening inside and outside. I argue that entrepreneurs who have high trait mindfulness acquire more information from the environment, since they are more attentive to the present moment, and see beyond their chronic schemas in order to establish a direct experience with the world. Scholars found empirical support that a traditional mindfulness-enhancing method called integrative body-mind training (IBMT) improves attention and self-regulation in an experiment conducted with Chinese students (Tang et al., 2007). Similarly, Moore & Malinowski (2009) found that the level of mindfulness is positively related to the ability to focus and sustain attention on specific tasks over time. Overall, researchers established a positive relationship between the level of mindfulness and attentional performance (Moore & Malinowski, 2009). Finally, mindfulness training program was found to reduce mind wandering in an experiment (Mrazek et al., 2013).
Accordingly, mindfulness improves the processes of both bottom-up and top-down attention. Thus, I argue that entrepreneurs with high level of trait mindfulness can sustain a wide attentional breadth longer than entrepreneurs with low level of mindfulness in order to scan the environment over time. This ability increases the amount of acquired information and the chance to recognize unexpected changes in the environment. Furthermore, mindfulness
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facilitates the control of attention, which in turn enables entrepreneurs to focus their attention on specific entrepreneurial tasks such as deliberate search. As the attentional abilities of entrepreneurs increase, they are likely to mind wander less. Thus, they do not pay much attention to thoughts and dialogues that are going on in their heads, but maintain a high awareness of the environment. This allows them not to get lost in their own mental schemas, and enhances the recognition of previously overlooked phenomena. Mindful entrepreneurs become more attentive and sensitive to signals of market disequilibrium. As a consequence, entrepreneurs with higher mindfulness have more complex mental schemas about changes at the market and in the environment (Gaglio & Katz, 2001). Ultimately, these processes lead to the presumption that mindfulness increases the ability of alert scanning and search.
Hypothesis 1: Trait mindfulness has a positive relationship with alert scanning and search.
Mindfulness and Association and Connection. Additionally, mindfulness advances entrepreneurial alertness through improving the ability of association and connection as well. It facilitates this process by enhancing creativity, interrupting automatic cognitive processes and directing awareness of inner mental movements. At this stage of opportunity recognition, individuals connect the information that they acquired from the environment with their existing knowledge structures or chronic schemas (Tang et al., 2012). Chronic schemas enable individuals to interpret the complex and dynamic world in an easy and convenient way. However, the downside of this ability is that people tend to use habitual thinking and logical problem solving to deal with novel situations. This phenomena is called framing effect, and the outcome of such a problem-solving style is incremental and conventional ideas (Ostafin & Kassman, 2012). In line with the previous reasoning, associative processes often occur automatically processed by the nonconscious system (Sloman, 1996). An interesting fact is that although these processes are not observable for individuals, their outcome can be perceived consciously such as intuition (Dane, 2010). Scholars indicated that mindfulness may facilitate the recognition of intuition by attuning people to nonconscious operations (Dane & Pratt, 2009). Individuals with high level of trait mindfulness may have greater access to internal processes and being more attentive to subtle cognitive movements.
Moreover, scholars found that mindfulness is directly related to creativity (Ostafin & Kassman, 2012). More specifically, Ostafin & Kassman (2012) provided evidence in an experiment that trait mindfulness predicted the ability for insight problem solving. Furthermore, a brief mindfulness training was found to result in better insight problem solving, and state mindfulness partially mediated the effect of the training on insight problem solving. Insight
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problem solving is a class of problems, in which past experience leads to an impasse. This obstacle can be overcome through restructuring the problem or the mental schemas. Often this problem solving technique is called the Eureka or ‘Aha’ moment, because the restructuring happens suddenly (Ostafin & Kassman, 2012).
Additionally, Moore & Malinowski (2009) found that mindfulness training is positively related to cognitive flexibility or cognitive adaptability. Mindfulness is a state of non-conceptual awareness that represents not clinging to ideas and memory (Brown et al., 2007). Thus, entrepreneurs with high trait mindfulness are less attached to their conventional cognitive processes, and more likely to reconsider their strategies about how to approach certain issues. Mindfulness reduces the influence of yesterday’s solutions on the interpretation of today’s problems and acting in the present moment (Ostafin & Kassman, 2012). Entrepreneurs who are willing to rethink their strategies in an ever-changing and uncertain environment, are considered to perform better (Haynie et al., 2010). This ability can give huge benefits for them, since they become able to approach the task of association from several perspectives.
As a conclusion, mindfulness facilitates changing and extending one’s mental schema to accommodate the information, and limits unconscious framing effects. Furthermore, it helps individuals undo causal sequences and break existing means-ends combinations by terminating habitual patterns (Gaglio & Katz, 2001). Due to the previously presented reasoning, I argue that mindfulness positively affects alert association and connection.
Hypothesis 2: Trait mindfulness has a positive relationship with alert association and connection.
Mindfulness and Evaluation and Judgment. Finally, I argue that mindfulness facilitates the process of evaluation and judgment by enhanced awareness of mental processes and increased ability of self-control. Entrepreneurs often engage in risky activities because they rely a lot on cognitive heuristics to make decision-making simple (Kahneman & Lovallo, 1993; Tversky & Kahneman, 1974). They tend to associate business opportunities with more attractive attributes (bigger strengths than weaknesses). This is kind of rule-based decision-making leads to less perceived risk and overconfidence, which in turn result in business failure (Busenitz, 1999). They tend to ignore potential factors that they cannot control, and make decisions based on non-rational heuristics such as illusion of control and representativeness (Simon et al., 2000). Thus, I argue that mindfulness facilitates entrepreneurial decision-making by debiasing the mind during evaluation and judgment.
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Especially, it illuminates nonconscious cognitive activities and affect the evaluation of opportunity ideas in many ways. Firstly, individuals who have high level of trait mindfulness do not perceive mental concepts and assumptions as fact, but as thoughts in consciousness. They are less likely to act on prejudices and biases that are not underpinned by objective evidence (Brown et al., 2007). Secondly, enhanced clarity of awareness allows entrepreneurs to discover insights into business contexts that were hidden previously. They often rely on their gut feeling or intuition during the evaluation phase based on their prior experience and expertise (Bryant, 2007). Furthermore, mindfulness facilitates the acceptance of newly acquired information, and reduces the anchoring effect to initial estimations. Thus, phenomena that represent threats to the self-concept or to the business idea such as overconfidence in certain business areas, can be recognized through mindful observation (Brown et al., 2007).
Similarly, mindfulness is closely related to self-control (Bowlin & Baer, 2012; Tang et al., 2007). Self-regulatory processes may be beneficial for entrepreneurs to control their rule-based decision-making, since it enhances goal-setting and directing attention to achieve the goal (Brown et al., 2007). As mindfulness enhances self-control and emotion regulation through attention, entrepreneurs may not engage in deteriorative cognitive and behavioural processes such as too much risk-taking. Lakey et al. (2007) found that mindfulness has a negative relationship with severe gambling outcomes. Furthermore, mindfulness was found to be significantly related to performance on two risk-related judgment and decision-making tasks. Hafenbrack et al. (2014) found evidence that trait mindfulness has positive relationship with resisting the sunk-cost bias, which happens when individuals continue a venture if they have already invested money and time into that (Arkes & Blumer, 1985). In a second study the confirmed that a short mindfulness intervention has positive effects on resisting the sunk-cost bias. People who engage in sunk costs bias usually are preoccupied with the past (where the sunk costs incurred) and the future (where the potential solution lies). This cognitive process often leads to escalating commitment. Mindfulness helps entrepreneurs increase their awareness of the present moment and reduce negative affect. The past costs are not so much cognitively salient in the mind of mindful entrepreneurs, and they weigh less heavily on current decisions (Hafenbrack et al., 2014). Finally, mindfulness leads to enhanced cognitive flexibility, which is a crucial cognitive ability of entrepreneurs (Moore & Malinowski, 2009). They can reconsider their decision-making rules and heuristics in order to use them efficiently. Thus, I argue that mindfulness enhances entrepreneurial performance in the process of evaluation and judgment.
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Hypothesis 3: Trait mindfulness has a positive relationship with the evaluation and judgment.
Moreover, I suggest a mediational model, where mindfulness advances opportunity recognition through the three components of alertness. The proposed relationship is based on the fact that mindfulness enhances the awareness of inner and outer phenomena that play an important role in opportunity recognition. Thus, it is able to explain why some individuals are more alert for potential business opportunities than others (Corbett & McMullen, 2007). The proposed relationships are displayed in Figure 1.
Hypothesis 4: Trait mindfulness has a positive indirect relationship with the number of opportunities recognized through the three components of alertness (alert scanning and search, alert association and connection and evaluation and judgment).
Figure 1
Expected Relationships between Trait Mindfulness, the Dimensions of Entrepreneurial Alertness and Opportunity Recognition
H1 H4 H2 H3 Number of Opportunities Recognized Alert Association and Connecion Evaluation and Judgment Alert Scanning and Search Trait Mindfulness H2
